Shanghai's continued lockdown is irking the international business community which has been publicly vocal about risks to the city’s hub status and is pleading for a policy shift away from zero-Covid measures.

After what was originally planned to be a staggered nine-day lockdown in Shanghai, China’s financial capital still remains largely sealed with coronavirus infection cases continuing to register new highs including a record 26,000 cases on Sunday before dipping to around 23,000 yesterday.  

Since introducing the lockdown in late March, the city of 26 million has faced numerous challenges: lacking access to food and medical supplies; insensitive measures such as separation of parents and their children; and, of course, disruption to businesses across industries including finance, manufacturing and logistics.

Foreign Business Disruption

Similar to when Hong Kong rolled out its zero-Covid measures, foreign businesses have been vocal about the lockdown challenges their businesses face in Shanghai.

In late March, the German Chamber of Commerce in China issued a flash survey with around 50% of companies reporting a «complete disruption or a severe impact» on logistics, warehousing, and supply chain. German companies called for more support from the local government including timely communication of policies (66 percent) and green channels for staff for key activities like commuting to work (59 percent).

American Chamber of Commerce in Shanghai also published a flash survey earlier this month with 99 percent of business respondents claiming they had been hit by the recent outbreak and 54 percent slashing their 2022 revenue projections since then.

EUCCC: Policy Review Needed

Perhaps the most vocal amongst foreign business chambers has been the European Union Chamber of Commerce in China (EUCCC) which has explicitly underlined the impact of the zero-Covid policy on China’s reputation.  

In a letter to Chinese Politburo member and vice-premier Hu Chunhua last Friday, EUCCC highlighted concerns about the social and economic costs of the strict measures and called for a policy review. 

«The Omicron variant is posing new challenges that seemingly cannot be overcome by applying the old toolbox of mass testing and isolation, and the social and economic costs of applying increasingly stringent measures to achieve this are rapidly mounting,» said EUCCC president Joerg Wuttke in the letter obtained by «SCMP».

«This is also having an unfortunate impact on China’s image to the rest of the world, while eroding foreign investors’ confidence in the Chinese market.»

Singapore as Role Model

On tweaking its Covid measures, the EUCCC raised several proposals: adoption of the best mix of vaccines and boosters; tolerance of positive cases with mild or no symptoms with home quarantining; and enhanced efforts to vaccinate the population including the elderly. 

Interestingly, the EUCCC cited rival hub Singapore’s adoption of such measures as an effective example of transitioning out of the pandemic.  

According to Wuttke, the proposals can help bring China in line with «the successful model that has been adopted in Singapore, which has allowed the country to simultaneously prioritize protection for all its citizens and economic growth».

No End in Sight

Meanwhile, it remains to be seen when Shanghai will effectively lift its lockdown. In addition to the deployment of the Chinese military, there are local reports that claim the lockdown will extend until at least May 1 before a decision will then be made on whether or not to reopen the city. 

According to estimates from Goldman Sachs, China could suffer a 1 percentage point GDP loss for every four weeks of lockdown in Shanghai – nearly one-fifth of Beijing's planned growth target of 5.5 percent – due to the city's critical importance to the country’s overall economy.

«If Shanghai really still wants to be a contender as a potential hub for Asia headquarters, we really need to shift away from mass testing and lockdowns, and we have to implement a strategy that prioritizes vaccinations instead,» said EUCCC executive committee vice president Bettina Schoen-Behanzin, adding that the current disruption is «the final nail in the coffin» for the city’s attractiveness to the rest of the world.