China’s zero-Covid policy tests small businesses in a make-or-break

BEIJING — While China tries to shake off omicron, the country’s zero-Covid policy of swift lockdowns sets small businesses up for a third year of stop-and-start uncertainty.

It’s a critical time for that portion of China’s economy. Medium- and small-sized businesses in the country have an average lifespan of three years, the People’s Bank of China said in 2018, before the pandemic.

Although state-owned corporations play a significant role in China’s economy, it’s the smaller, non-state-owned businesses that account for the majority of national growth and jobs.

As the Covid situation worsened this year, central and local governments issued some support measures —such as rent waivers and tax refunds for certain affected small businesses, especially in services industries.

Shanghai, which is in a two-part lockdown this week, announced about 140 billion yuan ($21.88 billion) in tax relief, according to state media.

But many small businesses “don’t have any income, so cutting taxes and fees doesn’t work anymore,” said an economic analyst, who requested anonymity in order to speak freely about the Covid policy’s impact on growth, currently a sensitive topic in China. That’s according to a CNBC translation of the Chinese.

Businesses are looking to government policies for a clearer sense of whether it’s worth sticking it out for another year, the analyst said. Right now “small businesses don’t have enough confidence. They can’t see how the pandemic will pass.”

China’s Ministry of Commerce wasn’t immediately available for comment ahead of a weekly Thursday afternoon press conference. The Ministry of Industry and Information Technology did not immediately respond to a request for comment.

Mainland China is trying to control its worst Covid outbreak since the initial shock of the pandemic in early 2020 pushed the economy into contraction. The country returned to growth within weeks by using lockdowns to control the virus’ spread domestically.

China has stuck to its zero-Covid policy in the two years since, while other countries have shifted to a looser “live with Covid” policy in the last several months. The mainland has reported far fewer Covid cases or deaths relative to other major countries.

And even with the last few weeks of scattered lockdowns and travel restrictions around major economic areas, other parts of the country are less affected. Anecdotally, Beijing’s city streets are still filled with a fairly normal amount of traffic.

China’s National Bureau of Statistics said earlier this month the impact of Covid would be felt more at a local level than a national one.

China’s Center for Disease Control and Prevention warned in November how a…