The government is interfering for the first time in decades in the work of companies..and the “black market” appears again

“Zero Covid” revives the specter of “planned economy” in China

Many cities have closed highway exits, halting e-commerce deliveries.

From the source

Yang Wenhui, 47, a self-made Chinese businessman, is an example of China's rise to becoming a global power.

He grew up poor, working as a farmer and construction worker before joining the country's nascent logistics industry.

In 2003, he established his own shipping company, and made a fortune with the launch of online shopping and selling in 2010.

"Zero Covid"

And when the “Corona” virus began to spread in China, the government sought to implement a “zero Covid” policy by closing dozens of cities, imposing restrictions on internal travel, and stopping transport trucks from working, which pushed shipping prices to rise 20% within weeks.

Wenhui said he's been in the logistics business for 28 years, but he's never seen a mess like this.

"I lost tens of thousands of dollars last March," he added.

giant machine

The Chinese economy is a giant and advanced machine, but it requires several parts to work in harmony. In China, there are 1.4 billion consumers, behind them are 150 million registered companies that provide jobs, food, and everything that keeps the economy machine running.

Now, in the name of controlling the pandemic, the Chinese government is interfering with the economy in a way that the country has not seen for decades, negatively affecting business, and businessmen are concerned that the country is starting to return to a “planned economy.”

balance and control

In the past two years, many of the world's governments have sought a balance between controlling the pandemic and keeping business open.

China has been largely successful in this until recently.

But the "Omicron" mutant caused a dangerous increase in cases, so the country doubled its "zero Covid" policy, which aims to focus on reducing death and infection rates.

Since last March, China has reported half a million cases of the virus, and 48 deaths as of last Friday.

The closure turned Shanghai, China's largest city, with a population of 25 million people, into a ghost town, especially with the suspension of many factories, shops and restaurants across the country.

However, the strict government measures to confront the pandemic are inflicting heavy losses on the economy, as national consumption decreased by 3.5% in March 2022, and spending on restaurants decreased by 16%.

loss of confidence

An economist at the University of Hong Kong, Qiu Chen, warned of the inability of private companies to continue to operate, citing fears of accelerating external migration and reducing the desire to invest.

He added, "Once people lose confidence in the country's future, it will be difficult for the economy to recover from the impact of the (zero Covid) policy."

The business community is also anxiously awaiting whether the government will apply the Shanghai lockdown model to other cities, a model in a "planned economy", when the government controls business activities, rather than allowing the market to regulate supply and demand.

During the pandemic, the Shanghai government overturned trading regulations, causing scarcity of supplies and a proliferation of black markets.

Some neighborhoods only allow the distribution of government-regulated groceries, while others do not allow their residents to buy diapers, baby formula and toilet paper because they are not essential.

Elsewhere in China, fruits and coffee are luxuries.

planned economy

Historically, starting in the 1980s, China moved away from its planned economy, because it left everyone poor.

It also led to the failure of the former Soviet Union and North Korea.

The CEO of a high-profile consumer brand, who preferred not to be named, wonders how long her company's money can last?

She said the company raised $100 million last year and has ambitious expansion plans, but nearly a third of her company's 150 retail stores have closed their doors, and Internet sales are currently suffering because many cities have closed highway exits, stopping E-commerce deliveries.

real estate anxiety

Nanjing, Jiangsu Province real estate developer Jun Ji is anxiously watching the shutdowns in Shanghai and other cities.

He believes that many people will lose their jobs and find it difficult to pay off their mortgages.

He asked, "When no one can afford housing, who will buy his apartment?"

"I am worried if we will go back to the planned economy, because if the economy continues to decline, we may become poor again," he added.

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