Shanghai Eases Covid Restrictions. Tesla Is Among Reopened Businesses. – Barron’s

The latest batch of 1,188 reopenings builds upon an initial list of 666 firms released two weeks ago by the city’s Economic and Information Technology Commission. Nearly 40% of the companies on the original list were in the automotive sector. The new list includes firms in a wider range of industries, including pharmaceuticals, chemicals, and electronics, including semiconductor production.

The loosening comes as Shanghai seems to have finally gotten control over China’s worst Covid-19 wave of the pandemic. The surge resulted in a lockdown of the city’s 26 million residents so severe that it caused rare local unrest and ground business operations to a halt. 

Experts have said the cessation of economic activity could shave up to 3% from the entire country’s GDP growth in April. And China’s manufacturing activity for the month dropped to its lowest level in more than two years, the official Purchasing Managers’ Index showed on Saturday.

The recent business openings have accompanied relaxations on residents as well. While much of Shanghai remains under strict containment, six districts—all outside of the city center—have been granted relaxations that allow residents free movement within their districts.

Though most of the companies now on the so-called whitelist are domestic firms, roughly 300 foreign-funded enterprises have been allowed some degree of operation, the city government said. 

Tesla (TSLA), for instance, was included in the initial batch, and its Shanghai Gigafactory—the largest EV production facility in the world—has now reached 80% of its normal output, Zhang Hongtao, chief engineer of the Economic and Information Technology Commission, said at a press conference on Saturday.

Tesla has not publicly commented on the reopening since CEO Elon Musk said on the company’s recent quarterly investor call that the facility is “coming back with a vengeance.”

Other foreign-funded entities back at work include Volkswagen ’s (VOW.Germany) joint venture with state-owned SAIC Motor (600104.China)—China’s biggest car maker— Dow Chemical , and Panasonic Holdings (6752.Japan).

In addition to the reopenings, the city government has issued 43.5 million yuan ($6.6 million) in “scientific innovation coupons” for tech companies, “which has brought benefits to nearly 200 companies and services institutions,” the state-run Global Times reported Monday, without further details.

The city government released lengthy guidelines firms must follow as they restart operations. The 21 requirements range from sweeping rules such as maintaining a “closed-loop” system that isolates workers from the wider society, down to specific measures like what kind of masks workers must wear.

The commission also said in a statement that the “most prominent” ongoing business difficulties were logistics difficulties, limited personnel, and the shortage of inventory.

Despite the gradual easing, a significant number of expats and foreign businesses are rethinking their future in the city, according to business groups and media reports. “The number of foreigners in China has halved since the pandemic began and could halve again this summer,” Joerg Wuttke, president of the European Chamber of Commerce in China, said at a recent business conference.

As Shanghai’s crisis appears to be easing, an uptick in new cases in Beijing has caused the capital city to implement swift and strict measures, such as citywide testing. Though only 62 new cases were officially reported in Beijing on Monday, up from 41 the day before, a handful of apartment compounds have been locked down, and indoor dining has been prohibited during the May Day holiday, which runs through Wednesday. 

City leaders said they hope the rapid response to the relatively small outbreak will prevent a Shanghai-style lockdown.