China foreign business sentiment reaches ‘tipping point’ as zero-Covid dents confidence, erodes attraction

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Foreign business sentiment in China has reached “a tipping point” with uncertainty denting confidence and eroding attraction for overseas talent and investment, the British Chamber of Commerce in China said on Tuesday.

The chamber, in its latest position paper, called for “predicable and proportionate” measures to be applied under China’s zero-Covid policy to mitigate disruption to mobility and manufacturing activities.

“Recent sporadic outbreaks of Covid-19 across the country and the corresponding snap lockdowns have taken away one of things most businesses have been able to depend on: a stable and relatively predictable business environment”, the paper said.

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“A growing sense of detachment and isolation among the foreign business community in China is now tangible.

“British business sentiment around China has reached a tipping point.”

The lack of clarity and communication in regards to various policies, goals and processes is perhaps the most significant cause for concern

British Chamber of Commerce in China

It is the latest call for China to tweak its highly restrictive virus controls to mitigate disruption to the economy and stabilise foreign capital.

Uncertainties are “reaching a crescendo”, which are weighing on operations and forcing foreign talent to leave China, with “considerable barriers” to bringing in replacements, the chamber added.

“The lack of clarity and communication in regards to various policies, goals and processes is perhaps the most significant cause for concern.”

Chairman Julian MacCormac welcomed Beijing’s recent measures to address business concerns, but added that the chamber was still waiting to see the actual results on the ground while also looking for long-term certainty.

There remains a big question around what will the current policies and control measures mean for businesses over coming months in China

Julian MacCormac

“It’s still early days very much when it comes to what it means in practice on the ground. We are only seeing the reopening of Shanghai and the resumption of commercial activities in Beijing,” he said.

“There remains a big question around what will the current policies and control measures mean for businesses over coming months in China … how can we become confident if we face continued disruptions? That question is still there. That is of course tied very closely to business confidence.”

The paper singled out the uncertain outlook for virus control, ambiguous regulations on cybersecurity and the crackdown on the private tutoring sector as the major concerns for the British companies.

It also called for a resumption of direct flights between the two countries in an effort to stabilise China’s international talent pool.

“A sizeable outflow” of international talent and a “brain drain” across all industries has taken place, the paper said, due to China’s strict border controls, including an estimated 40 to 60 per cent departure rate of international teachers for the coming school year.

“Most people are now deprived of the opportunity to experience China first-hand and form their own perspectives that are so important for understanding and building trust,” the paper added.

British businesses also continue to struggle with the lack of clarity from regulatory updates, while they are also concerned about compliance issues due to the lack of a clear framework or timeline for implementation.

Foreign companies should be allowed more chances to consult the governments in developing industrial policies and standards and should be granted more market access, especially in government procurement, to ensure competition is based on an equal footing, it said.

China’s coronavirus controls ‘throttling US business confidence’

The chamber, which has been a long-time advocate for more clarity on cyber regulation, called for the defining key concepts and the setting up of a mechanism for cross-border data transfer.

“Steps must be taken to address the management of the [coronavirus] pandemic, the resumption of international travel, greater market reform and continued increased engagement with foreign business, in order to restore the balance and revitalise the optimism that businesses once had in China,” the paper said.

The chamber, though, highlighted long term optimism due to China’s market potential, including financial services, retail and consumer goods and decarbonisation.

“We also firmly believe that should the pandemic situation improve, optimism will be further restored,” the paper concluded.

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