Shanghai’s return to business tests China’s reopening

As Shanghai reemerges from a Covid-19 outbreak and three years of restrictions that have hampered travel and trade, the financial center is doing so without much evidence of what makes it China’s most cosmopolitan city: foreign visitors.

Before the pandemic, its iconic Bund was usually packed with foreign travelers and business delegations. But on a recent blustery February day, the tourists admiring the colonial architecture and high-rises were all from mainland China.

The revival of China’s largest and most international city will test the country’s engagement with the outside world as policymakers begin to reopen years after their Western counterparts. Shanghai was among the cities hardest hit by the government’s zero-Covid policy and in 2022 endured a two-month-long lockdown that crippled the economy.

Last month, the city’s mayor, Gong Zheng, told reporters that foreign investment reached a record $23.5 billion last year, “showing that Shanghai is still one of the most attractive destinations for foreign investment in the world.”

But it is reluctant to take immediate effect as international businesses continue to face visa delays and other frustrations after the uncertainty of going zero-Covid. One exporter suggested some businesses still have doubts about traveling to the country given the recent Covid wave.

“Shanghai has a window of opportunity to restore the trust that has been damaged over the past three years,” said Bettina Schön-Behanzin, chairwoman of the Shanghai branch of the European Chamber of Commerce in China, and urged the city’s government to “take reasonable steps.” create a transparent and predictable business environment”.

While domestic trade has boomed since Beijing lifted pandemic restrictions late last year, Shanghai’s full global reintegration lags behind.

Last month, the city welcomed a total of 180,000 international air arrivals, compared with 2.7 million in January 2019, according to airport authority data. Foreign tourists are also not allowed to enter China.

Shanghai will be an important engine to revive strong growth in China as consumption drags down with the delayed reopening. The city contributes more to China’s economy than any other, but its output fell by 0.2 percent in 2022, compared with 3 percent growth nationwide. Exports, which have fueled the economy through much of the pandemic, are also declining amid an uncertain global economic outlook.

Shanghai’s former Chinese Communist leader Li Qiang, the official responsible for overseeing Shanghai’s lockdown, will be elected China’s premier at the National People’s Congress, making him the number two official in charge of the national economy to President Xi Jinping.

Observers expect international business to begin to return in earnest from March, when Apple CEO Tim Cook is expected to visit China. After three years of isolation, Shanghai wants to sue foreign businesses. But many have had a number of complaints, including that they are having trouble persuading workers to move abroad after witnessing the difficulties of the lockdown.

“It’s about trying to convince European and American CEOs that China is still investable,” said one attendee at a recent private event for international business leaders in Shanghai.

The Shanghai chapter of the European Chamber of Commerce in China issued a series of recommendations to the local government this month, including lower barriers to market entry. His position paper was deleted on the Chinese social media platform WeChat shortly after it was published.

“The European consumer is a major job creation force in the Chinese economy,” said Jörg Wuttke, president of the chamber. “But the open access market for us is very small. In 2021, EU companies sold 23 percent more to Switzerland than to China.

Yang Jianwen, an economist at the Shanghai Academy of Social Sciences, said ownership and consumption were the “two biggest challenges” China needed to address. Shanghai is well-placed to address both, he said, adding that the city’s real estate market is “not under a lot of pressure.”

In Shanghai, visible signs of China’s Covid-fighting apparatus are disappearing. The mobile kiosks, where the city’s 26 million residents undergo mandatory PCR tests almost every day, have been put up for sale on Xianyu, a second-hand shopping app. Queues are forming outside restaurants again, and face masks, which were ubiquitous in December and January, have all but disappeared from the streets as the virus sweeps the city again.

“It’s more noisy than I imagined,” said Zhang Yang, a university student in the nearby city of Hangzhou, who was visiting Shanghai for the first time with two friends. Only one of the trio was wearing a mask, but she said that was because she was wearing no makeup.

Shanghai Metro data showed daily ridership rose to 9.5 million in February, more than 10 million closer to pre-pandemic levels.

“The virus is dead, children can go to school and we can travel,” said Zhang Baolian, a 70-year-old former electrician visiting a bakery on Nanjing Road, the city’s most popular shopping street. “There is nothing to fear now.”

There are new signs of business activity returning. Canadian coffee group Tim Hortons has partnered with Popeyes to relaunch its American fried chicken brand in China.

Lei, a 37-year-old Shanghai resident, plans to open a restaurant in March and leased his shop at the height of the outbreak late last year. Rents for similar stores are now up 30 percent, he says. In a group on WeChat, he saw a villa on a popular road for rent within an hour of being listed this week. “Although the city has not fully recovered, queues for restaurants are coming back,” he said.

Last week, a long lunch line formed outside Guang Ming Cun, a restaurant known for its local food and popular with the city’s elderly, a few doors down from a Popeyes location in downtown Shanghai.

“It’s the first time I’ve queued like this in three years,” said 80-year-old Ma, a pensioner wearing a mask. “The queue will be about half an hour,” he said. “It used to be longer.”