Tesla’s plant in Shanghai has been “back-up” since Wednesday, according to CEO Elon Musk’s comments during the quarterly earnings call, according to a StreetAccount transcript. This photo shows the factory on the outskirts of Shanghai in July 2021.
Vcg | Visual China Group | Getty Images
BEIJING – Foreign companies are struggling to bring back factory workers after weeks of blockades in Shanghai as the country struggles with Covid’s worst outbreak since the pandemic began.
Nearly a month after Covid’s restrictions began in earnest in Shanghai, companies in the United States and the United Kingdom say less than half of their employees can return to work.
Since March, mainland China has imposed travel restrictions and orders to stay at home in economic centers from the southern city of Shenzhen to the northern province of Jilin. The degree of control over Covid varies by region.
The blockades in the southeastern metropolis of Shanghai, which began on a large scale in late March, were among the most destructive – for everyday life, for foreign companies and their supply chains. The city accounts for about 3.8% of China’s GDP, but is home to the world’s busiest port.
Last Friday, China’s Ministry of Industry and Information Technology announced it had sent a team to Shanghai. The ministry called for priority resumption of work in 666 large enterprises in industries such as chips, biopharmaceuticals and the production of cars and equipment.
Many companies still face the challenges of labor shortages and logistical difficulties.
Bettina Schoen-Behanzin
European Union Chamber of Commerce in China
“A significant number of members of the European Union Chamber of Commerce in China are on the white list, especially in the manufacturing, chemicals and automotive sectors,” said Bettina Schoen-Behanzin, vice president of the chamber and president of Shanghai.
But “many companies are still facing the challenges of labor shortages and logistical difficulties,” she told CNBC in a statement, estimating that less than 30% of members’ workforce is eligible to return to work. due to blockage.
Being on the list means that a factory can resume operations if workers live on the production site and contact is limited to people with valid negative virus tests – what is known locally as ‘closed loop management’.
“Some believe that by reopening the whitelist, closed-loop requirements may not be achievable or may only call 30-40% of staff back to production facilities,” said Matthew Margoulis, senior vice president of operations. in China for the US-China Business Council, said in an email.
Difficulties in recruiting workers in factories mean companies cannot easily hire new staff for other shifts, foreign business organizations said.
Prior to the publication of the list, some companies in Shanghai and other Covid-blocking regions were able to maintain minimal operations under closed-loop protocols.
When companies try to attract new workers, it usually “fails with local communities that don’t want to let people out,” said Johan Anel, a partner at Asia Perspective, a consulting firm that works primarily with northern European companies operating in Eastern and Eastern Europe. Southeast Asia.
The only good thing about the current situation is that it is so obviously unsustainable for the economy and all companies that it will not last too long.
Johan Anel
partner, Asia Perspective
Another challenge for workers who are still allowed to leave their apartments is Covid’s travel restrictions, at which point the return to work process “usually fails,” he said.
Transport restrictions can also affect the delivery of parts.
“There is fear among truck drivers that if you risk a 14-day quarantine to go to this factory, you may miss this delivery and do something else,” said Anne.
To be able to run a business with 30% capacity in a week or so is a “really good result”, he added.
“The only good thing about the current situation is that it is so obviously unsustainable for the economy and all companies that it won’t last too long,” he said. “I would not expect the situation to be as bad as it is now, when we reach the second half of May or June.
The car load is falling
Local restrictions vary from province to province and can range from general travel bans to virus testing requirements for drivers.
The various measures have an uneven impact on business, whether foreign or Chinese.
China’s road haulage turnover fell 27.2 percent nationwide from April 1 to 17 from a year earlier, Nomura’s chief Chinese economist Ting Lu said in a report Wednesday.
For Shanghai, the same transport measure collapsed by 82.6% over the same period, the report said.
China’s central government has repeatedly called on local authorities to support transportation services and remove restrictions, such as forcing drivers to wait for virus test results before they can move on.
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Last week, Huawei CEO Richard Yu warned in a WeChat post – similar to a Facebook update – that if work and production in Shanghai could not resume by May, all industrial and technology companies with supply chain links with the region will have to stop production, especially cars.
Huawei confirmed the contents of Yu’s post from his personal account, which was first reported by Chinese media. Yu’s publication came at about the same time as the government announced the white list.
Asked about such warnings and staffing problems, the industry ministry told reporters on Tuesday that the problems were only “temporary” and that authorities would improve the whitelist system.
“On the one hand, we think the government understands how important Shanghai is. On the other hand, 600 manufacturing companies is a good first step, but there are thousands of manufacturing companies in Shanghai that are closed, “said Michael Hart, Beijing-based president of the US Chamber of Commerce in China, in a telephone interview Wednesday.
“Some of our companies in northern China have contacted us, their key suppliers in Shanghai are not among those eligible to restart,” Hart said.
What the companies say
Foreign companies in China report various states of return to work. Shanghai still reports new daily cases of Covid of about 20,000, with and without symptoms.
Tesla’s plant in Shanghai has been “back-up” since Wednesday, according to CEO Elon Musk’s comments during the quarterly earnings call, according to a StreetAccount transcript. “They really had significant challenges due to the shutdown of Covid, and yet they managed to produce a huge number of high-quality vehicles.
On the other hand, the American chemical company DuPont told CNBC late on Tuesday that while most of its production facilities in China are operating normally or under closed loop management, those in Shanghai remain closed.
“Our production facilities in Shanghai will resume production as soon as we receive approval from the government and when our colleagues are allowed to leave the community health department,” the company said. “We assess the logistics challenges of the supply chain and look for alternative routes and systems for transporting products and materials to meet the needs of our customers.”
As of Monday, Volkswagen said it was assessing the possibility of resuming production at its Anting plant on the outskirts of Shanghai, while its factories in the northern city of Changchun in Jilin Province were “gradually resuming production”.
German chemical giant BASF said on Wednesday that its facilities in Shanghai have been operating under local government restrictions since late March, with some producing at reduced levels.
“There have been some problems with raw material supplies, logistical disruptions and labor shortages affecting our work and business,” the company said, noting that most of its manufacturing facilities in China continue to operate.
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