European businesses are rethinking their plans for a ‘closed’ China

BEIJING — European businesses in China are revaluating their market plans after this year’s Covid controls further isolated the country from the rest of the world, said Joerg Wuttke, president of the European Union Chamber of Commerce in China.

China’s stringent Covid policy has restricted international travel, and business activity — especially after a two-month lockdown this year in Shanghai.

The tough measures of the last two years initially helped China recover more quickly from the pandemic’s shock compared to other countries.

But the policy increasingly contrasts with a world that’s increasingly relaxing many Covid restrictions.

For European businesses, “we talk about a complete readjustment of our view on China over the last six months,” Wuttke told reporters at a briefing for the chamber’s annual China position paper, released Wednesday.

He said the lockdowns and uncertainty for businesses have turned China into a “closed” and “distinctively different” country that might prompt companies to leave.

So far, most companies haven’t left — only some very small ones, Wuttke said. But he pointed out the chamber isn’t able to survey businesses that decided not to enter China at all.

Foreign direct investment from the EU into China dropped by 11.8% in 2020 from a year earlier, according to the chamber’s position paper. More recent figures weren’t available.

“While there are still ‘a select group of high-profile multinational companies ready to make billion dollar splashes,’ the trend of declining FDI is unlikely to reverse while European executives are heavily restricted from travelling to and from China to develop potential greenfield projects,” the paper said.

China’s economy grew by 2.5% in the first half of the year, well below the official target of around 5.5%. Beijing indicated in late July the country might not reach that target.

Meanwhile, authorities have showed little sign of removing the so-called dynamic zero-Covid policy.

China has reduced quarantine time for international and domestic travelers. But sporadic lockdowns, whether of the tourist island of Hainan or the city of Chengdu, has kept business uncertainty elevated.

Wuttke said he expects the earliest China could open its borders is late 2023, based on the time needed to vaccinate enough of the population.

European businesses that have remained in China increasingly face an environment in which “ideology trumps the economy,” the chamber’s position paper said in its executive summary.

“I’ve been here on and off 40 years and I’ve never…