Dear Members and Friends

As you read this newsletter, the May 1 national holiday is taking place in China. Traditionally, millions of Chinese travel to tourism destinations across China during this week. It is the second of the three holiday periods for Chinese domestic tourism: the Chinese Lunar New Year, the May 1 holiday, and the Golden Week in early October. So far, both holiday seasons in 2022 were marked by travel warnings from the Chinese government, resulting in very low travel frequencies – with corresponding and predictable economic losses for the travel and tourism industry. As the recently published figures show, domestic consumption is declining from an already comparatively low level.

The reasons are obvious: the restrictions imposed to fight the pandemic, which aim to reduce the number of covid contagions to zero, have an impact on the economy.

The logistics industry around Shanghai came to a near standstill in mid-March. Since then, the long-distance transport industry has been severely affected, even triggering calls from the national level for local officials to be careful not to disrupt supply chains excessively.

Long queues of ships to be unloaded are forming in Chinese ports, further exacerbating the already tight situation in global container stocks. All of this raises the question of how long the Chinese economy can weather this perfect storm.

Globalization with its just-in-time delivery of goods with highly optimized and efficient supply chains seems to be a thing of the past. Starting with trade tensions, and now a pandemic, the onslaught on the markets’ finely tuned logistics processes has been going on for five years and shows no signs of abating.

The Chinese government’s policy statement that globalization must be maintained seems disconnected from economic reality. International investors and shareholders expect corporate management to act and ensure sustainable production of products and services with predictable costs and delivery times. This will lead to a global search for alternative sourcing locations and processes, at the price of higher costs for businesses and consumers. It will not only be energy prices that drive up inflation, but also the other components of consumer goods.

And that is only one element of geopolitics. We will certainly not see a summer slump in 2022, but rather fast and as yet unknown developments that we will all have to adjust to.

The chamber was very active in April with a board and advisory board retreat. This work will continue with several high-level meetings and initiatives that the SCCC has created or is involved in. The belated Chinese New Year Reception will be held in May, please register and attend. Networking and keeping up to date with the latest developments in person is an important part of staying abreast with developments in the Chinese markets and making the most of opportunities. We look forward to seeing you at the chamber events and wish you a warm and flowery month of May.

sān rén xíng , bì yǒu wǒ shī.

if three walk together, one can be my teacher.