Coronavirus: American factories in China unable to staff production lines as lockdown continues
- American Chamber of Commerce in Shanghai members struggling to kick-start production despite the end of the official Lunar New Year holiday extension
- Situation reflects wider congestion in China, with roads, ports and cargo depots clogged up due to staff shortages
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.
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.
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.
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.
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,” 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.
Purchase the China AI Report 2020 brought to you by SCMP Research and enjoy a 20% discount (original price US$400). This 60-page all new intelligence report gives you first-hand insights and analysis into the latest industry developments and intelligence about China AI. Get exclusive access to our webinars for continuous learning, and interact with China AI executives in live Q&A. Offer valid until 31 March 2020.