Michael Hart became president of the American Chamber of Commerce in March and has had some dull moments at the Beijing-based group ever since. First came tougher Covid-linked travel restrictions that have created problems for members, followed by disruptive Shanghai lockdowns that hurt supply chains and investment plans for American businesses. This week, massive covid tests have reached Beijing’s population of about 20 million.
“There was probably a little bit of arrogance among the population” in Beijing about the prospects of keeping Covid cases to zero under China’s zero Covid policy, he said in a Zoom interview on Monday. “Many people thought that Shanghai was unique and that these cases would not reach Beijing”, the proud capital of China.
However, expats in Beijing saw it differently. “One of the big differences between the foreign business community and the Chinese business community is that most people in the foreign business community have these references from home,” and they weren’t as optimistic about a policy to bring cases down to zero. Easily communicable Omicron. We haven’t seen it at work anywhere else.”
In addition, he said, “most of us have family members who have been vaccinated and survived Covid, and then went back to normal life. So when we see what’s happening here, the question is, ‘Haven’t we already learned this lesson?’”
Hart has learned many lessons in a career in Asia that has spanned more than a quarter century after landing in Taiwan in 1996. He moved to the mainland in 2003 and was an executive with JLL in both Shanghai and Tianjin before setting up his own firm. in Tianjin in 2019, bringing you insights into the investment and logistics decisions made by companies in the world’s No. 2 economy.
Beijing, in addition to China’s center of political power and home to Communist Party Chairman Xi Jinping, is a major business center with the country’s largest number of billionaires (83 on the 2022 Forbes Billionaires List), including leading techies like TikTok owner ByteDance, co-founder Zhang Yiming, JD.com chairman Richard Liu, and Xiaomi CEO Lei Jun.
Back in Shanghai, the damage and frustration caused by the closures of 26 million people and business interruption have been costly for many companies. Residents took to social media en masse to complain about food shortages and unsanitary conditions in state-run quarantine centers, among other difficulties. About 20% of AmCham’s own workforce did not show up for work on Tuesday.
“A lot of the frustrations that our members have is (that) some of them will say that we have senior executives who say, ‘We oversee thousands of people. We have information. We can see what is happening. But instead they are told to stay home and close the factories.’ That’s very frustrating,” Hart said.
“In many cases, American companies have things that they would like to share. They have trucks for transportation. They have food to distribute. They have medical care to try to provide. There is no way out of that.”
On the business side, supply chain disruptions are also causing frustration. “People here are saying, ‘Why doesn’t the US want China to be part of its supply chain?’ The truth is yes, but what the lockdown in Shanghai has told people is that it can be risky if a city and a country are part of your global supply chain. I don’t think there is anything anti-China in any of it. It is concern for the resilience of its global supply chain.”
Members, Hart said, are also upset about the lack of information. “When will the lockdown end? What is the policy in the future? That’s where the big frustration lies. Shanghai is slowly reopening, but uncertainty remains. It looks like we are starting to get on the road to reopening, but there is no clear timeline. What companies don’t like is uncertainty, and what we have with the closure of Shanghai is a lot of uncertainty.”
Even after the current lockdowns end, the impact on foreign companies in China will continue for years, Hart believes. Even before the latest outbreaks this year, about 70% of companies had reported difficulty getting executives to come to China on long visas or quarantines, she said. “Travel is too expensive because there are not enough flights,” she noted. Executives who normally come and personally review expensive investment projects are not allowed in.
“Right now, there is no way for global management to come to China. So what’s going on? Even people who think China is a good place to invest are starting to push China down the list of places I would invest in because it’s too difficult,” Hart said.
At the same time, the leader of AmCham China is starting to “see executives leaving or executives not being able to come in; that starts to hurt his business,” he said. “And that’s kind of a canary in the coal mine, warning us if top executives aren’t willing to work in China. This will have implications for attracting new projects and managing global research operations.
He noted that another warning in Shanghai for the rest of China is the loss of teachers in international schools that will lessen China’s attractiveness to expat families in the future. “If you don’t have international schools, you can’t have international communities,” Hart noted.
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