Home Business Chinese Businesses Are Shutting Down, As Lockdowns Continue

Chinese Businesses Are Shutting Down, As Lockdowns Continue

Chinese Businesses Are Shutting Down, As Lockdowns Continue
Source: Tricor

Several global corporations have ceased operations as China continues to tighten its Covid restrictions, which are among the most severe since the outbreak began.

As officials report unprecedented numbers of illnesses, tens of millions of people across the country suffer restrictions, including the whole Jilin province and technological capital Shenzhen.

Toyota, Volkswagen, and Foxconn, an Apple supplier, are among the companies affected.

The lockdowns have prompted fears that vital supply networks would be affected.

China recorded a new high of over 5,000 cases on Tuesday, the majority of which were in Jilin.

On Monday, all 24 million people of the province’s north-eastern region were placed under quarantine. Since the Wuhan and Hebei lockdowns at the start of the epidemic, this is the first time China has restricted a whole province.

Residents of Jilin are prohibited from travelling about, and anybody wishing to leave the province must first obtain permission from the police.

It happened a day after the 12.5 million people of Shenzhen’s southern metropolis were placed under a five-day curfew, with all bus and subway services stopped.

Authorities in Langfang, which borders Beijing, as well as Dongguan, in Guangdong’s southern province, initiated emergency lockdowns on Tuesday.

Businesses in many of the impacted areas have been advised to close or send their staff home unless they can provide vital services such as food, utilities, or other essentials.

Foxconn, which makes iPhones for Apple, halted operations in Shenzhen on Monday, saying it would “advise the local authorities” on when it would resume production.

It does, however, have many manufacturing facilities in China, and told the BBC that it had “modified the production line to minimize the potential impact.” The company’s plant in Zhengzhou, which is home to the world’s largest iPhone production, is still operational, as the city was spared from the limitations.

Toyota, which closed its manufacturing in Changchun, Jilin Province, had no indication of when it will reopen. The decision was made to evaluate the “effect on supplier operations” as well as the “safety and security of employees and related parties,” according to the Japanese automaker.

Volkswagen likewise shut down operations in Changchun, citing “affected” production of Volkswagen and Audi vehicles and components, but said that it aimed to restore its manufacturing on Thursday.

The Shanghai Composite plummeted 5% on Tuesday, while the Hang Seng index, which includes numerous Chinese technology heavyweights, plunged nearly 6%.

Analysts predict that businesses will be able to weather the storm. “Such lockdowns have happened previously, and (cities) have reopened in a short length of time after the number of Covid cases was under control,” said Yeang Cheng Ling, a senior financial strategist at Singapore’s DBS Bank.

Shenzhen is not a “significant” production location for suppliers, according to UBS analyst Grace Chen, but it would be concerning if the lockdowns spread to Shanghai and the neighboring areas, since the region is a vital manufacturing center for laptops, servers, and smart gadgets.