China’s Zero COVID Policy Starts To Scare Away Foreign Business
For almost two years, the country where COVID-19 emerged has been living virtually cut off from the rest of the world. And in the realm of business, China's zero COVID policy has had serious consequences on foreign workers and companies, which may last beyond the pandemic.
It is 4:30 a.m. as the ambulance cuts through the Shanghai night on its way to a hospital in the Pudong district. Disembarked in an isolated building, the Frenchman was first sprayed with a disinfectant before undergoing two serological tests, a PCR test in the nose, another in the mouth and then a lung X-ray.
There is no face in front of him. The staff is masked, visor in front of the eyes and dressed in a full protective suit. There were few words exchanged, but the young man understood that he had tipped into another dimension.
"You have tested positive for COVID-19. Get your things ready, you're going to the hospital," he was warned by a phone call a few hours earlier.
He was about to spend his fourth night of quarantine in a requisitioned hotel room, a must for any traveler arriving in China, even if vaccinated. The news came as a shock. Being positive to COVID-19 in China means total isolation in a quarantine hospital until all traces of the virus disappear. It will sometimes last multiple weeks.
"A few hours later, they came to tell me that all the additional tests were negative for COVID-19," the Frenchman says.
The relief was immense, but the fight was not over. He had to stay in the hospital for another 72 hours for further tests before being taken back to his quarantine room. Three weeks after his arrival on Chinese soil and 24 PCR tests later, he was finally able to return to his job in Beijing.
Hunting down “imported” cases
China has erected a "great health wall" at its borders, horrified at the prospect of seeing the virus reappear from abroad. For almost two years, the country has been largely cut off from the world. Locked in a strategy of zero tolerance toward the virus, Beijing is hunting so-called "imported" cases.
At the end of March 2020, China introduced an almost total ban on the entry of foreign nationals into the country. And it no longer renews the passports of its citizens, except for compelling reasons.
Flights are canceled at the last minute and quarantine rules change without notice.
Planes bound for China are grounded: Beijing is only allowing the equivalent of 2% of the volume of scheduled flights that existed before the pandemic. This is without counting the numerous cancellations decreed by the Chinese authorities to punish companies that carried passengers who tested positive upon arrival.
As a result, there are no more scheduled flights between Germany and China. The number of weekly flights between France and China can be counted on the fingers of one hand, whereas before the emergence of COVID-19 in Wuhan, there were more than 100. The uncertainty is persistent: Flights are canceled at the last minute and quarantine rules change without notice.
The “Great Wall of Health” has left many foreigners stranded outside China. Some had fled the country at the beginning of the epidemic and found themselves unable to return. China has not been issuing tourist or student visas for two years. New work permits are being issued only sparingly, with applicants needing to obtain a letter of invitation from the Chinese authorities.
Fanny Nguyen, a partner at LPA-CGR Avocats in Shanghai, shares the case of a director of operations for a French logistics company who was trying to return for almost a year, but the authorities wouldn’t allow it.
“They asked for the accounts of the subsidiary, observed that the activity was growing and therefore decreed that this expatriate was not essential in China," Nguyen says. His request has finally been accepted after long negotiations and political support.
Conversely, tens of thousands of foreigners find themselves stranded in China, unable to return to their countries of origin unless they leave Chinese soil for good. This drastic option is increasingly favored by families discouraged by the long quarantines and other restrictions.
According to the latest consular figures, the number of French nationals in mainland China (excluding Hong Kong) fell by 11% last year to 12,400. There are now four times as many French people living in Luxembourg as in China! COVID-19 has accelerated the decline of the French community that began seven years ago. And it's not over yet.
A business leader says, "There is a real moral fatigue among expatriates, some of whom have not seen their family and friends for almost three years.”
For many, the summer of 2022 will be the time of a great departure.
Passengers wearing masks ride on an escalator at the Hankow Railway Station in Wuhan.
