BEIJING — Foreign companies are struggling to bring workers back to factories after weeks of shutdowns in Shanghai, as the country battles its worst Covid outbreak since the pandemic began.
Nearly a month after Covid restrictions began in Shanghai, US and European companies say less than half of their employees are able to return to work.
Since March, mainland China has imposed travel restrictions and stay-at-home orders on economic hubs from the southern city of Shenzhen to the northern province of Jilin. The extent of Covid checks has varied by region.
The lockdowns in the southeastern metropolis of Shanghai, which began on a large scale in late March, have been among the most disruptive – to daily life, as well as to foreign businesses and their supply chains. The city accounts for around 3.8% of China’s GDP, but is home to the world’s busiest port.
Last Friday, the Chinese Ministry of Industry and Information Technology announced that it had sent a team to Shanghai. The ministry called for prioritizing the resumption of work at 666 major companies in sectors including chips, biopharmaceuticals and automobile and equipment manufacturing.
A “significant” number of members of the European Union Chamber of Commerce in China are on the whitelist, particularly in the manufacturing, chemical and automotive sectors, Bettina Schoen-Behanzin said, vice president of the chamber and president of Shanghai.
But “many businesses still face the challenges of labor shortages and logistical difficulties,” she told CNBC in a statement, estimating that less than 30% of members’ workforces are eligible to return. at work due to closures.
Being on the list means that a factory could resume operations if workers live at the production site and contact is limited to people with valid negative virus tests – what is known locally as ‘loop management’ closed”.
“Some feel that with the reopening of the whitelist, the requirements to achieve closed-loop status may not be feasible, or perhaps they can only recall 30-40% of personnel in manufacturing plants” , said Matthew Margulies, senior vice president of China operations. for the US-China Business Council, said in an email.
The difficulty of bringing workers into factories means companies cannot easily recruit new employees for other shifts, foreign trade organizations have said.
Before the list was released, some businesses in Shanghai and other regions subject to Covid lockdowns were able to maintain minimal operations under closed-loop protocols.
When companies try to hire new workers, it usually fails with local communities not wanting to let people go,” said Johan Annell, partner at Asia Perspective, a consultancy firm that works primarily with businesses in Northern Europe operating in East and Southeast Asia.
Another challenge for workers getting permission to leave their flats is Covid-related travel restrictions, in which case the return-to-work process “usually fails”, he said.
Transportation restrictions may also affect the delivery of parts.
There’s a “fear among truck drivers, if you’re risking a 14-day quarantine to get to that factory, you might be skipping that delivery and doing something else,” Annell said.
For a business to be able to operate at 30% capacity in about a week is “a very good result”, he added.
“The only good thing about the current situation is that it is so obviously unsustainable for the economy and all businesses that it won’t last too long,” he said. “I wouldn’t expect the situation to be nearly as bad as it is now when we come to the second half of May or June.”
Road freight plunges
Local restrictions vary from province to province and can range from blanket travel bans to virus testing requirements for drivers.
The different measures have had an unequal impact on companies, whether foreign or Chinese.
A measure of China’s road freight turnover fell 27.2% nationwide from April 1-17 from a year ago, Nomura’s chief economist pointed out on Wednesday. for China, Ting Lu, in a report.
For Shanghai, that same transport metric fell 82.6% over the same period, according to the report.
China’s central government has more than once called on local authorities to support transport services and remove constraints, such as requiring drivers to wait for virus test results before they can proceed.
Last week, Huawei Consumer Business Group CEO Richard Yu warned in a WeChat post – similar to a Facebook update – that if work and production in Shanghai cannot resume by May, all industrial and technology companies with ties to the region’s supply chain will have to halt production, especially automobiles.
Huawei confirmed the contents of Yu’s message from his personal account, which was first reported by Chinese media. Yu’s post came around the same time the government announced the whitelist.
Asked about the warnings and the staffing issues, the Industry Department told reporters on Tuesday that the problems were only “temporary” and that authorities would improve the whitelisting system.
“On the one hand, we think the government understands the importance of Shanghai. On the other hand, 600 manufacturing companies – that’s a good first step, but there are thousands of manufacturing companies in Shanghai that are closed. “said Michael Hart, Beijing. -based president of the American Chamber of Commerce in China, said in a telephone interview Wednesday.
“We have asked some of our businesses in northern China to contact us, their key suppliers in Shanghai are not among those allowed to restart,” Hart said.
What companies are saying
Foreign companies in China have reported varying states of return to work. Shanghai is still reporting daily new Covid cases of around 20,000, with and without symptoms.
Tesla’s Shanghai factory was “up and running again” on Wednesday, according to CEO Elon Musk’s comments during a quarterly earnings call, according to a StreetAccount transcript. “They really had some significant challenges due to the Covid shutdowns and still were able to produce a tremendous number of high quality vehicles.”
On the other hand, the American chemical company DuPont told CNBC on Tuesday evening that while most of its manufacturing sites in China were operating normally or in a closed loop, those in Shanghai remained closed.
“Our manufacturing sites in Shanghai will resume production as soon as we receive government approval and when our colleagues are allowed to leave community health management,” the company said. “We are evaluating supply chain logistics challenges and researching alternative routes and systems to transport products and materials to meet our customers’ needs.”
On Monday, Volkswagen said it was assessing the feasibility of resuming production at its Anting plant on the outskirts of Shanghai, while its factories in the northern city of Changchun in Jilin province “have gradually resumed production. production”.
German chemicals giant BASF said on Wednesday its Shanghai sites had been operating under local management restrictions since late March, with some producing at reduced levels.
“There have been individual raw material supply issues, logistical disruptions and labor shortages, which are impacting our operations and business,” the company said, noting that most of its production sites in China remain in operation.
Correction: This story has been updated to correct an editing error and accurately reflect that US and European companies say less than half of their factory workers have been able to return to work.
Shanghai workers struggle to return to work
Source link Shanghai workers struggle to return to work