Global companies suffer under China's 'unsustainable' zero Covid policy
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Global companies suffer under China’s ‘unsustainable’ zero Covid policy

China's enormous services sector suffered its second steepest drop on record in April while manufacturing activities also hit a record low.

WEB DESK by WEB DESK
May 12, 2022, 11:32 am IST
in World
Representative Image (File/Reuters)

Representative Image (File/Reuters)

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Beijing [China]: As businesses in China continue to suffer due to the zero-covid policy, global brands have revealed the damage to their bottom lines as both supply and demand took a major hit with millions of people living under strict lockdown.

Dozens of mainland Chinese cities, including the financial hub of Shanghai, have been locked down as authorities work to stamp out the coronavirus in recent weeks.

Many companies had just run up millions, or billions, of dollars in losses due to the war in Ukraine, which led to a massive — and costly — corporate exodus from Russia. The combination of both events has created a staggering one-two punch for multinational corporations, CNN reported.

“Like it or not, at this point if you’re a multinational, China is probably your first or second-largest consumer market,” said Ben Cavender, managing director of the consultancy China Market Research Group.

Over the last few years, many businesses have worked to shift at least some of their manufacturing outside China, thanks to the trade war with the United States. Last month, Apple warned of huge losses due to the COVID-19 outbreak in China, saying that supply chain issues could hit its sales by as much as USD 4 billion to USD 8 billion this quarter.

Additionally, Microsoft also said that shutdowns in Chinese production had hurt its supply of surface laptops and Xbox consoles and could potentially “have a big impact” on its quarterly performance.

According to CNN, two of the world’s biggest automakers– Volkswagen and Toyota– were forced to suspend production recently. While both companies have since resumed production, they warned that they would only build up gradually as supply chain snags continued.

However, many brands have expressed optimism about recovery for their businesses once the crisis subsides.

China’s enormous services sector suffered its second steepest drop on record in April while manufacturing activities also hit a record low. Despite that, Chinese President Xi Jinping has doubled down on the country’s pandemic approach, saying that the government would “resolutely adhere to” its “zero Covid” policy.

Meanwhile, WHO Director-General Dr Tedros Adhanom Ghebreyesus has termed China’s “zero Covid” policy as “unsustainable”. “When we talk about the zero-COVID strategy, we don’t think that it’s sustainable, considering the behaviour of the virus now and what we anticipate in the future,” he had said.

As per CNN’s latest calculation based on government data, at least 31 cities in China are under either full or partial lockdown, potentially affecting about 214 million people across the country.

While other nations continue to reopen, some foreign companies may consider moving their regional headquarters out of China, according to Jorg Wuttke, president of the European Union Chamber of Commerce in China. (ANI)

 

Topics: ChinaShanghaiZero Covid PolicyAppleMicrosoft
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