Breaking News
Investing Pro 0
💎 Reveal Undervalued Stocks Hiding in Any Market Get Started

Analysis-China's services sector eyes recovery after reopening, but challenges loom

Economy Dec 29, 2022 01:06AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
3/3 © Reuters. FILE PHOTO: People wearing face masks walk on Jinli Ancient Street, following the coronavirus disease (COVID-19) outbreak, in Chengdu, Sichuan province, China September 8, 2020. REUTERS/Tingshu Wang/File Photo 2/3
 
HK50
-1.75%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

By Joe Cash and Engen Tham

BEIJING/SHANGHAI (Reuters) - Jordan Li, a restaurant owner in the southwestern Chinese city of Chengdu, hopes desperately that next month's Lunar New Year holidays will help him make up for business lost this year because of COVID-related travel and other restrictions.

Although infections have risen sharply since the central government lifted most of its pandemic-control curbs this month, Li thinks people will still travel to Chengdu. He envisions a different problem: a lack of workers to handle the demand.

Li says he is preparing for a worst-case scenario in which he single-handedly keeps his restaurant open as he "can be the boss, the chef, the waiter and handle the finances all at the same time."

Stung by the repeated pandemic-related disruptions to his business in the past three years, he does not want to hire staff until operations return to normal.

Li's predicament underscores challenges for China's economically crucial services sector as it bets on a post-COVID revival.

With the virus spreading unchecked across the country now, representatives from the services sector say frequent lockdowns have left them without money to expand.

They also must deal with a growing number of sick workers, especially ahead of and during the Lunar New Year next month, a peak travel period in China, when millions head home to celebrate with families.

The contact-intensive services sector, which accounted for 53.3% of China's gross domestic product (GDP) in 2021, suffered the most amid the country's anti-virus curbs, which shut down many restaurants and restricted travel.

Beijing this month dismantled almost all such curbs, which have battered the $17-trillion economy.

"There is still a shortage of labour in the services sector in the big cities, and the loss of productivity is quite obvious," said Dan Wang, chief economist at Hang Seng Bank China. "That situation won't improve significantly before Chinese New Year, and the rebound isn't happening simultaneously, but city by city."

Ordinary Chinese and travel agencies say a return to anything like normal will take months, given worries about COVID and more careful spending because of the impact of the pandemic.

"It's hard to say how much demand there will be for travel during the Spring Festival because it depends on whether people can recover in time," adds Zhou Weihong, deputy general manager at Spring Tour, the travel arm of Shanghai-based Spring Group.

CONSUMPTION REVIVAL

Retail sales, a key gauge of consumption, dropped 5.9% in November from a year earlier, and catering fell by 8.4% amid broad-based weakness in the services sector.

Policymakers have set out plans to revive consumption and investment, but the impact of a slowing economy on unemployment and wages is expected to keep a lid on services spending in the near term.

In Lijiang city, a tourist hotspot in the southwestern Chinese province of Yunnan, about half of shops and restaurants have shuttered since pandemic control measures were put in place three years ago.

Standing in a small, empty restaurant this month after curbs on domestic travel were lifted, its owner, surnamed Wen, said business had been bad during the pandemic. There were little prospects for a revival, he said.

"It's not the COVID restrictions that stopped people coming, it's because people don't have money," he said.

Many shops in Shanghai, Beijing and elsewhere have also closed in recent days with staff unable to come to work, while some factories have already sent many of their workers on leave for the Lunar New Year holidays.

The lack of healthy workers has also led to long waits for deliveries in major Chinese cities.

"We've recently recruited two new people, but recruiting is hard," said Seven, manager of a Blue Frog restaurant franchise in Beijing's Chaoyang district, the capital's worst hit in the recent COVID wave.

"The cost of living in Beijing is going up, and even though the pay at our restaurant is quite good, people are then still worried about getting infected on the job."

Some in the service sector say there remains some hope.

A senior executive at a hotel chain with more than 600 properties in China said the firm was "confident that Lunar New Year is going to be great," as its website traffic surged 300%-400% after the announcements of eased COVID rules.

The chain is now scrambling to "adjust to the new policies" to get ready for the holidays, the executive said.

Analysis-China's services sector eyes recovery after reopening, but challenges loom
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your investing.com profile, will be public on investing.com and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email