China’s “inflexible” and “inconsistent” zero-Covid policy is crippling European business operations in the country, a major business lobby said Wednesday, warning that the presence of the companies “can no longer be taken for granted”.

The report by the European Union’s Chamber of Commerce in China marks the latest statement by the foreign business community that Beijing’s hardline virus curbs are harming the world’s second-largest economy and isolating it on the international stage.

Shanghai skyline. Photo: Daniel Cukier/Flickr.

China is the last major economy wedded to a strategy of stamping out emerging virus outbreaks as they arise, through a combination of snap lockdowns, mass testing and lengthy quarantines.

Despite sparking business closures and roiling global supply chains, President Xi Jinping has declared the approach China’s most “economic and effective” path forward, and officials have not indicated when the rules might be eased.

The European Chamber — a group of more than 1,800 European companies in China — said in a position paper that zero-Covid and its “massive uncertainty” had had a “negative impact” on 75 percent of its members’ operations.

“China’s business environment will remain unpredictable as long as the threat of lockdowns exists,” the organisation said, calling Xi’s flagship policy “inflexible and inconsistently implemented” and cautioning that ideology seemed to be “trumping the economy”.

It added that the situation had prompted nearly a quarter of firms to consider shifting current or planned investments out of China, the highest percentage in the past decade.

Shanghai, in China, in July 2020. Photo: John Pasden, via Flickr.

Despite China’s significant growth potential, “the extent of European firms’ engagement can no longer be taken for granted”, the report said.

China in June reduced the length of mandatory quarantine for inbound travellers from 21 to 10 days, but a lack of flights and sky-high ticket prices remain a major obstacle to travel.

The near-total shutdown of the country’s borders since 2020 has quickened an “exodus” of European nationals and left those who remain more isolated than before, according to the report.

If Beijing continues to persist with the policy, “the business environment will continue to become more challenging”, it said.

In a foreword to the report, European Chamber President Joerg Wuttke wrote that “the rest of the world has largely resumed pre-pandemic levels of ‘normality’, but China remains reluctant to open its doors”.

European companies “need China to fulfil its huge economic potential”, he added.

The Shanghai stock exchange. Photo: Wikicommons.

China’s economy expanded just 0.4 percent in the second quarter as virus restrictions across swathes of the country caused business shutdowns and roiled supply chains.

Analysts say the country is set to miss its annual growth target of around 5.5 percent by a wide margin.

Support HKFP  |  Code of Ethics  |  Error/typo?  |  Contact Us  |  Newsletter  | Transparency & Annual Report


AFP is a global news agency delivering fast, in-depth coverage of the events shaping our world from wars and conflicts to politics, sports, entertainment and the latest breakthroughs in health, science and technology.