Coronavirus: China’s southern manufacturing hub facing supply shortage as global fears grow

Amanda Lee

Almost a third of companies in China’s southern manufacturing hub are facing a supply shortage as the coronavirus takes it toll around the world, a survey of companies showed.

The survey by the American Chamber of Commerce in South China also showed that 15 per cent of the 237 companies which took part in the survey conducted from March 9 to 14 said they had already run out of some supplies.

Just over half said their manufacturing ability had been “slightly” impaired by supply chain disruption, while 42 per cent described the impact as “moderate”, with 6 per cent saying they had been “severely” affected.

“It will require a coordinated international series of actions to minimise the impact of disruption in the supply chain. Today’s events prove we need each other as no one country can do it alone,” said Harley Seyedin, president of the American Chamber of Commerce in South China.

Supplies from within China have been most disrupted, followed by those from United States, Asia-Pacific and the European Union, with the situation within China expected to recover quickly while global disruption is expected to worsen as the virus spreads.

All respondents to the survey reported that the coronavirus had affected their supply chains in some way, with 89 per cent expecting that the disruption would last between one to three months, while 11 per cent believed it would last six months or longer.

Transport and logistics disruptions for themselves or their suppliers were expected by 60 per cent of respondents, with 17 per cent saying a shortage of supplies and 23 per cent citing a shortage of labour among the main disruptions.

We are increasingly bearish on economic disruption in Europe and the US. A global recession is becoming increasingly likely and supply chains will face disruption,

Louis Kuijs

“We are increasingly bearish on economic disruption in Europe and the US. A global recession is becoming increasingly likely and supply chains will face disruption,” said Louis Kuijs, head of Asia economics from Oxford Economics.

“How much will this affect China? Some supply chains that China is a part of are very rich, with inputs from many countries, including the US and/or Europe. But most of these supply chains that China plays a role in mainly feature other Asian countries.

“If, as has been the case so far, the other key Asian economies are able to broadly contain the coronavirus outbreaks, I would think that the stress in Europe and the US should not be hugely disruptive to China in terms of supply chains.”

The survey involved companies mainly from the US, with the European Union, China and other Asia-Pacific counties making up the remaining firms. Multinational companies made up nearly half of the companies, with manufacturers accounting for 76 per cent.

In a separate report on the state of business in southern China, a survey also conducted by the American Chamber of Commerce in South China between October 15 to January 15, found that there was prevailing pessimism on US and China trade relations.

“Even after the first phase of the US-China trade agreement was signed, an overwhelming majority believe the dispute was likely to escalate in 2020. Compared with their Chinese counterpart, more US companies reported that they had been hurt in the trade tension, particularly reflected by their lost market share,” the survey said.

Fierce local competition and rising operating costs were reported as persistent challenges for foreign companies operating in southern China, the survey showed.

Around 70 per cent of the companies planned to reinvest in China this year, down 7 per cent year-on-year. Nearly half of US companies preferred not to reinvest in China in 2020, with 56 per cent indicating they would.

While more than 70 per cent of respondents expected reinvestment of less than US$10 million in 2020, nearly 10 per cent expected to reinvest US$250 million or more which matched results from the previous four years.

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