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China’s COVID policy, Ukraine war disrupt European firms: EU Chamber




China’s COVID-19 policy and Russia’s war in Ukraine are creating severe challenges to European business operations, with logistics suffering the most overall, according to a survey conducted by European Chamber, in partnership with Roland Berger.

As a result of China’s COVID-19 policy, 23 per cent of respondents are now considering shifting current or planned investments out of China to other markets—more than double the number that were considering doing so at the beginning of 2022, and the highest proportion in a decade—and 7 per cent are considering the same due to the war in Ukraine, EU Chamber said in its report.

The introduction of more stringent COVID-19 containment measures in 2022, with China imposing full or partial lockdowns in at least 45 cities, is causing massive uncertainty for businesses. Three quarters of respondents report the measures have negatively impacted their operations, most acutely on logistics/warehousing, business travel and the ability to conduct face-to-face meetings, which have had a negative impact for 94 per cent, 97 per cent and 94 per cent of respondents, respectively.

China’s COVID-19 policy and Russia’s war in Ukraine are creating severe challenges to European business operations, with logistics suffering the most overall, according to a recent survey. As a result of China’s COVID-19 policy, 23 per cent of respondents are now considering shifting current or planned investments out of China to other markets.

Supply chains have taken a pounding, both upstream and downstream, with 92 per cent of companies being impacted by measures such as China’s recent port closures, the decrease in road freight and spiralling sea freight costs.

More than a quarter of European businesses report headcount decreases because of China’s COVID-19 policy, with this happening most in the education (80 per cent), legal (46 per cent), retail (43 per cent) and cosmetics (40 per cent) industries.

Moreover, 60 per cent of respondents have decreased their 2022 revenue forecasts. About 91 per cent of respondents believe China should focus on vaccinating the entire population, including those over 60; 82 per cent believe that positive cases with no or mild symptoms should be permitted to quarantine at home to alleviate pressure on the health system; and 82 per cent believe that the best mix of vaccinations and boosters should by permitted, including making foreign mRNA vaccines available to all residents in China.

Close to 78 per cent of respondents feel that China is a less attractive investment destination as a result of its more stringent COVID-19 restrictions, the report added.

The war in Ukraine has also made China a less attractive investment destination for a third of respondents. The war is exacerbating challenges faced by businesses as supply chains disintegrate. Nearly two thirds of respondents have faced disruptions transporting goods to and from Europe. In addition, rising material and energy costs are having a negative impact on 63 per cent and 58 per cent of respondents respectively.

“Our members are willing to weather the current storm, but if the current situation continues, they will of course increasingly evaluate alternatives to China,” said Jörg Wuttke, president of the European Union Chamber of Commerce. “A predictable, functioning market is better than one that, despite having high growth potential, is volatile and suffers from supply chain paralysis.”

“The uncertainty caused by the stringent and dynamic COVID-19 policies impedes the ability for European companies to make sound business decisions, in an overall deteriorating economic context due to the impact of the war in Ukraine,” said Denis Depoux, global managing director of Roland Berger. “A clearer crisis exit strategy would help maintain confidence in a European business community still highly committed to Chinese markets.”

Fibre2Fashion News Desk (KD)





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