Shanghai business owners still tallying up costs as lockdown eases
Chen Weiming, who owns a bath products company called Desire and Passion, was locked in his Shanghai apartment in early March – a month earlier than the rest of the city. The financial hub was facing the biggest surge in COVID-19 cases.
For 91 days, Chen’s routine consisted of exercise, regular COVID PCR tests and getting by on government food distributions. He also polished 48 bottles of red wine, mostly from France.
Chen said the lockdown was not entirely bad for him personally, but professionally his business came to a halt.
“The logistics have stopped. We couldn’t send products to customers,” he said.
China will release its gross domestic product figures for the second quarter on Friday, and they are expected to show the impact of the two-month lockdown in Shanghai, the country’s financial, transportation and manufacturing hub.
The lockdown imposed in the early stages of the pandemic helped factories in China resume operations within months, and they were able to fulfill overseas orders. But the same playbook was less effective against the more contagious omicron variant. In Shanghai, the COVID lockdown has crippled the supply chain and logistics.
The restrictions forced Chen to do something the bosses would normally be shy about. He asked his customers – mainly golf courses in other parts of China – to buy from his competitors in the meantime.
Shanghai’s city-wide lockdown lasted through April and May; authorities began easing restrictions in June. So far, only a third of Chen’s customers have returned.
Even before the Shanghai lockdown, many businesses felt stuck.
“The cost of freight has skyrocketed” over the past two years, said Colin Zhao, boss of medical supplies maker Suntop. “Usually a container to Europe costs between $2,000 and $3,000. Now it’s around $15,000 to $20,000.
These additional costs are undoubtedly passed on to end consumers in Europe and the United States. Manufacturers also have to deal with rising costs for raw materials and cardboard packaging. Zhao said he finally raised his prices by 10% last year.
“But afterwards, the euro depreciated against the Chinese yuan” because of the war in Ukraine, he said. “So our profit margin actually went down.”
Restaurants were perhaps the hardest hit. They are usually the first to close and the last to reopen during periods of confinement.
Wang Ying runs a lamb hot pot restaurant. In May, he had been out of work for at least two months and was not in a good mood.
“I feel depressed. I can’t do business during the lockdown, yet I’m still paying for all my workers. I’m losing money every day,” he said.
Public gatherings are not allowed, so Frank Tsai of China Crossroads – which organizes public lectures – hasn’t had much income since Shanghai began its continuous lockdowns in March.
Additionally, his girlfriend had a mental health emergency that required hospitalization. Getting to the hospital during the lockdown was a challenge as most public transport had stopped.
“We had to wait three hours for an ambulance. There were no taxis to hospitals,” Tsai said.
At one point they cycled to get around, and when they arrived at one of the top public mental health hospitals, they couldn’t find a bed.
“The staff there said, ‘Normally you’d have a bed because [my girlfriend] is obviously in very poor condition. But not now because [there was] such a long waiting list,” says Tsai.
In public hospitals, waiting lists were long during confinement.
Eventually, Tsai found a private international hospital for his girlfriend. However, the treatment was much more expensive than in the public institution and the results were not satisfactory.
Easing of containment
Most of Shanghai was allowed to return to work on June 1.
“Three months without income is a loss of about 600,000 yuan,” or $89,000, Chen of the bath products company said.
There was supposed to be relief for businesses, according to restaurant owner Wang.
“The government asked for the rent to be reduced for six months, but the mall we are in only gave us a reduction for one month,” he said. “And we still have to pay all the usual property management and marketing fees.”
No relief for medical supplies maker Zhao either. And after a recalculation by the authorities, he must contribute more to the social security fund of his employees.
“It’s $30 more per month per employee.”
On top of that, a single COVID infection could send buildings all over the city back into lockdown and trigger mass testing.
Zhao said success for him these days is not about profit, but about survival.
Additional research by Charles Zhang.
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