'Covid zero' and Ukraine make China less attractive for EU businesses

A neighborhood under Covid-19 lockdown in Shanghai's Jing'an district on May 4, 2022. AFP - HECTOR RETAMAL

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2 mins

The “zero Covid” policy in China and the war in Ukraine make the Chinese market less attractive for European companies.

This is the conclusion of a study published this Thursday, May 5 by the EU Chamber of Commerce in China.

Nearly a quarter of respondents would consider relocating part of their investments to other Asian countries.

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With our correspondent in Beijing,

Stéphane Lagarde

Nearly 40% of Chinese GDP affected by the confinement and semi-confinement of dozens of megacities in China.

Inevitably, the “zero Covid” strategy also has an impact on foreign companies present on the Chinese market.

Of the more than 370 European companies questioned in this study, 60% expect a drop in income this year, 77% think that China is less attractive and, more seriously, 23% think of moving part of their investments, underway or planned, particularly in South and South-East Asia.

Zero Covid and lack of prospects

A lack of confidence in the future which also has consequences on recruitment.

Difficult to bring in talents accompanied by their families, when the borders are closed, not to mention the problem of schools.

Teacher turnover was 25% at the start of the 2021 academic year, 40% last year and, this year, it is believed that 50% of teachers in international schools will have to be replaced, with an average of six months of procedures for teacher visas.

It's difficult, explained one of the speakers during the press conference this Thursday, May 5 in Beijing.

There is a “

 change of context

 ”, underlines another: “ 

Shanghai, which was once considered the best managed city in China, has been locked for a month and there is no end in sight (…) Even if it is a year from now, we need to know when China will reopen. 

“ 

What kills business is uncertainty and the lack of prospects 

,” adds the latter.

Impact of the war in Ukraine

A lack of horizon reinforced by the war in Ukraine, which interrupted the silk rail trains between China and Europe and forced a bypass of Russian and Ukrainian airspace, which further disrupted logistics and made the freight cost.

►Frequency Asia: What impact of the war in Ukraine on the "new silk roads"?

The European Union Chamber of Commerce report stresses that China should focus more on vaccinating its people.

An economic imperative in the face of “whatever it costs” of “zero Covid”.

The Chinese strategy of absolute non-tolerance with the virus is today undermined by Omicron, but still defended by the communist leaders in the name of the health of the Chinese.

For the Chamber of Commerce of the European Union, a return to the "beautiful days" is necessary, knowing that China represents 30% of world trade.

►International guest: "Zero-Covid" policy, "a real logistical problem that angers the population"

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  • China

  • Coronavirus

  • Economy

  • Economic crisis

  • Ukraine

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