China’s services sector eyes recovery after reopening, but challenges loom
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Restaurants like this one in Shanghai are in need of staff but are still reluctant to hire due to lingering uncertainties.
PHOTO: AFP
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BEIJING – Mr Jordan Li, a restaurant owner in the south-western Chinese city of Chengdu, hopes desperately that January’s Chinese New Year holidays will help him make up for business lost in 2022 because of Covid-related travel and other restrictions.
Although infections have risen sharply since the central government lifted most of its pandemic-control curbs in December, Mr Li thinks people will still travel to Chengdu.
He envisions a different problem: a lack of workers to handle the demand.
Mr 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.
Mr 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 China now,
They also must deal with a growing number of sick workers, especially ahead of and during Chinese New Year, a peak travel period in China, when millions head home to celebrate with families.
The contact-intensive services sector, which accounted for 53.3 per cent of China’s gross domestic product in 2021, suffered the most amid the country’s anti-virus curbs, which shut down many restaurants and restricted travel.
Beijing has dismantled almost all such curbs,
“There is still a shortage of labour in the services sector in the big cities, and the loss of productivity is quite obvious,” said Ms 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-19 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 Mr Zhou Weihong, deputy general manager at Spring Tour, the travel arm of Shanghai-based Spring Group.
‘People don’t have money’
Retail sales, a key gauge of consumption, dropped 5.9 per cent in November from a year earlier, and catering fell by 8.4 per cent 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 south-western 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 in December 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 Chinese New Year holidays.
The lack of healthy workers has also led to long waits for deliveries in major Chinese cities.
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 is “confident that Chinese New Year is going to be great”, as its website traffic surged 300 to 400 per cent after the announcements of eased Covid-19 rules.
The chain is now scrambling to “adjust to the new policies” to get ready for the holidays, the executive said. REUTERS
