Shenzhen firms tend wounds after COVID ‘war’ – Chinese state media

FILE PHOTO: A worker in a protective suit takes a swab from a resident of a locked-down apartment complex following the outbreak of the coronavirus disease (COVID-19) in Shenzhen, Guangdong province, China, March 14, 2022. Picture was taken March 14, 2022 cnsphoto via REUTERS

March 29, 2022

BEIJING (Reuters) – China’s manufacturing hub of Shenzhen is gradually bouncing back after being hit by shutdowns amid a recent COVID-19 outbreak, but many smaller companies are concerned about their near-term prospects, clouded by uncertain demand, Securities Times reported.

Shenzhen’s recent “war” on COVID-19 has hurt up to 93% of local small and medium-sized businesses surveyed by the state-controlled newspaper, with many suffering production disruptions due to shutdowns, supply chain disruptions and ordering delays executions.

Shenzhen allowed businesses and factories to resume operations on March 21 after authorities said the latest outbreak had been brought under control.

The city, which has struggled with multiple outbreaks so far this year, conducted three rounds of mass testing in March following a spike in infections.

The outbreaks have been modest by international standards, but Shenzhen authorities have been quick to take action, including business closures as part of China’s so-called “dynamic” zero-COVID policy.

In the Securities Times survey, 93% of 97 responding companies said the epidemic had increased their operating costs, including labor, logistics and raw material costs.

About half of them had 100 to 500 employees, while 26% had more than 500 employees.

Their ailments, they said, were compounded by difficulties in accessing finance.

Of greater concern than the short-term impact of the shutdowns is the long-term drop in demand caused by the epidemic, the newspaper warned, citing a “profound” impact of COVID-19 on Chinese demand.

Businesses complained about changes in consumer behavior from delays in getting surgical procedures to buying new cellphones.

Data on China’s manufacturing and service sectors for March, due out in the coming days, is expected to reflect the COVID-related pain.

The epicenter of China’s efforts to contain COVID has since shifted to Shanghai, where the megacity of 26 million faces its worst flare-up since China first erupted in 2020.

Beijing has vowed to stabilize economic growth in a year when President Xi Jinping is expected to secure a third term as chairman of a five-year congress of the ruling Communist Party in the fall.

“Although Beijing has also called on some occasions to minimize the economic costs (of its zero-COVID strategy), in practice local government officials have tightened mandatory mass testing and social distancing measures for fear of being charged with dereliction of duty,” Nomura said .

“The result is that China’s economy is under the strongest pressure since spring 2020.”

(This story is refiled to correct typos in paragraph 12.)

(Reporting by Ryan Woo; Editing by Bernard Orr)