Covid blockade in Shanghai: the city is aiming for business as usual, but obstacles remain

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

From June 1, companies will no longer need so-called “white list” approval to have employees working on site. However, those wishing to get to work will still have to submit 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 of people confined to their homes and causing high levels of public distress. The restrictions disrupted business in virtually every sector and brought the city to a standstill.
Major car manufacturers, including Tesla (TSLA) And Volkswagen (VLKAF)have been forced to temporarily suspend production, while electronics manufacturers love Apple (AAPL) they also reported major supply chain disruptions across the city.
Some companies also operate with so-called “closed-loop” systems, which allow essential staff to continue working as long as they stay within certain parameters.

On Sunday, authorities said they will work to loosen Covid’s “unreasonable” rules. The government also plans to offer tax breaks and rental assistance to businesses and support for some construction projects.

It will also reduce the sales tax on some passenger cars and distribute subsidies to those who replace their cars with purely electric cars, according to the state-owned Xinhua news agency. Shanghai had zero auto sales for the entire month of April.

Concerns remain

The Chinese 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.

Last week, UBS downgraded its 2022 GDP estimate to 3%, far below the official Chinese target of 5.5%.

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

The gravity of the situation led Chinese senior officials to hold an emergency meeting last week, during which they promised to implement new 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 Shanghai US Chamber of Commerce, said that while he welcomed the city’s new measures, it didn’t alleviate all his concerns.

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

“[But] too often, sub-district and even neighborhood officials have prevented or slowed the resumption of commercial activities by imposing excessive bureaucracy. “

Investors across the region welcomed the news on Monday.

Asian markets rose, with Japan Nikkei (N225) index and Hong Kong Hang Seng Index (HSI) each with an increase of more than 2%. that of South Korea Kospi (COSPI) jumped 1.2%.
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The reaction is “a clear signal that the light at the end of the Covid lockdown … has gotten a little brighter,” Stephen Innes, managing partner of SPI Asset Management, told CNN Business.

But the Chinese markets were quieter. The reference point Shanghai composite (SHCOMP) the index was up 0.6%, while the Shenzhen Composite gained 1%.

“The tepid response on mainland actions suggests that a broader economic reopening may be needed,” Innes said.

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

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