What European companies are facing with China’s non-spreading Covid policy

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 Jiancheng | China Optical Group | Getty Images

BEIJING – China’s coronavirus controls have disrupted supply chains and stressed the daily lives of workers, particularly in Shanghai and Shenyang, according to a slew of anecdotes from the European Chamber of Commerce in China.

Mainland China has struggled in the past few weeks to control the worst wave of Covid since the initial shock of the epidemic in early 2020. And while rapid lockdowns since then helped the country get the virus under control and return to growth, the latest outbreak stems from the most transmissible infections. omicron variable.

Shanghai, home to the world’s largest container shipping port, The two-part lockdown started on March 28 It has not yet been announced when the restrictions will be lifted.

EU Chamber members estimate Shanghai port volumes are down about 40% on a weekly basis, Bettina Schoen-Behanzen, Shanghai branch president and vice president of the Chamber, said Wednesday.

She noted that while the port is “technically operating as usual”, logistics still face challenges from a shortage of truck drivers, who are stuck in lockdown or in need of frequent negative tests for viruses.

Shanghai International Port Group In a statement Saturday, he said that the ability of ships to reach the places designated for unloading or loading goods was more efficient than it was last year in general. The port said that since March 28, the average waiting time for container ships at the port has been less than 24 hours.

“Shanghai is in a bit of an exceptional situation,” Schwinn-Behanzen said. “There is a strong sense of uncertainty across the city. It is fueled by the lack of supplies, the endless closures and the really big fear of being sent to these quarantine camps.”

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In an effort to deal with the increase in cases, Shanghai authorities have set up temporary quarantine centers.

Schoen-Bhanzen points to reports that people living in seclusion in the city have had to get up at 4 a.m. to compete for online delivery of vegetables.

Schoen-Bhanzen said companies that get permission to continue operations — in the food, pharmaceutical or chemical industries — need to keep employees in a bubble around production facilities.

“We hear more and more that some workers don’t volunteer anymore because they are no longer there [a] A clear end is looming and they don’t want to eat and sleep on site.”

Local authorities allowed similar labor policies to remain in place during a nearly week-long shutdown last month at Shenzhen’s Southern Technology and Manufacturing Center.

Two days after the lockdown was lifted, the head of the EU Chamber’s South China branch, Clause Zinkel, said the company he visited still had “many, many folding beds” – which the company planned to keep on hand because they weren’t sure if they Need it again soon.

China’s Ministry of Commerce did not immediately respond to a request for comment.

Automotive supply chain hurdles

In the northern Chinese city of Shenyang, local residents have been on lockdown for more than two weeks, according to local branch chief Harald Kompfert.

He said the city’s BMW joint venture could initially maintain production, but had to stop after an indefinite time “because the supply chain could not be maintained”.

“Any mode of transportation is parked on the road,” Kompfert said. “The police will arrest you if you are on the road and you do not have special permission.”

BMW did not respond to CNBC’s request for comment.

Volkswagen, which has plants on the outskirts of Shanghai and in a major city in Jilin province – which are also closed – said its two production sites would remain closed on Wednesday and Thursday.

Kumpfert also anecdotally said during Wednesday’s webinar that a member firm was unable to obtain a loan because a bank said it was unable to grant loans due to the number of insolvencies and bankruptcies. It was not clear the size of the loan or the bank involved.

Limited national impact

Long-term challenges

EU Chamber representatives said the long-term impact of Covid on China – especially as Shanghai continues to be closed – is talent retention. They noted that Covid-related travel and quarantine requirements, especially to enter the country, have already discouraged new foreign employees from taking up jobs in China.

Shanghai has been the center of foreign business in the country, due in part to the city’s culture and regulations – including a large number of international schools and hospitals.

“Everyone was stunned that this happened to Shanghai. It’s not the center of Hunan. It’s Shanghai,” said Jörg Wutke, president of the chamber.

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Wootki estimated that the number of foreigners on the mainland has halved since the pandemic began, and could halve again this summer. In general, it is expected that the total European population in the country has fallen so sharply that they would fit into Beijing’s Bird’s Nest stadium.

The permanent stadium capacity is about 80,000 seats.

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 during those 10 years rose by nearly 40% to 1.4 million people.

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