New Shanghai COVID-19 Rules Dim China Luxury Market Outlook
SHANGHAI — The Shanghai government’s announcement Tuesday of a policy that requires new arrivals in the city to stay away from public places for five days is likely to put even more pressure on the local luxury retail market.
Starting Thursday, people entering Shanghai were barred from public venues, including restaurants, pubs, shopping malls, department stores, supermarkets, indoor gyms and internet cafes for five days upon entry.
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People traveling to Shanghai must take three nucleic acid tests three days in a row, the last test on their fifth day in the city, before being allowed to travel freely with a green code.
The government said it would “dynamically adjust” the rules in line with the development of the pandemic.
China reported more than 29,700 new cases on Wednesday, topping a record high since the Shanghai outbreak in April. Shanghai reported nine confirmed COVID-19 cases and 58 asymptomatic cases on Wednesday.
After an online backlash, the Shanghai government revised the regulations on Thursday to include a white list for cross-provincial workers who can bypass the five-day rule.
According to a report published by Barclays, the latest round of restrictions in one of China’s most important luxury hubs will bring an “additional headwind to China luxury sales in the fourth quarter.”
“Shanghai’s announcement yesterday is particularly relevant for the luxury sector, as it effectively prevents non-local luxury consumers from making short to mid-length shopping trips into the city,” wrote the report, which was issued Wednesday.
According to an earlier report published by Barclays in September, non-local clients can contribute up to 50 percent of sales to malls in major cities such as Shanghai and Beijing.
The tightening comes as cases spiked in major hubs such as Beijing, Guangzhou and Chongqing after Beijing reenacted a 20-step rule aimed at easing COVID-19-related restrictions.
The 20-step guideline announced less than three weeks ago lifted flight bans and cut the quarantine time for international travelers to five days in centralized quarantine centers and three days at home.
For locally infected people and close contacts, the quarantine requirements were also cut from seven days to five.
But with Beijing still sticking to its “zero-COVID-19” policy, local authorities came under pressure to implement rules that avoid excessive restrictions while reducing new cases.
Shijiazhuang, a northern city not far from the capital, was the first to loosen COVID-19 measures but reverted to daily mass testing for five consecutive days after local cases spiked to over 600 a day.
The southern hub of Guangzhou imposed a five-day lockdown on its largest district on Monday, suspending public transportation and canceling in-person classes for schools. Guangzhou reported more than 8,000 new cases on Wednesday.
After the rules were introduced in Shanghai, cities such as Shenzhen, Nanchang, Xi’an, Sanya, Zhengzhou and Harbin followed up with identical policies. Travel restrictions for arrivals ranged from three to five days. Local governments also urged residents to cancel travel plans if possible.
It remains to be seen how COVID-19 disruption and weak consumer sentiment will affect the appetite for luxury goods. Barclays has previously stated that as long as severe lockdowns are not imposed in key cities, luxury sales in the Asia-Pacific region will be up by around 5 percent in the second half of 2022.
“The development in the following few weeks may be key as we approach the Chinese New Year holiday, which falls early on Jan. 22, 2023, and which is one of the most important periods for Chinese cross-regional travel,” said the Barclays report.
According to a Goldman Sachs report published on Nov. 6, China is likely to exit its “zero-COVID-19” policy in the second quarter of 2023, after the second Congress of the Party next March, when President Xi Jinping will renew his presidency.
