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New questions arise for US companies in China after 'discordant' end to zero-Covid policy

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US businesses in China are optimistic that easing the country’s strict zero Covid policies will pave the way for better business, US Chamber of Commerce President Michael Hart said in a statement on Thursday. interview from Beijing.

“Most of our member companies are now quite optimistic that the impact of Covid itself will be short-lived – one to three months, and it will be over,” Hart said via Zoom. “Everyone is delighted that the flights are open and the quarantine (on arrival) is over.”

Uncertainty over the speed of a recovery in consumer spending in the world’s second-largest economy remains as Covid-19 cases continue to spread. “It’s still an unanswered question about how consumer spending will recover. I think it’s going to take a little while — probably not in the first quarter,” Hart said. Companies are more evenly hoping that an improved political atmosphere between the United States and China after a summit between President Joe Biden and President Xi Jinping in November will lead to better business relations, he said. .

The American Chamber of Commerce in China, headquartered in Beijing, has nearly 1,000 members, making it one of the largest foreign business groups in the country. Members include Boeing, Merck, Apple, Intel and KKR. Edited interview excerpts follow.

Flannery: How do you measure the impact of the relaxation of the “zero-Covid” policy for American companies?

Hart: People have always liked the predictability of China. With the zero-Covid policy, there was no predictability. It was very disruptive due to constant testing, constant change and the inability to travel within the country. People didn’t like that.

On the one hand, corporate America is very happy that zero-Covid is over, but the sudden change has been a bit shocking – everyone is getting used to it.

Another element is Covid itself, due to its sweeping. I had Covid. Our staff went from 0% to 40% positive in about four days; then, in about a week, it was 60%, and in 10 days, it was 80%. Now, more than 80% of our staff have gone through the Covid.

Most of our member companies are now quite optimistic that the impact of Covid itself will be short-lived – one to three months, and it will be over. Everyone is happy that the flights are open and the quarantine is over.

Flannery: What does this mean for investing?

Hart: We are warning the Chinese government that FDI (foreign direct investment) will not return as soon as flights open. And what we’re hearing is that flights may not return (much) until March. Many US airlines already have their planes on other routes. Chinese airlines will be able to ramp up more quickly.

Flannery: What will affect IDEs?

Hart: Normally I would say it’s potentially a two-year process: there’s interest in investing, then due diligence, then setting up the actual investment. The big (downward) impact will be next year when we have gone three full years since the onset of Covid.

Flannery: Many American companies are focused on Chinese consumers. Where is the recovery in consumer spending?

Hart: That’s an interesting question. There have been a few photos over the past two days of visa application lines forming outside the US Embassy. One question is whether many people will go (overseas) for a vacation and spend money they haven’t spent in China in the last couple of years.

Most young Chinese have never experienced a recession. Due to rising costs, a number of Chinese are much more conservative with their money. Overall, it’s still an unanswered question about how consumer spending will recover. I think it’s going to take a little while – probably not in the first trimester.

Flannery: There seems to be hope for improved overall US-China relations after the Biden-Xi meeting and other developments. Do you agree with that, and what do these types of atmospheres mean for American companies in China?

Hart: There are currently positive signs in US-China relations. First, the Biden-Xi meeting put a floor under the relationship. Both groups realized that they needed each other, and that was positive.

Second, there were actually a few meetings last month or early December between working-level government officials. Secretary of State Blinken is expected to visit China in early February. There are potential plans for Biden to visit China in 2023, so everything seems to be going in the right direction.

A more cautious point is that Congress is still quite cold towards China. The House is setting up a select committee to conduct investigations and (there is) some concern that any company with investments in China could be part of the committee’s work. It depends on what the China Select Committee actually does. With the fireworks on the House Speakers’ race, maybe this committee won’t be so aggressive. This came out of the discussions we had with members of Congress (recently). No one (in Congress) is pro-China. Everyone is either a hawk or a super hawk right now over China.

Flannery: Do you have any specific expectations for what will come out of Antony Blinken’s visit next month?

Hart: First, the fact that he is coming is a good sign that the United States is talking to China. The other thing that is positive is that Ambassador Qin Gang has been promoted to head the Ministry of Foreign Affairs. Many American businessmen who have met him love him; they think his recent experience in the United States is probably helpful. It’s probably a good thing that you have a foreign minister who has a very clear and very sober view of US-China relations from DC.

See related articles:

China to end quarantine for international arrivals from January 8

More than a million people could die in China from Covid until 2023 – Report

US Ambassador to China Qin Gang promoted to foreign minister

US and China advance talks on pact to accelerate cancer drug trials

@rfannerychina

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