After months of lockdown, the Chinese Communist Party (CCP) has finally started loosening restrictions. As a result, this event brings excitement and worry to the country.

Some residents have shared their excitement with the South China Morning Post (SCMP) 

Song Yingdi said it was pretty good as there weren’t any restrictions anywhere she went. She can go back to the office soon. She will also go shopping in her free time. 

According to SCMP, the lifting is a significant step forward in China’s COVID prevention policies. Another resident named Zhu Yihui told reporters that people would gain confidence. Meanwhile, Xu, a restaurant employee, was excited about reorders after half a month as he was preparing to reopen the restaurant. 

China has lifted most of the strict measures to prevent COVID. Public places across the country no longer require negative tests upon entry, except for schools, hospitals, nursing homes, and other sites. While some residents show excitement, there could be some hidden issues. 

A resident named Yang Hao told reporters in an interview with SCMP that there would be chances for COVID cases to surge now the lockdowns are off.

Big business  and social issues after lifting the blockades

Although the CCP has eased the measures, it might not be so optimistic for some big businesses in China.

Reuters reports stories of some giant firms in the transportation fields.

Skoda Auto, a subsidiary of Volkswagen (VOWG p. DE), is considering leaving China. Klaus Zellmer, Chief Executive at Skoda, said that his company would make a final decision in 2023.

Regarding the company’s option to exit China, Zellmer said, [quote] “The competition is very intense there, so we will consider, together with our Chinese joint venture partner, how we want to proceed.” [end quote]

Zellmer said it was worth checking all scenarios and deciding where the company wanted to focus its energy. He added that the automaker wanted to focus more on the Indian market. 

In addition to Volkswagen, Reuters cites sources familiar with the matter who say that Tesla will suspend Model Y assembly at its Shanghai plant in the last week of December. This suspension would be part of a cut in planned production of about 30% in the month for Tesla’s best-selling Model Y. 

According to Reuters, the company’s operations in China completed modernizing the production facilities over the summer. However, since then, they have been struggling with their inventory.

Moreover, Tesla cut prices to inspire Chinese buyers. The company offered Chinese buyers a limited-time discount of $860 (6,000 yuan) on select models until the end of 2022.

Tesla representatives haven’t made any comments about the suspension. However, the Shanghai factory is the crucial hub for Tesla. The Model Y represents the largest share of production at the Shanghai plant.

The China Passenger Car Association (CPCA) reported a fall in car sales for the 

first time in six months in November. The drop in sales is because of weakening demands, even with COVID rule relaxations.

While these companies are struggling with production, others have issues with manpower.

The biggest headache for Wu Weimin吴卫民, chairman of a company in Baiyun District, is worker recruitment in the post-COVID restriction period. He told reporters from the Chinese media outlet Nandu that the factory was affected and shut down during the epidemic. Therefore, many workers returned home early.

It’s an extra burden for the company as they plan to deliver more than 4 million sets of products to customers.

However, there are possibilities for COVID cases to surge after lifting the lockdown. 

Resident Yang Hao told SCMP there could be risks if they lift the lockdown entirely. <footage 4: 0:06-0:10>. According to Reuters, further infection surges could put massive pressure on its fragile health system. As a result, businesses in China are preparing for the pandemic’s return. 

VOA Chinese cites information from Reuters that they are considering the unclear situation. Businesses expect to deal with a manpower shortage for an extended period.

With COVID cases on the rise, Xidan Pearl Mall said the average arrival rate for the merchants was less than 20%. It means that the daily number of people entering the mall is meager.

According to VOA Chinese, Chinese companies are struggling. China’s “zero-COVID” policy was unusual worldwide, and its slowing economy will likely face difficulties.

State-backed media outlet CCTV reported empty shopping malls, subways, and bus stations. 

What’s next for China after loosening restrictions?

Some analysts have warned about a potential surge in inflation as China reopens. It could also worsen price hikes in the global economy.

Bruce Pang, chief economist at Jones Lang Lasalle said, [quote] “The potential reopening could bring inflationary challenges to China, with a surge in demand. Especially the accelerating household consumption, and short-term disruption to labour supply, production and supply chains amid an inevitable exit wave of new cases.”

Reuters cites a report by Eastspring Investments that a disordered reopening, bringing with it rising inflation as the economy rebounds would be key risks for China.

According to the report, high energy prices have been another inflation driver. The prices will likely face more upward pressure when the country reopens. As a result, it could prolong the central banks’ battle against inflation. 
According to Fortune, China’s economic recovery is zigzagging. Even Morgan Stanley’s more upbeat research note predicted a “bumpy” recovery. Moreover, Robin Xing, the bank’s chief China economist said that there would be “lingering containment measures, and possibly some zigzagging, during the initial phase of reopening.”

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