After a minimal number of COVID-19 cases over the past two years, China is now battling a sudden resurgence of the virus. The government has doubled down on its zero-COVID policy, vowing to eradicate all cases. Over the past two months, it has rolled out various forms of lockdown and mass testing across many Chinese cities.
And Shanghai, China's economic powerhouse and the base of our Greater China head office, has been at the forefront of this.
Against this background, there are four main questions we keep hearing from western firms interested in China. So we put them to our Shanghai-based China MD, Alex Barton.
1. What’s the current situation in Shanghai?
"Following an outbreak of the Omicron variant in March, the Chinese government implemented strict lockdown measures across the city. The exact nature of the restrictions has varied by district, but steps taken here have been more severe than those taken by western countries over the past couple of years. They include home confinement, frequent mass testing and centralised quarantine for positive cases. Essentially, most residents have been confined to their homes for the past eight to ten weeks."
2. When will the restrictions be lifted?
"Earlier this week, the government announced its intention to lift restrictions gradually over the coming month. The situation looks increasingly positive, although such announcements have been prone to sudden changes before. Reopening will take a step-by-step approach, with the process and timeline varying between districts. For most, the first stage will be allowing residents to make occasional trips outside to run errands, albeit often only within their districts.
"Indeed, several of our Shanghai team have just received passes that allow us to venture out at periodic intervals – varying from once a day to once a week.”
3. How is this affecting people’s ability to do business in China?
"Some sectors have been harder hit than others, with retail being an obvious loser. Nationwide, year-on-year retail sales were down 11.1% in April, according to government data.
"In our field – business development for western tech companies – the biggest change has been an inability to meet Chinese customers face-to-face. But, while moving to virtual environments and working from home have required some adaptation, this is a process most people in the west have already embraced. And this is exactly what our Shanghai team has been doing over the past couple of months, finding new ways to drive business forward.
"From a business perspective, the transition to a ‘new normal’ working environment in the current Shanghai lockdown has arguably been smoother, as professionals in China have had time to prepare. Barring a few months in 2020, the situation over the past couple of years in China has been relatively stable, giving us time to adapt to the new style of working without being forced into it overnight.
“In fact, one of our Shanghai team members has just closed a EUR 1 million deal and a EUR 400,000 deal for a German life sciences client, despite the lockdown!”
4. COVID aside, China seems to be drifting further away from the west, especially the US. How is this affecting western firms’ prospects in the country?
“The Chinese government’s policy shift away from the west, in particular the US, is well-documented. It’s driven by a quest for more economic control, rather than just economic growth. And, as a result, Chinese firms are increasingly looking for domestic solutions – often under government pressure.
“But despite this, the Chinese government has some major problems to solve. And there are big gaps in the capabilities of Chinese firms – which they can’t simply wait for local firms to play catch-up to fill.
“Some pressing examples are food security, an aging population and environment pollution. These present significant opportunities for western firms in the agtech, medtech & life sciences, renewables and environmental cleanup fields.
“And, while trade tensions between China and the US may feel unsettling, they open big opportunities for non-US firms, providing gaps for market entry. Innovative tech companies from the UK, EU and Israel are particularly well-placed to capitalise on this trend.”
For any questions about your business prospects in China, you can contact Alex at alex.barton@intralinkgroup.com