On June 9, 2022, Tesla Inc. (TSLA) canceled three live job hiring events for China, which were originally scheduled this month, after the Shanghai government having already held two video roundtable talks for foreign companies in Early June; the second of which included executives from six foreign auto enterprises, including Tesla.
Telsa did not explain why they had canceled the three job hiring fairs , but nothing could stop speculations of whether Tesla might be considering cutting back on their investment plans in China.
People also wondering whether roundtable talks, which were catered to foreign enterprises, would play much of a significant role in stabilizing foreign investments. Although Jiefang Daily, a Shanghai government-backed newspaper, claimed that foreign executives expressed ” their full confidence in the future of Shanghai and China” during the roundtable conference.
Foreign companies had contributed around 20% of job opportunities in Shanghai. The number of regional headquarters of multinational companies in Shanghai had reached 831, as well as 506 research and development centers at end-2021. However, many foreign companies decided to evacuate China amid the pandemic-related lockdowns pains.
According to a Chinese media NetEase, US semiconductor supplier ONSEMI (NASDAQ: ON) announced the closure of its global distribution center in Shanghai in April 2022; the relocation of its related operations will be moved to Singapore.
Hong Kong’s Ming Pao also reported on April 17, 2022, that Shuichi Akamatsu, Consul General of Japan in Shanghai, had written to the vice mayor of Shanghai about the disruptions of Japanese enterprises’ economic activities caused by the city’s harsh pandemic prevention policies. Those corporations might not have a choice but to transfer production and manufacturing to other countries and regions.
Although all enterprises are allowed to resume work since June 1, their operations are still impacted substantially by the normalized COVID-19 prevention policies. People are required to show a 72-hour (NAATs) nucleic acid report before they could take public transport. Some people were still in quarantine and couldn’t return to work at all . “We’re back to work, but we haven’t reached to our normal capacity. Workers are not all there yet! ” a production manager said helplessly in an internal meeting.
China’s strict Zero-Covid Policy seriously affected the business environment in China. It also woke up foreign investors about what they had been facing in China: tremendous uncertainties and high policy and regulatory risks.
Managers cannot tell when their employees would be pushed into isolation facilities again, or whether there might be another harsh lockdown in the near term. Making reasonable operations and investments plans become a tough work for them.
The British Chamber of Commerce in China expressed that uncertainty dent confidence on 31 May 2022. In a survey conducted with more than 600 members, 74 percent of companies were “severely impacted” by China’s Zero-Covid policy, while nearly half of them had delayed their investment plans, according to VOA. Another survey released by the American Chamber of Commerce in China revealed similar results on May 9. Around 52% of companies said they had postponed or reduced their investments in China
If companies leave China, jobs will follow. If companies postpone their investments, , the new jobs come with those investments would also be postponed. It is worth noting that once the businesses withdraw from China, it is highly unlikely they will return anytime soon. This implies a medium-to-long term, rather than a short-term, impact on the unemployment rate, which further related to people’s income, consumption, and their ability to service mortgage and other debts.
Defaults of mortgage and other debts will jeopardize the property and banking sector, posing significant risk to the financial system.
Unemployment rate stayed elevated at 5.9% in May 2022, after it surged to 6.1% in April 2022, the highest level since March 2020. The unemployment rate of young people aged between 16 and 24 rose to a record-high level of 18.4% in May 2022, from 18.2% in April 2022, according to National Bureau of Statistics of China (NBS).
Rising unemployment rate goes along with dampened consumption, which fell by 11.3% and 6.7% year-on-year in April 2022 and May 2022, respectively, after a drop of 3.5% in March 2022. Property sales also dropped by 31.5% in the first five months of 2022, with dented consumer confidence.
China’s factory activities have also contracted for three consecutive months. Purchasing Managers’ Index (PMI), an index of the prevailing direction of economic trends in manufacturing, were below 50% from March to May 2022.
PMI is compiled and released monthly. A PMI above 50 represents an expansion compared with the previous month, whereas a PMI below 50 represents a contraction. China’s PMI rose to 48.4 percent in May 2022, from 42.7 percent in April. However, this does not suggest an improved prosperity, as what NBS stated in their press release. The truth is the economy contracted further in May.
The outbreak of coronavirus during early 2020 did not dampen market confidence. Most companies indicated a strong recovery after the pandemic in the conferences with analysts.
However, it is a totally different story in 2022. The management of most companies said in their conferences with analysts: it’s difficult to reach the target this year, as there are too many uncertainties.
On June 1, Ms. Liu (pseudonym), a senior manager of a foreign company in Shanghai , walked into the open air for the first time, after being isolated at home for two months. She took a photo of the street and posted it on her social media. It wrote, “Shanghai cannot recover to its past golden days. There is no going back.”