Shortage of expats
The travel restrictions have a heavy impact on foreign companies. "This is their number one, two and three problem!" says Joerg Wuttke, president of the European Chamber of Commerce in China. The main difficulty is the turnover of staff and the impossibility of bringing in talent for one-off assignments.
An executive of a French service company says, "In addition to visa problems, no one is rushing to work in China knowing the quarantine conditions and the near impossibility of leaving the country for an unknown period of time.”
Wuttke notes that Volkswagen has about 100 expatriates who arrived in 2019 and whose contracts are due to expire. "When the management offers them an extension, they wonder if it's not a joke,” he says.
This shortage of expatriates is accelerating local hiring. Here again, this "sinicization" process had already been underway for several years among foreign subsidiaries anxious to reduce expatriation costs and enhance the skills of Chinese managers. But what was a choice has become an imperative with COVID-19, because of the lack of ability to recruit abroad.
Distrust of foreign headquarters
The closure of the country complicates communication between headquarters and subsidiaries. "I haven’t seen my CEO in two and a half years," one subsidiary manager says. "He used to come to China regularly and I used to go to France. The zero COVID strategy is a form of decoupling between China and the rest of the world.”
Several subsidiary managers interviewed worry that Parisian headquarters will lose their understanding of the Chinese market. "Here, things are moving radically faster than in France," one of them says.
The gap between the perception of China by the head offices and by the subsidiaries is widening.
The gap between the perception of China by the head offices and by the subsidiaries is widening. The very clear deterioration of the country's image in the West is fueling mistrust at headquarters. This disconnect makes decisions more complicated. If China continues to attract investment from around the world, "investments that used to take two weeks to be validated in Paris now takes two months," a business leader in Shanghai says.
Bettina Schoen-Behanzin, vice-president of the European Chamber of Commerce, says that the impact on investment decisions will be felt in the next few years. "Because they are not able to come and see for themselves and are hearing a flood of negative news, more and more companies will prefer to invest elsewhere than in China,” she says.
Indeed, in the past, the visit of the big boss was often a business accelerator. “He had access to high-ranking authorities and met with our partners and major clients," the China boss of a leading French company says. “Internally, his visit helped to get everyone on the same page.”
Upside of a fast economic recovery
Despite these difficulties, China's Zero COVID policy (border closures, technological tracing of the population, massive screening and lockdowns as soon as a few cases appear) has been formidably effective: China reports an official death toll of less than 5,000, which, even if it is questionable, contrasts sharply with the rest of the world.
This zero tolerance has also allowed the Chinese economy to recover very quickly. But it is being put to the test by the ultra-contagious Omicron variant. Voices are being raised — especially outside China — to question this strategy. The IMF has urged Beijing to "readjust" its plan, judging that it is becoming a "burden" for its economy and the rest of the world.
In Tianjin, Xi'An and Ningbo, the lockdowns have recently led to temporary factory closures and disrupted global value chains. With Omicron, quarantines will increase in the country, the German Chamber of Commerce fears.
Uniqlo customers had to stay overnight in the clothing store to be sure they were all negative.
The appearance of the slightest case in a city triggers authorities to go on the offensive. Those who were too slow to react, as in Xi'an, are punished. In Shanghai, more than 30,000 visitors were tested in early November before they could leave Disneyland, following the detection of a single case of COVID in a person who had previously visited the amusement park. More recently, about 50 Uniqlo customers had to stay overnight in the clothing store while they were checked to make sure they were all negative.
In mid-January, some 200 employees of the Publicis advertising agency were trapped for more than 48 hours in their Shanghai offices to undergo PCR tests. Sleeping bags, toiletries and meals were rushed in. For each case of contamination, the person's past whereabouts are carefully traced: contact cases, as well as contact cases of contact cases, are traced, tested and isolated.
Business leaders and medical experts alike note that Beijing has likewise taken no epidemic risk in the organizing of the Winter Olympic Games and the 20th Communist Party Congress slated for the fall. President Xi Jinping has made conquering the coronavirus a personal victory. And it will apparently be fought to the bitter end.
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