Shanghai, home to the world’s largest container shipping port, began a two-part lockdown on March 28 and has yet to announce when the restrictions will be lifted.
Yang Jianzheng | China Visual Group | fake images
BEIJING – China’s Covid controls have disrupted supply chains and stressed the daily lives of workers, mainly in Shanghai and Shenyang, according to a series of anecdotes from the EU Chamber of Commerce in China.
Mainland China has struggled in recent weeks to control its worst wave of covid since the initial impact of the pandemic in early 2020. While rapid lockdowns helped the country bring the virus under control and return to growth, the latest outbreak stems from the most transmissible omicron variant.
Shanghai, home to the world’s largest container shipping port, began a two-part lockdown on March 28 and has yet to announce when the restrictions will be lifted.
Members of the EU Chamber estimate that Shanghai port volumes are down by about 40% week over week, Bettina Schoen-Behanzin, president of the Shanghai chapter and vice president of the chamber, said on Wednesday.
He noted that while the port is “technically operating as usual,” logistics still face challenges due to a shortage of truckers, who are locked down or need frequent negative virus tests.
Shanghai International Port Group said in a statement on Saturday that the ability of ships to reach designated places to unload or load cargo was more efficient than last year overall. As of March 28, the average waiting time for container ships at the port was less than 24 hours, the port said.
“Shanghai is in a kind of state of emergency,” Schoen-Behanzin said. “There is a strong sense of uncertainty throughout the city. It’s fueled by supply shortages, endless lockdowns, and a really big fear of being sent to those quarantine camps.”
In an attempt to handle a spike in cases, authorities in Shanghai have set up makeshift quarantine centers.
Schoen-Behanzin pointed to reports that people living on lockdown in the city have had to wake up at 4 a.m. to compete for online vegetable deliveries.
Companies that get permission to keep their operations, in the food, pharmaceutical or chemical industries, must keep employees in a bubble around production facilities, Schoen-Behanzin said.
“We are hearing more and more that some workers are no longer volunteering because there is no [a] clear end in sight and they don’t want to eat or sleep on the spot,” he said.
Local authorities allowed similar stay-in-place labor policies during a roughly week-long shutdown last month at the southern technology and manufacturing hub of Shenzhen.
Two days after the lockdown was lifted, the chairman of the EU House’s southern China chapter, Klauz Zenkel, said a company he visited still had “many, many rollaway beds,” which the company planned to have at hand because they weren’t sure if they would need them. again soon.
China’s Commerce Ministry did not immediately respond to a request for comment.
Automotive supply chain issues
In the northern Chinese city of Shenyang, locals have been in lockdown for more than two weeks, according to local chapter president Harald Kumpfert.
He said the city’s BMW joint venture was initially able to maintain production, but had to stop after an unspecified time “because the supply chain could not be maintained.”
“Any transport stops on the road,” Kumpfert said. “The police would catch you if you’re on the road and you don’t have a special permit.”
BMW did not respond to a CNBC request for comment.
Volkswagen, which has factories outside Shanghai and in a major city in Jilin province also closed, said the two production sites would remain closed on Wednesday and Thursday.
Kumpfert also said anecdotally during Wednesday’s webinar that a member company couldn’t get a loan because a bank said it couldn’t make loans due to the number of insolvencies and bankruptcies. It was not clear what size loan or bank was involved.
Limited national impact
EU House representatives in the southwest and other parts of China noted some supply chain disruptions, but overall less of an impact from Covid on local operations. The chamber noted that they did not know what the Covid situation was in rural China.
Citi analysts said on Wednesday they see a “considerable impact on consumption” but less on production and investment from the wave of omicron in March.
“Although Shanghai and Guangdong province 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 controllable: the lockdown of half the city of Shanghai only started on March 28, while those of Dongguan and Shenzhen were completed within a week,” the analysts said. They expect GDP growth of 4.7% in the first quarter, against the previous forecast of 3.8%.
Last week, a survey of US companies in China found that 54% of respondents have lowered revenue projections for 2022 due to the latest Covid-19 outbreak.
Among manufacturers, more than 80% reported slower or reduced production and supply chain disruptions. The Beijing-based American Chamber of Commerce in China and its counterpart in Shanghai conducted the survey last week.
Long-term challenges
The long-term impact of Covid on China, especially as the Shanghai lockdown persists, is the retention of talent, EU House representatives said. They pointed out how Covid-related travel and quarantine requirements, especially to enter the country, have already discouraged new foreign employees from taking jobs in China.
Shanghai has been a hub for foreign business in the country, in part due to the city’s culture and systems, including a large number of international schools and hospitals.
“Everyone is stunned that this has happened to Shanghai. It’s not downtown Hunan. It’s Shanghai,” said Joerg Wuttke, chairman of the chamber.
Wuttke estimated that the number of foreigners on the mainland has halved since the pandemic began and could halve again this summer. In all, he hopes that the overall population of Europeans in the country has shrunk so much that they could fit into Beijing’s Bird’s Nest Stadium.
The stadium has a permanent capacity of about 80,000 seats.
The number of foreigners living in Beijing and Shanghai fell by 41.5% and 21%, respectively, between the 2010 and 2020 official censuses. The total number of foreigners in the country increased during those ten years by about one 40% to 1.4 million people.
