What European companies face with China’s zero-covid policy

Shanghai, home to the world’s largest container shipping port, began a two-part closure on March 28 and has not yet announced when the restrictions will be lifted.

Yang Jianzheng | Visual China Group | Getty photos

BEIJING – Covid China’s surveillance has disrupted supply chains, focusing on the daily lives of workers, primarily in Shanghai and Shenyang, according to a number of rumors from the EU Trade Council in China.

China’s mainland has struggled to contain its worst Covid wave since the start of the pandemic in early 2020. Although rapid closures have helped the country control the virus and return to growth, the latest epidemic is due to more infections. omicron variant.

Shanghai, home to the world’s largest container shipping port, began a two-part closure on March 28 and has not yet announced when the restrictions will be lifted.

Representatives of the EU Council estimate that the number of ports in Shanghai has decreased by 40% from week to week, said Bettina Schoen-Behanzin, chairwoman of Shanghai and vice-president of the department, on Wednesday.

She pointed out that although the port is “technically doing business as usual”, transport is still facing challenges due to the lack of truck drivers, who are stuck in closure or often have to undergo negative virus tests.

Shanghai International Port Group said in a statement on Saturday that being able to ship to certain locations to unload or load cargo was more efficient than it was last year as a whole. Since March 28, the average waiting time for container vessels at the port has been less than 24 hours, the port said.

“Shanghai is in a state of emergency,” Schoen-Behanzin said. “There is a great deal of uncertainty throughout the city. It is driven by a shortage of supplies, endless closures and a real fear of being sent to these quarantine camps.”

To try to deal with the increase in cases, the Shanghai authorities have set up temporary quarantine stations.

Schoen-Behanzin pointed out reports that people living in a closure in the city had to wake up at 4 o’clock to compete for online vegetable deliveries.

Companies licensed to operate – in the food, pharmaceutical or chemical industries – need to keep workers in a bubble around the plant, Schoen-Behanzin said.

“We hear more and more that some employees are no longer volunteering where they are not [a] a clear end in sight and they do not want to eat and sleep on the spot, “she said.

Local authorities allowed similar on-site work policies for about a week of closure last month in the southern part of the Shenzhen Technology and Production Center.

Two days after the closure was lifted, Klauz Zenkel, chairman of South China’s EU division, said the company he was visiting still had “many, many collapsible beds” – which the company was going to have on hand because they were unsure. whether they would need them. again soon.

The Chinese Ministry of Commerce did not immediately respond to a request for comment.

Car supply chain slips

In the northern Chinese city of Shenyang, locals have been closed for more than two weeks, according to Harald Kumpfert, the department’s chairman.

He said that BMW’s joint venture in the city could initially sustain production, but would have to stop after an indefinite period “because the supply chain could not be maintained.”

“All transport is stopped on the road,” said Kumpfert. “You would be taken away by the police if you are on the road and do not have a special permit.”

BMW did not respond to a request for comment from CNBC.

Volkswagen, which has factories on the outskirts of Shanghai and in the city of Jilin province – also in closure – said the two production facilities would remain closed on Wednesday and Thursday.

Kumpfert also involuntarily said during the webinar on Wednesday that a member company could not get a loan because a bank said it could not provide a loan due to the number of bankruptcies and bankruptcies. It was not clear what size of loan or bank it was.

Limited impact nationally

Representatives of the EU Council in southwestern China and other parts of China noticed some disruption to the supply chain, but overall less of Covid’s impact on local operations. The House of Representatives stated that they did not know what the Covid situation was like in rural China.

Citi analysts said on Wednesday that they saw a “significant impact on consumption”, but less on production and investment from the Omicron wave in March.

“Although Shanghai and Guangdong provinces accounted for 7.3% and 23.1% of China’s exports and 14.4% and 18.5% of imports in 2021, we believe the impact on trade is manageable: closing in half a city Shanghai began only March 28, but Dongguan and Dongguan. Shenzhen was completed within a week, “said the experts. They expect 4.7% economic growth in the first quarter, compared to the previous forecast of 3.8%.

Last week, a survey of US companies in China showed that 54% of respondents have reduced their income estimates for 2022 due to the latest Covid-19 epidemic.

Among producers, more than 80% reported slower or lower production, as well as supply chain disruptions. The US Chamber of Commerce in Beijing, China, and its Shanghai counterpart conducted the survey last week.

Long-term challenges

Covid’s long-term impact on China – especially as Shanghai’s closure persists – is a retention of talent, EU councilors said. They noted that Covid-related travel and quarantine requirements, especially for entry into the country, have already reduced the number of new foreign workers from taking jobs in China.

Shanghai has been the center of foreign companies in the country, in part because of the city’s culture and systems – including a number of international schools and hospitals.

“Everyone is appalled that this has happened in Shanghai. This is not the center of Hunan. This is Shanghai,” said Joerg Wuttke, Speaker of the House of Representatives.

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Wuttke estimated that the number of foreigners on the mainland had halved since the start of the pandemic and could halve again this summer. In all, he expects the total number of Europeans in the country to have decreased so much that they would fit into the Bird’s Nest Stadium in Beijing.

The stadium holds about 80,000 seats permanently.

The number of foreigners living in Beijing and Shanghai decreased by 41.5% and 21%, respectively, between the official censuses in 2010 and 2020. The total number of foreigners in the country increased during these ten years by 40% to 1.4 million people .

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