Chinese consumers are skeptical after Beijing eased COVID restrictions

SHANGHAI, Dec 12 (Reuters) – China’s weary public and businesses have welcomed the easing of strict ‘zero-COVID’ measures, but Jorry Fan, who lives in the eastern city of Suzhou, said it has prompted her to shelve all plans to dropping food for weeks.

The 44-year-old mother of two wants to avoid indoor dining or crowded places, opting for grocery deliveries instead amid concerns she or her family could contract COVID-19 after China suspended testing as a requirement for many activities Has.

“I’m very happy because I used to have to do a nucleic acid test almost every day, so it’s more convenient,” she said. “On the other hand, we don’t know who’s safe, we don’t know who has the coronavirus. So we will be more careful.”

Consumers and Fan alike show why analysts don’t expect a quick, broad recovery in spending in the world’s second-largest economy as cheering over abrupt easing has been tempered by uncertainty for consumers and businesses.

In theory, prospects for fast-food companies like McDonald’s Corp (MCD.N), Starbucks Corp (SBUX.O), Yum China (9987.HK) and luxury companies like LVMH (LVMH.PA) have brightened after measures such as as lockdowns withered sales.

However, the easing is expected to kickstart a wave of infections that experts say could hit 60% of the country’s 1.4 billion population. Fear of this has driven many people off the streets and threatens to disrupt jobs and supply chains.

Spending is also likely to remain held back by ongoing concerns about job security and a slowing economy.

Some economists have lowered growth forecasts for China early next year, which are expected to continue this year’s dismal growth figures, which have been among the worst in the last half century.

“The move from isolation facility quarantine to home quarantine will not significantly increase retail sales,” said Iris Pang, chief economist for Greater China at ING.

The loosening is also playing out differently in different places, as some retain curbs dropped by others.

In the commercial hub of Shanghai, for example, people no longer need a negative COVID test to enter restaurants as of Friday, but the rule still applies to those in Beijing.

Despite some reports from analyst firms of skyrocketing domestic flight bookings and movie tickets, the moves are low-based and paint a picture that clashes with scenes of empty rush-hour subway seats in major cities like Beijing and Shanghai.

The reopening of queues has been more common outside of pharmacies than inside malls and shops as people stock up on antigen tests and medicines to treat cold and flu symptoms.

A spa at a mall in downtown Beijing that resumed operations on Friday said most staff had returned but customers were far fewer.

“Because of the epidemic, we are now using promotions and coupons to attract customers, which actually leaves us at a loss,” said one of the massage therapists.

COMPLETELY UNPREPARED

Many businesses also say they’ve been caught flat-footed, with one executive at a major hotel chain saying he was “completely unprepared for such a dramatic and drastic reopening”.

With many of his hotels still being used for quarantine purposes, convincing owners to open and hire more staff after the zero-COVID campaign has instilled a conservative mindset is proving difficult, he told Reuters.

“The company is now adjusting its strategy so that 80% of resources are dedicated to capitalizing on ‘revenge’ spending, while 20% of hotel occupancy and staff are reserved for when quarantine returns,” added the executive on condition of anonymity.

Sales of items like cosmetics, wine and spirits are likely to continue to suffer as cautious consumers stay at home in the coming months, said Jason Yu, chief executive of consumer research firm Kantar Worldpanel for Greater China.

Instead, people will focus on items that promote health and wellness and buy less instant noodles and frozen items, which are popular with those preparing for lockdowns, he said.

Still, some analysts said a reopening, bumpy as it might be, bodes well for companies investing in China over the long term.

Fast food brands, for example, will be able to return to large expansions that they had planned.

In 2023, new restaurant development in China will account for about half of McDonald’s global unit openings and about a third of Starbucks’ new locations, said Bank of America analyst Sara Senatore.

Luca Solca, a luxury analyst at Bernstein, said the end of restrictions is good news for the luxury industry, which is heavily dependent on Chinese spending.

“My base case is that the slowdown should prompt Chinese consumers to get back to enjoying life and spending – which will benefit top luxury brands, among others,” he said.

Reporting by Casey Hall; Additional coverage by Joe Cash and Sophie Yu in Beijing, Mimosa Spencer in Paris and Richa Naidu in London and the Beijing Newsroom; Edited by Brenda Goh and Clarence Fernandez

Our standards: The Thomson Reuters Trust Principles.

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