Total Disaster: Shanghai’s shutdown puts small businesses at risk

Cotton Ding was heartbroken when more than 26 million residents of Shanghai were placed under lockdown last week.

“We’ve been fighting the epidemic since 2020, and we’ve seen a lot of change in the last two years,” Ding, who runs two restaurants in the former colonial palace in the former French discount center, told Al Jazeera.

“We were finally back on our feet, business was back and doing somewhat better and then the current outbreaks and lockdowns hit.”

Ding’s biggest season is often spring, with guests taking advantage of its green veranda to enjoy the mild Shanghai climate.

Instead, he described the business as a “complete disaster” as a result of the lockdown, which officials extended this week after failing to contain the two-stage lockdown coronavirus outbreak imposed on March 28 to permanently include the entire city.

“Typically, we hire and train new staff for this period, improve our furniture arrangements and enliven the garden,” he explained.

“We have been instructed to close our doors now, and we expect to be closed most of April.”

Ding said he had no idea when he would be ready to reopen or resume operations at full capacity.

“Anxiety has made it impossible for me to sleep,” he explained.

Authorities in China’s most populous cities have recorded more than 114,000 cases since the beginning of March, far exceeding the national average of the previous two years. Shanghai filed 19,982 cases on Thursday, the highest daily total ever.

Chinese officials have described the outbreak as “very serious” and have mobilized thousands of healthcare professionals, including the military, to help prevent infection in the city.

Nevertheless, officials have failed to register any deaths in the city, raising suspicions about Chinese official data.

There is evidence that public confidence in China’s zero-tolerance policy as an economic toll on the virus known as “Dynamic Zero Covid” has waned.

According to a video circulated on social media, residents are unable to get basic necessities like food and water due to the constant closure of shops and overloading of delivery services. Other locals in the recording complained about the crowded and unsanitary situation in the city’s public quarantine centers, such as the lack of dirty communal toilets and shower facilities.

In one video, a woman begs her husband to give up her property so that her husband can receive cancer treatment. Residents were also outraged by the removal of covid-positive children from their parents, prompting officials to cave in to public pressure and to cancel the program on Wednesday.

The behemoth prolonged shutdown of China’s industry will have far-reaching economic effects at home and abroad. Shanghai is the country’s main financial and manufacturing center, accounting for 4% of China’s GDP. The city is home to the world’s largest port, which handles about 20% of China’s exports.

According to Zia Le, chief Asia economist at Banco Bilbao Vizcaya Argentina (BBVA), the economic impact of the shutdown will be determined by its duration.

“If the lockdown lasts only two months, say April and May, China’s growth will slow 0.3-0.5 percent this year,” Xia added. If the lockdown continues in the third quarter, China’s growth will slow to 1.5-2 percent.

According to Zia, if the lockdown continues until June, China will not be able to meet its official growth target of 5.5 percent, “although the authorities implement more development initiatives.”

Beijing has warned of significant headwinds in the economy this year, including the effects of the epidemic, but has shown no indication that they plan to significantly change its zero-tolerance policy.

The non-manufacturing Purchasing Managers’ Index (PMI) fell to 51.4 from 48.6 in the previous month, according to China’s official data.

A private sector survey shows a worse picture. According to Kaixin data released on Wednesday, China’s PMI fell from 50.2 in February to 42 in March, the lowest level since the onset of the epidemic in February 2020.

“Overall, the outbreak reduced activity in both industry and services in March,” Wang Zhe, a senior economist at Kaixin Insight Group, said in a statement. “Like the previous Kovid outbreak in China, the service sector suffered more severely than manufacturing.”

“Policymakers should focus on vulnerable populations and strengthen support for critical industries, small and micro enterprises and start-ups to help stabilize market expectations,” Wang added.

As the rest of the world learns to live with the virus, China’s unusually drastic measures have raised concerns about the country’s competitiveness in world markets where epidemic limitations are usually a thing of the past.

“In a truly ‘open’ economy, Chinese exporters will lose more orders to foreign competitors,” said Xia, a BBVA economist. “Before restarting its economy, China is expected to attract less foreign direct investment.” Meanwhile, foreign investors may lose interest in Chinese assets. ”

According to Zia, the zero covid policy will not work in the long run.

“I’m not suggesting they should abandon this plan once,” he added, “but it’s time to test the strategy and adjust at some point.” “A prudent transformation strategy will strike a decent balance between saving lives and preserving economic success.”

Stress and anxiety

The previous few weeks were financially devastating for Shanghai Restaurant Ding.

“It has completely destroyed our financial flow,” he explained. “As a small firm, we would be unable to pay our rent, employees and suppliers immediately.” It will take us a few years to pay off our obligations. ”

Ding expressed concern for the well-being of his 50 employees, whose livelihoods he felt were responsible for.

“Uncertainty has caused them a lot of anxiety and stress,” he explained. “I communicate with them regularly and they tell me they are scared and restless.”

The Chinese government has provided limited financial support to companies, including 140 billion yuan ($ 22 billion) in tax relief and a three-month rental discount for small tenants in state-owned enterprises.

“It’s a small proportion of our losses, and you don’t have to pay a lot of taxes anyway if you don’t do something,” Ding explained.

“Unfortunately, both of my sites have been kept private, so I will not be eligible for a discount.” I will personally try to negotiate a reduction with my landlord, but only one of them has tried to increase the rent by 15%, it can be difficult. “

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