Covid surge in China hits its commercial hub Guangzhou

Covid surge in China had hit its southern commercial hub Guangzhou, denting its economic prestige as it faces a difficult road to recovery, reported The Straits Times.

Three weeks after Xi Jinping, China's top leader tried to reinvigorate China's stalled economy by abruptly abandoning his stringent pandemic restrictions, downtown Guangzhou is faced with an unpredictable - and uncontrolled - epidemic and financial uncertainty, people and companies are spending cautiously, suggesting that the road to recovery will take time.

Nearly three years of "zero-Covid" measures have crushed businesses. Streets are lined with shuttered stores and workshops. Walls are plastered not with "help wanted" signs, but with notices from entrepreneurs putting their businesses up for sale. Roads and alleys once packed with migrant workers are now mostly empty, reported The Straits Times.

China's reversal of its Covid-19 restrictions in early December was meant to help places like Guangzhou. But the chaotic approach has contributed to a tsunami of infections that has swept across the nation, overwhelming hospitals and funeral parlours.

In many industries, truck drivers and other workers have quickly fallen ill, temporarily stretching staff and slowing operations, reported The Straits Times.

The global economy is slowing, dragged down by high inflation, an energy crisis and geopolitical turmoil. As American and European shoppers tighten their budgets, China increasingly faces a double blow of slumping demand both at home and abroad.

In Guangzhou, Tony Tang, the owner of a women's clothing workshop, said his sales had plunged by two-thirds in the past year, reported The Straits Times.

Tang's workforce has shrunk from 30 to 10, but there is no shortage of labour. When he needed a worker to help sew an order of halter tops, he went out on a street corner with a handmade cardboard sign and hired one within several minutes, for one-sixth less than he paid about a year ago.

China's factory activity contracted further in December as rapidly spreading infections grounded workers, snarled deliveries and dampened demand, reported The Straits Times.

For service industries like restaurants, the same survey found, business was almost as bad as in early 2020, during the nearly nationwide lockdown that followed the first Covid-19 outbreak in the city of Wuhan. Eateries and other businesses closed last month as customers stayed home to avoid infection or because they were sick.

"The epidemic has had a great impact on the production and demand of enterprises, the attendance of personnel, and logistics and distribution," the National Bureau of Statistics said in a statement that accompanied its release of the survey data.

Manufacturing had already been in decline in November when many cities and regions in China imposed lockdowns on residents in a futile bid to contain outbreaks. Car dealerships are crammed with unsold cars. Stores have little need to order more for their shelves when they are already full of unsold merchandise, reported The Straits Times.

Nio, an electric car manufacturer in east-central China's Anhui province, said that Covid-19 outbreaks had affected its supply chain and reduced its car deliveries in December.

Tesla suspended the production of cars at its factory in Shanghai for the last week of December, a move that Yale Zhang, managing director of Automotive Foresight, a consultancy in Shanghai, saw as a sign of flagging sales in China and elsewhere, partly because other automakers are introducing more electric cars.

Many European manufacturers in China have been forced to operate with about half their usual staff for two to three weeks, affecting output somewhat, said Klaus Zenkel, the chair of the chamber's South China chapter.

The damage that "zero-Covid" inflicted on China's once-unbeatable attractiveness as a manufacturing hub could be hard to repair, The Straits Times reported.