Shanghai Covid lockdown: City aims for status quo but obstacles remain

0

Shanghai authorities pledged on Sunday to allow all businesses to open from Wednesday. The city’s deputy mayor, Wu Qing, announced the easing of restrictions at a press conference, alongside a series of 50 new measures taken to revive the city’s struggling economy.

From June 1, companies will no longer need a so-called “white list” approval to have employees working on site. However, those who wish to go to work will still have to present a negative Covid test 72 hours before taking public transport.

Shanghai has been under some form of lockdown since late March, leaving tens of millions confined to their homes and causing high levels of public distress. The restrictions have disrupted business in virtually every sector and brought the city to a standstill.
Major car manufacturers, including You’re here (TSLA) and volkswagen (VLKAF)have been forced to temporarily suspend production, while electronics manufacturers like Apple (AAPL) also reported severe supply chain disruptions in the city.
Some companies are also operating under so-called “closed loop” systems, which allow essential staff to continue working provided they meet certain parameters.

On Sunday, authorities said they would work to relax the “unreasonable” Covid rules. The government also plans to offer tax breaks and rental assistance to businesses, as well as support for some construction projects.

It will also reduce a sales tax on certain passenger vehicles and give subsidies to those who replace their cars with purely electric ones, according to the official Xinhua news agency. Shanghai recorded no car sales for the entire month of April.

Concerns remain

China’s economy has been hit hard by the pandemic and the government’s “zero Covid” approach, forcing analysts to lower their growth forecasts for the year.

UBS last week lowered its GDP estimate for 2022 to 3%, well below China’s official target of 5.5%.

“The continued restrictions and lack of clarity on an exit strategy from current Covid policy are likely to weaken business and consumer confidence and hamper the release of pent-up demand,” the bank’s economists wrote in a report. .

The gravity of the situation led senior Chinese officials to hold an emergency meeting last week, where they pledged to roll out further relief measures to help stabilize the economy. These include small business loans, higher tax refunds and financial support for the aviation industry.

Eric Zheng, president of the American Chamber of Commerce in Shanghai, said while he welcomed the city’s new measures, they had not allayed his concerns.

“For American businesses, the number one priority is to resume normal operations as soon as possible,” he told CNN Business.

“[But] too often, sub-district and even ward officials have prevented or slowed the resumption of business activities by imposing excessive red tape. »

Investors across the region seemed to welcome the news on Monday.

Asian markets grew, with Japan Nikkei (N225) the index and that of Hong Kong Hang Seng Index (HSI) each increasing by more than 2%. South Korea Kospi (KOSPI) jumped 1.2%.
Chief trader says Chinese markets are

The reaction is “a clear sign that the light at the end of the Covid lockdown…has become a bit brighter,” Stephen Innes, managing partner at SPI Asset Management, told CNN Business.

But the Chinese markets were more discreet. The reference Shanghai composite (SHCOMP) the index rose 0.6%, while the Shenzhen Composite gained 1%.

“The lukewarm response to mainland equities suggests there may be a need for a broader economic reopening,” Innes said.

——CNN’s Shawn Deng, Elizabeth Yee and Lauren Lau contributed to this report.

Share.

Comments are closed.