Shanghai business owners are still calculating costs as the lockdown eases.

Chen Weiming, owner of bathroom products company Desire and Passion, was locked in a Shanghai apartment in early March – a month earlier than the rest of the city. The financial center was dealing with the biggest change in the wake of Covid-19.

For 91 days, Chen’s routine included exercise, regular Covid PCR tests and access to government cookbooks. He produced 48 red wines, mostly from France.

Chen said the lockout was not a bad thing for him personally, but that he was standing up for his company professionally.

“Logistics are at a standstill. We have not been able to deliver products to customers,” he said.

China will release second-quarter gross domestic product figures on Friday, and are expected to show the impact of a two-month lockdown in Shanghai, the country’s financial, transport and manufacturing hub.

A lockdown in the early stages of the outbreak helped factories in China resume operations within months and fulfill overseas orders. But the same playbook is less effective against the more contagious omicron variant. In Shanghai, the Covid lockdown has crippled the supply chain and logistics.

The restrictions forced Chen to do something his superiors would normally be loathe to do. It has asked its customers – mostly golf clubs in other parts of China – to temporarily buy from competitors.

Shanghai’s city-wide lockdown lasted through April and May. Authorities began easing restrictions in June. So far, only a third of Chen’s customers have returned.

Pre-lock tests

Even before the Shanghai lockout, many companies felt the pinch.

Over the past two years, “freight costs have increased,” said Colin Zhao, chief of medical supplies maker Suntop. “Usually a container to Europe costs between $2,000 and $3,000. Now, it’s around $15,000 to $20,000.

These additional costs will no doubt be passed on to end consumers in Europe, and US manufacturers are also dealing with rising costs of raw materials and cardboard packaging. Zhao said he eventually raised prices by 10% last year.

“But then the euro depreciated against the Chinese yuan,” he said, because of the war in Ukraine. “So our profit margin has actually gone down.”

The woes of the lock

Perhaps restaurants are the hardest hit. They are usually the first and last to open during lockdown.

Wang Ying runs a lamb hotpot restaurant. By May he had been out of action for at least two months and was not in good spirits.

“I feel depressed. I can’t do business during the lockdown, but I still pay all my employees. I am losing money every day,” he said.

Public gatherings are not allowed, so China Crossroads Frank Tai – which organizes public talks – has had little income since Shanghai began its lockdown in March.

Additionally, his girlfriend had a mental health emergency that required hospitalization. During the lockdown, getting to the hospital was a challenge as most public transport stopped.

“We had to wait three hours for an ambulance. There were no taxis to hospitals,” she said.

Once, they cycled around, and when they arrived at one of the best public mental health hospitals, they couldn’t find a bed.

“The staff there said, ‘Because you usually get a bed [my girlfriend] He is obviously in a very bad state. But not now because [there was] Such a big waiting list,’” Tsai said.

In public hospitals, waiting lists were long during the lockdown.

Finally, Chi found a private and international hospital for his girlfriend. However, the treatment was more expensive than public institutions, and the results were not satisfactory.

Simplify the lock

Most of Shanghai was allowed to return to work on June 1.

“Without three months of income, it’s a loss of 600,000 yuan,” or $89,000, said Chen of a bathroom products company.

According to Wang, the owner of the restaurant, it is expected that there will be relief for businesses.

“Although the government asked for a six-month rent reduction, the shopping mall we are in only gave us a one-month discount,” he said. “And we still have to pay all the usual property management and transaction fees.”

There is no relief for Zhao, a manufacturer of medical supplies. And after recalculation by the authorities, he has to pay more to the workers’ social security fund.

It’s $30 more per employee per month.

On top of that, just one Covid infection can send buildings across the city into lockdown and trigger mass testing.

Zhao now says that his success is not about profit – it’s about survival.

Further research by Charles Zhang.