China’s Zero-COVID Policies Prompt U.S. Firms in Shanghai to Cut Forecasts: Survey

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SHANGHAI – Over 90% of U.S. multinational firms surveyed by the American Chamber of Commerce (AmCham) in Shanghai have cut their annual revenue projections in the wake of the city’s grueling two-month lockdown, the business group said on Wednesday.

Of 133 member companies surveyed by AmCham Shanghai, 93% said they had reduced their revenue forecast for this year, with a quarter expecting a drop of more than 20% compared with original projections.

A quarter of the 64 consumer and services companies and 20% of the 69 manufacturers said they planned to decrease investment in China. Only one company said it planned to increase investment in the country, where a zero-COVID policy is causing concern about further restrictions and economic fallout.

The survey, conducted a week after Shanghai’s population of 25 million officially exited lockdown on June 1, also found only 35% of manufacturers operating at full throttle, with a quarter operating below 75% of usual capacity.

The most common issue they reported inhibiting production was the inability of workers to move freely between homes and workplaces.

“To restore confidence, the Shanghai government must act quickly to ensure unhindered supply chains, logistics and worker mobility and to accelerate the provision of financial support to businesses,” said Eric Zheng, president of AmCham Shanghai.

Shanghai’s two-month lockdown fueled widespread frustration and even rare protests among its residents as they struggled to access necessities and lost income. It also battered China’s economy, disrupting supply chains and slowing international trade.

But China has continued its zero-COVID strategy, saying it is needed to protect the elderly and the medical system, even as other countries try to live with the virus, meaning the possibility of lockdowns loom every time a new case is found.

In practice, while most curbs have been lifted, many people in Shanghai still remain in lockdown for periods from a few days to several weeks due to such incidents.

Authorities in the city, where U.S. companies from Tesla to Procter & Gamble have large operations, are seeking to mend relations with foreign firms to restore confidence, holding multiple roundtables and relaxing some visa requirements.

But the survey also showed that 87% of respondents said Shanghai should limit the use of lockdowns to manage future COVID-19 outbreaks. The city needs to “return to its pro-business mindset while dealing with the pandemic,” Zheng said.

(Reporting by Casey Hall; editing by Mark Potter)

Photograph: In this photo released by Xinhua News Agency, a container ship from Japan is anchored at the container dock of Shanghai’s Yangshan Port in east China on April 27, 2022. China’s trade growth rebounded in May after anti-virus restrictions, which shut down Shanghai and other industrial centers, began to ease, according to a customs agency statement issued on Thursday, June 9, 2022. Photo credit: Chen Jianli/Xinhua via AP, File.