Coronavirus: American factories in China unable to staff production lines as lockdown continues

·6-min read

As China tries to put its economy back to work amid a novel coronavirus outbreak that has left swathes of the country on lockdown, American manufacturers have warned that they do not have enough staff to man their production lines.

The Lunar New Year holiday was officially extended until February 10 in a bid to stem contagion, but factories begun reopening last week across the country, with differing rules applying across China’s almost 3,000 counties.

A survey of 109 companies in the manufacturing powerhouse of the Shanghai region found that while two-thirds of factories were up and running by the end of last week, 78 per cent did not have enough workers to kick-start full production. Almost half, meanwhile, said that their global operations have already been hit by the spread of the coronavirus.

Companies in the area, which includes Suzhou, Nanjing and the wider Yangtze River Delta, had to apply for permission to reopen, and of those that were granted a licence, just 58 per cent were permitted to open all of their production lines, according to the survey conducted by the American Chamber of Commerce (AmCham) in Shanghai between February 11 and 14.

“The biggest problem is lack of workers as they are subjected to travel restrictions and quarantines, the number one and number two problems identified in the survey. Anyone coming from outside the immediate area undergoes a 14 day quarantine,” said Ker Gibbs, AmCham Shanghai president.

“Therefore, most factories have a severe shortage of workers, even after they are allowed to open. This is going to have a severe impact on global supply chains that is only beginning to show up.

The survey highlights the challenges faced by China in managing the spread of a disease which has killed more than 1,700 and infected more than 70,000, while simultaneously trying to avoid a total collapse of its economy.

Shanghai, which is China’s biggest city in terms of both population and gross domestic product, is a vital hub of commerce, exports and financial services, while the surrounding areas are hotbeds of high-value industry in the world’s second largest economy.

Tesla’s US$2 billion Shanghai gigafactory, which only opened at the end of last year, resumed production starting from last Monday following the government-ordered break to combat the coronavirus.

More than 60 per cent of the companies surveyed by AmCham said that the quarantine rules enforced by authorities – whereby migrant workers must spend two weeks in isolation before returning to their jobs – have stopped them from returning to full capacity.

Meanwhile, almost 40 per cent said that even if their workers did return, the factories would not have enough masks. This could lead to regulatory problems, with some authorities allowing factories to reopen provided they meet specific coronavirus prevention standards, such as supplying protective gear for all workers.

While researchers only quizzed those in the Shanghai area, the results are unlikely to match the situation nationwide. At Foxconn plants that usually employ 16,000 and 20,000 workers in Zhengzhou and Shenzhen, respectively, only 10 per cent were expected back to work last week, Reuters reported. A source within Foxconn, which manufactures Apple’s iPhones, told Reuters that it hoped to return to 80 per cent production in March.

Jared Haw, president of EPower Corp, an American contract manufacturer with facilities in Guangdong province, said that 50 workers returned to work on February 10, after the local authorities permitted the plant to reopen, out of 200 that had worked there before Lunar New Year. Upon arrival, they were sprayed with disinfectant by government workers in white hazmat suits before entering the factory.

We are concerned about our supplier network. While we will be open, we are still not sure how many suppliers will be coming back

Jared Haw

“We are concerned about our supplier network. While we will be open, we are still not sure how many suppliers will be coming back,” Haw said. “We are strongly correlated to our suppliers, so if they are not at work, we will be unable to complete a lot of projects. We do have inventory of some parts, but not for all of them.”

Companies manufacturing goods for export may also struggle to transport their goods out of the country.

“Cross-provincial trucking remains challenging throughout China as authorities require drivers to remain 14 days in self-quarantine depending on the number plate of the truck and the registered province of the driver to curb the spread of the coronavirus. In particular, trucks with number plates from Hubei province where Wuhan is located have been stopped at provincial borders and asked to return to their provinces,” read a report by DHL’s Resilience360 supply chain consultancy.

This has meant only 40 per cent of Shanghai’s trucking network is available, the report read, down to 10 per cent from Shanghai to other cities, with drivers rejecting trips to inland provinces.

The lack of available trucking has led to congestion of goods at air cargo depots and warehouses, while only half of the staff that usually load and unload cargo at the world’s biggest container port in Shanghai had reported for duty as of the start of last week, DHL reported.

It amounts to a huge economic headache for Beijing, with analysts at Moody’s predicting that the coronavirus will cut China’s gross domestic product growth rate to 5.2 per cent in 2020, while Goldman Sachs say it will trim 1.6 percentage points from the economy over the first quarter.

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