Shanghai’s return to business will be a test for reopening China

As Shanghai recovers from the Covid-19 outbreak and three years of restrictions hindering travel and trade, the financial center is doing so without much evidence of what made it China’s most cosmopolitan city: foreign visitors.

Before the pandemic, its iconic waterfront was usually filled with foreign travelers and business delegations. But on a recent windy day in February, the tourists admiring colonial architecture and tall buildings were from mainland China.

The re-emergence of China’s largest and most international city will be a test of the country’s engagement with the outside world, as politicians start reopening years later than their Western counterparts. Shanghai has been one of the cities hardest hit by the government’s COVID-19 policy as it experienced a draconian two-month lockdown in 2022 that suffocated the economy.

Last month, the city’s mayor, Gong Zheng, told reporters that foreign investment reached a record $23.5 billion last year, which he said “shows that Shanghai continues to be one of the most attractive foreign investment destinations in the world.” .

But after the uncertainty surrounding the zero Covid regime, international business remains reluctant to return to power immediately as it continues to face visa delays and other frustrations. One exporter suggested that some businesses are still hesitant to travel to the country given the recent wave of Covid.

“Shanghai has an opportunity to restore the trust that has been eroded over the past three years,” said Bettina Schon-Behanzin, chair of the Shanghai branch of the European Chamber of Commerce in China, calling on the city government to take “tangible steps.” to create a transparent and predictable business environment.”

Chefs prepare dumplings outside a restaurant in Shanghai's Yuyuan Bazaar.
Shanghai is once again lining up in front of restaurants as the city reopens to domestic travelers © Qilai Shen/Bloomberg

While domestic trade skyrocketed after Beijing removal of pandemic restrictions At the end of last year, the full global reintegration of Shanghai is lagging behind.

The city received just 180,000 international flights last month, compared to 2.7 million in January 2019, according to the airport authority. Foreign tourists are also not yet allowed to enter China.

Shanghai will be a critical engine for restoring sustainable growth across China. consumption slows down delayed opening. The city contributes more to China’s economy than any other city, but its production fell by 0.2 percent in 2022, compared to a 3 percent growth nationwide. Exports, which have supported the economy through most of the pandemic, are also declining amid an uncertain global economic picture.

Former head of the Communists of China in Shanghai Li Qiangthe official in charge of overseeing the quarantine in Shanghai is to be appointed by the Chinese premier at the National People’s Congress, making him the second official after President Xi Jinping in charge of the national economy.

Observers expect international business to start making a serious comeback from March, when Apple CEO Tim Cook is expected to visit China. After three years of isolation, Shanghai is looking to attract foreign business. But many have a range of concerns, including the difficulty of encouraging employees to relocate from abroad after witnessing the hardships of the lockdown.

“It’s about trying to convince European and American leaders that China is still attractive for investment,” said one attendee at a recent private event in Shanghai for international business leaders.

The Shanghai branch of the European Chamber of Commerce in China this month made a number of recommendations to local governments, including reducing barriers to market access. His position paper was removed from the Chinese social network WeChat shortly after it was posted.

“The European consumer is a powerful force creating jobs in the Chinese economy,” said Jörg Wuttke, president of the chamber. “But the open market available to us is very small. In 2021, EU companies sold 23% more to Switzerland than to China.”

PCR testing booths that used to be on almost every corner of Shanghai are being dismantled and some are even up for sale online © Alex Plavevski/EPA-EFE

Yang Jianwen, an economist at the Shanghai Academy of Social Sciences, said property and consumption were “the two biggest problems” China needed to address. Shanghai is well positioned to address both issues, he said, adding that the city’s real estate market “isn’t under a lot of pressure.”

Visible signs are disappearing all over Shanghai that China’s Covid-fighting apparatus is disappearing. Mobile kiosks, where the city’s 26 million residents took mandatory PCR tests almost daily, are up for sale in Xianyu, a second-hand shopping app. Queues are once again forming outside restaurants, and face masks, ubiquitous in December and January, when the virus swept through the city again, have all but disappeared from the streets.

“It’s much noisier here than I imagined,” said Zhang Yang, a university student from the nearby city of Hangzhou, who came to Shanghai for the first time with two friends. Only one of the trio was wearing a mask, but she said it was because she wasn’t wearing makeup.

Shanghai Metro data showed an increase in the number of passengers per day in February to 9.5 million people, approaching pre-pandemic levels by more than 10 million people.

“The virus has subsided, children can go to school, and we can travel,” said Zhang Baolian, a 70-year-old former electrician who used to visit a bakery on Nanjing Road, the city’s most famous shopping street. “Now there is nothing to be afraid of.”

There are first signs of a recovery in business activity. Canadian coffee group Tim Hortons partners with Popeyes Relaunch American fried chicken brand in China.

Lei, a 37-year-old Shanghai resident, plans to open a restaurant in March and rented his store at the height of the outbreak late last year. He says rents for similar stores have now increased by 30 percent. In a WeChat group, he saw a villa on a popular street rented out within an hour of being listed for sale this week. “While the city has not fully recovered, queues for restaurants have returned,” he said.

Last week, a few doors down from the Popeyes restaurant in downtown Shanghai, a long queue lined up for lunch in front of Guang Ming Cun Restaurant, famous for its local food and popular with the city’s seniors.

“This is the first time I’ve stood in such a queue in three years,” said Ma, 80, a masked pensioner. “The queue will be about half an hour,” he added. “It used to be longer.”

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