China’s “inflexible” and “inconsistent” zero-virus policy is crippling European business operations in the country, a major business lobby group said on Wednesday, warning that the companies’ presence “can no longer be taken for granted.”
The report by the European Union Chamber of Commerce in China marks the latest statement from the foreign business community that Beijing’s tough virus containment measures are hurting the world’s second-largest economy and isolating it from the international stage.
China is the last major economy to stick to a strategy of wiping out the emerging virus outbreak through rapid lockdowns, mass testing and prolonged quarantines.
Despite sparking business closures and turmoil in global supply chains, Chinese President Xi Jinping has declared this approach the country’s most “economical and efficient” way forward, and officials have not said when the rules might be eased.
The European Chamber of Commerce – a group of more than 1,800 European companies in China – said in a position paper that the zero Covid-19 outbreak and its “enormous uncertainty” had “negatively impacted the operations of 75% of its members” “.
“As long as there is a threat of a lockdown, China’s business environment will remain unpredictable,” the group said, calling Xi’s flagship policy “inflexible and inconsistently implemented” and warning that ideology appeared to “trump the economy.”
The situation has prompted nearly a quarter of companies to consider moving current or planned investments out of China, the highest percentage in the past decade, it added.
Despite China’s huge growth potential, “the level of participation of European companies can no longer be taken for granted,” the report said.
China cut its mandatory quarantine period for incoming travelers from 21 days to 10 days in June, but flight shortages and high fares remain major obstacles to travel.
The country’s borders have been almost completely closed since 2020, accelerating the “exodus” of European nationals and leaving those still more isolated than before, the report said.
If Beijing continues to adhere to this policy, “the business environment will continue to become more challenging,” it said.
“The rest of the world has largely returned to pre-pandemic ‘normal’ levels, but China remains reluctant to open its doors,” European Chamber President Jorg Wutke wrote in the report’s foreword.
He added that European companies “need China to realize its enormous economic potential”.
China’s economy grew just 0.4% in the second quarter as virus restrictions across the country shut businesses and disrupted supply chains.
Analysts say the country will fall sharply short of its annual growth target of around 5.5 percent.