Business Environment in South China: The Small Business Point of View

For many years, Dezan Shira & Associates has maintained close contact with companies and entrepreneurs throughout China, listening to their concerns and suggestions and witnessing their failures and successes.

We did this not only by looking at the business surveys and position papers that the Chamber of Commerce publishes from time to time, but also directly talking to our clients, asking them questions, listening to their concerns, and when necessary, thinking. Possible solutions.

In this article, we look at the concerns of small businesses in southern China and some recent signs that things will be better in the near future.

The current COVID-19 pandemic – biggest concern of South China businesses

Yes! We say current. Because even though the rest of the world has moved on from it and gone so far as to declare it “the end”, as President Biden recently said, and removed all containment measures associated with it, like the UK and most countries across the world. The Globe, that’s not the case here. In China, the containment measures associated with the pandemic remain alive, some say that the measures are even increasing in its occurrence, intensity and unpredictability.

As the World Health Organization (WHO) Chief Tedros Adhanom Ghebreyesus said, the pandemic is not yet over despite the improvements –“We’ve spent two-and-a-half years in a long, dark tunnel, and we’re just beginning to see the light at the end of the tunnel…There is still a long way to go, and the tunnel is still dark, with many obstacles that could shake us if we are not careful.” This attitude may be one of the many reasons why China continues to keep its borders closed to most visa types, imposing quarantine upon entry (although recently reduced to 5 days in hotel plus 3 days at home), daily use of mask, 48 hours Nucleic acid tests in most cities, and many other measures that vary across the region, city and even neighborhood.

Most people and small businesses are still nostalgic for “the time before COVID” when you could cross the border from Shenzhen to Hong Kong for breakfast, go to Macau for lunch and return to Shenzhen for dinner without a worry in your heart. The people keep hope and have the expectation that change is just around the corner and that at any point we will return to a status of “business as usual” with the charming chaos of full restaurants, cinemas and hordes of tourists as far as the eye can see. can see

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However, as they say, “expectations minus reality equals disappointment” and the reality is proving to be very disappointing for a large number of people, who were hoping that the COVID-19 measures would be relaxed and things could return to normal after October.

“It’s the lack of predictability that gets me” – a sports school owner says that for one week things can go smoothly, and group outdoor activities can happen normally, while the week after, the group gatherings are prohibited for three days at least even If there are no cases in the school – if someone was in close contact with the confirmed cases.

“The rules are always changing. One day you’re compliant, the next day you don’t know what to do. The complaints are from another business owner, who doesn’t understand the degree of separation a person must have from close contacts, to Not put under lockdown, quarantine, etc.

Some well-loved local restaurants don’t have the financial liquidity to withstand the February and March lockdowns (and subsequent mini-lockdowns). Others, however, are resilient and keep soldering on. “We are fighting against the clock,” said an owner of a restaurant group, adding, “We are living on only minimum customers, hoping that soon things will change and if not, we will close.”

Light at the end of the tunnel – latest COVID relaxations

Knowing full well that the economy is not what it could be, with youth unemployment on the rise and several bankruptcies here and there, China has increasingly emphasized that it will make more efforts to protect people’s lives and health while minimizing the social and economic Fallout.

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Adding to this is the international pressure the markets are putting on China to fully open – chambers of commerce in China, such as AmCham and the European Chamber – have repeatedly expressed their concerns about the impact of China’s stringent COVID-19 rules on business confidence.

In addition, there are other factors that will require China to consider adjusting its COVID-19 policy, such as the huge costs that the containment measures have on the coffers of the Chinese government, including the cost to hire permanent medical personnel throughout the country. , buy literally tons of supplies for tests, cleansing and treatment, etc.

The government is moving slowly and cautiously, avoiding giving good news and false hope, but slowly and surely things are changing with ease in the issuance of business and work visas, reduction of the international quarantine.

For example, on November 11, 2022, the National Health Commission (NHC) released a circular that China will ease some of ​​its COVID-19 rules to better balance COVID-19 prevention and control with economic and social development. Among others, the below adjustments were introduced:

  • For close contacts and inbound travelers, the quarantine requirement will change from “7 days centralized quarantine + 3 days home health monitoring” to “5 days centralized quarantine + 3 days home quarantine”. After the completion of the quarantine at the first point of entry, the quarantine at the destination will not be repeated for inbound travelers.
  • The secondary close contacts will no longer be traced.
  • For people passing through high-risk areas, the quarantine requirement will change from “7 days centralized quarantine” to “7 days home quarantine”.
  • The three categories of “high-risk areas, medium-risk areas, low-risk areas” will be combined into two categories – “high-risk areas and low-risk areas”.
  • Areas that have not experienced outbreaks are discouraged from mass testing.
  • The circuit breaker mechanism for inbound flights will be abolished, and the requirement of “two negative nucleic acid tests within 48 hours before boarding” will be adjusted to “one negative nucleic acid test within 48 hours before boarding”.
  • For important inbound business personnel and sports groups, etc., they will be released from quarantine under a “closed-loop bubble”, which means “point-to-point” transfer to the isolation free closed-loop management area.
  • China will intensify efforts to address the “one-size-fits-all” problem. It is strictly prohibited to arbitrarily close schools and classes, suspend production, block traffic without approval, arbitrarily adopt “static management”, arbitrarily lock down, etc.
  • During the COVID-19 outbreak, China will make every effort to ensure smooth logistics. It is prohibited to arbitrarily request key enterprises related to the overall industrial chain and affecting people’s livelihood to suspend production.
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After the release of the NHC circular, many cities quickly followed up with detailed implementation measures to improve local COVID-19 prevention and control procedures. For example, Guangzhou lifted lockdowns on secondary close contacts on the afternoon of November 11.

Famous institutions, such as the International Monetary Fund (IMF), predicted that China will exit from zero COVID in 2023.

conclusion

The GBA is undoubtedly the richest, most well-planned and most technologically advanced region of China and its potential is limitless.

Attentive to the small steps, the whole local and international communities are together in “crossing their fingers”, hoping that 2023 is the year in which, even if we do not go completely to a pre-pandemic period, we will have stability, growth , and above all, hope that companies and entrepreneurs have and keep for the south of China and for the country as a whole.

We will keep monitoring and keep you updated on any changes.


About us

China Briefing is written and produced by Dezan Shira & Associates. The four assists foreign investors in China and has done since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen and Hong Kong. Please contact the company for assistance in China at [email protected]

Dezan Shira & Associates has offices in Vietnam, Indonesia, Singapore, United States, Germany, Italy, India and Russia, in addition to our trade research facilities along the Belt & Road Initiative. We also have partner firms assisting foreign investors in the Philippines, Malaysia, Thailand, Bangladesh.

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