New AmCham China president sees frustration and risk as Beijing begins mass Covid testing

Michael Hart became president of the American Chamber of Commerce in China in March and has recently been bored with the Beijing-based group. First came tighter Covid-related travel restrictions that created problems for members, followed by disruptive lockdowns in Shanghai that hurt supply chains and investment plans for American companies. This week, mass Covid testing arrived to Beijing’s population of some 20 million.

“There was probably a bit of hubris among the people” in Beijing over the prospects of zeroing Covid cases under China’s zero Covid policy, he said in a Zoom interview on Monday. . “A lot of people thought Shanghai was unique and that these cases wouldn’t come to Beijing,” the proud capital of China.

Yet expats in Beijing saw it differently. “One of the big differences between the foreign business community and the Chinese business community is that most people in the foreign business community have those credentials from back home,” and weren’t so optimistic about a policy. aimed at reducing cases to zero from easily transmitted Omicron. We didn’t see it at work anywhere else.

Also, he said, “most of us have family members who were vaccinated and survived Covid and then went back to normal life. So when we see what’s going on here, the question is, ‘Haven’t we learned that lesson already?’ »

Hart learned many lessons during a career in Asia that spanned more than a quarter of a century after arriving in Taiwan in 1996. He moved to the mainland in 2003 and served as an executive at JLL in Shanghai and Tianjin before setting up his own company in Tianjin in 2019, giving him insight into the investment and logistics decisions made by companies in the world’s second-largest economy.

Beijing, in addition to the center of Chinese political power and the seat of Communist Party Chairman Xi Jinping, is a major business center with the largest number of billionaires in the country (83 on the Forbes 2022 billionaires list), including tech leaders such as TikTok owner ByteDance co-founder Zhang Yiming, chairman Richard Liu and Xiaomi CEO Lei Jun.

Back in Shanghai, the damage and frustration caused by the lockdown of 26 million people and trade disruptions have cost many businesses dearly. Residents have taken to social media overwhelmingly to complain about food shortages and unsanitary conditions at state-run quarantine centers, among other hardships. About 20% of the American Chamber of Commerce in China’s workforce did not go to work on Tuesday.

“A big part of our members’ frustrations is (that) some of them will say that we have senior managers who say, ‘We’re monitoring thousands of people. We have information. We can see what is happening. But instead, they are being told to stay home and close the factories. It’s very frustrating,” Hart said.

“In many cases, American companies have things they would like to share. They have trucks to transport. They have food to distribute. They have medical care to try to provide. There is no outlet for that.”

On the business side, supply chain disruptions are also causing frustration. “People here say, ‘Why doesn’t America want China in their supply chain?’ The truth is it is, but what the lockdown in Shanghai has told people is that it can be risky if a city and country is part of your global supply chain. I don’t think there’s any anti-China in there. It’s about the resilience of your global supply chain.

Members, Hart said, are also upset about the lack of information. “When is the lockdown going to end? What is the policy going forward? Therein lies the big frustration. Shanghai is slowly reopening but uncertainty remains. It looks like we are starting to be on the road to reopening, but there is no clear timeline. What businesses don’t like is uncertainty, and what we have with the Shanghai lockdown is a lot of uncertainty.”

Even after the current shutdowns end, the impact on foreign businesses in China will continue for years, Hart believes. Even before the latest outbreaks this year, some 70% of companies reported difficulty bringing executives to China from visas or extended quarantines, he said. “Travel costs too much because there are not enough flights,” he noted. Executives who normally come to personally check expensive investment projects cannot enter.

“Right now, there’s no way for global management to come to China. So what’s going on? Even people who believe China is a good place to invest are starting to drag China down from the list of places you would invest in because it’s just too hard,” Hart said.

At the same time, the leader of AmCham China is beginning “to see executives leaving or not entering; it starts hurting your business,” he said. “And it’s kind of a canary in the coal mine, warning us that if senior managers aren’t willing to work in China. This will have implications for attracting new projects and managing global research operations.

Another warning in Shanghai for the rest of China, he noted, is a loss of teachers at international schools that will lessen China’s appeal to expat families in the future. “If you don’t have international schools, you can’t have international communities,” Hart noted.

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