Shanghai officials have recently announced to lift restrictions on businesses thanks to an easing Covid lockdown. However, experts said that China would face irreversible pressure of foreign capital withdrawal from the country.

As Reuters reported, the Shanghai government held a press conference on May 29. They released an action plan for accelerating economic recovery and revitalization.

Following the plan, Shanghai authorities will cancel many conditions for businesses to resume work from June 1. They introduced a series of policies to help stabilize foreign investment, boost consumption and expand investment.

Vice Mayor Wu Qing was speaking at the news conference. He said that the Shanghai government will revise guidelines for Covid pandemic prevention and control, and cancel “unreasonable restrictions” on the resumption of work for businesses.

Wu Qing said businesses will no longer need to apply to resume work from June 1.

The action plan also includes policy measures to boost the issuance of local government bonds, ask banks to renew loans for enterprises, and accelerate the approval of real estate projects.

The measures come as Shanghai is easing a city-wide lockdown that kicked off two months ago.

Though the plan mentioned measures to stabilize foreign investment and foreign trade, some experts said that foreign capital withdrawal may still become a practice.

During the two months of lockdown, many residents among 25 million people in Shanghai had difficulty accessing food and medical aid. A battered economy has made foreign companies consider pulling out of China. 

Apollo News cited experts saying that China is facing irreversible pressure of foreign capital withdrawal.

On May 5, the European Union Chamber of Commerce in China released a survey. It showed that China is losing its attractiveness to European companies significantly.

The chamber said that China’s severe business environment has caused nearly a quarter of EU companies to consider shifting current or planned investments out of China to other markets. The rate of European businessmen wanting to leave China has hit a ten-year high.

For American businessmen, their willingness to leave China is also high.

That’s Shanghai magazine released a survey in mid-March. It showed that a total of 85% of foreigners in Shanghai reconsider their travel plans due to its lockdown measures. 

In addition, 48% of business operators in Shanghai plan to leave China in 2023, and 37% choose to wait and see if the Covid containment measures are adjusted. 

Xie Jinhe is chairman of Taiwan Caixin Media. He said on May 30 that the pressure China is now facing is irreversible. 

Xie explained that China is no longer a preeminent production base, and the high cost of production is causing foreign capital to start leaving.

Besides, China has imposed zero-Covid policy in various places. Foreign investors have placed many production bases in China, and this risk is now starting to emerge. 

Xie forecast the withdrawal of foreign capital from China will become common after this Covid epidemic.

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