Since Shanghai was put under hard lockdown, many factories halted production. As the situation normalizes, Shanghai factories reopen to ensure economic growth and reach the planned annual growth rate for this year. China’s Ministry of Industry and Information Technology has published a “whitelist” containing the first batch of companies in Shanghai that are allowed to resume production under certain conditions.
Shanghai factories reopen despite lockdown
Curbed production in China affects consumers all over the world. In Shanghai, there are suppliers of such global brands as Apple and Sony, as well as the partner of General Motors and Volkswagen, the state-owned automotive group SAIC Motor. Tesla’s Shanghai Giga factory, which produced around 2,000 electric vehicles a day, was also forced to halt production. When it reopens, Tesla’s production capacity will be halved.
The first published “whitelist” includes 666 key companies, mainly from the following sectors:
- automotive (about 40% of companies on the “whitelist”)
- semiconductors (Shanghai is China’s largest semiconductor manufacturing hub)
- consumer electronics
- equipment manufacturing
- food
- medical supplies.
Production can be resumed under certain conditions, such as using preventive measures (social distancing, wearing protective masks, disinfecting), testing twice a day, and working in a closed-loop system (employees live on campus). Employers provide mattresses, sleeping bags, and three meals a day to accommodate the workers. Moreover, a special digital platform has been created to inform about truck drivers with a “green health code” who are allowed to move around the city.
Not all companies on the announced “whitelist” are ready to resume production right away. Many of them suffer from staff shortages and disrupted logistics chains; without workers and components, there is no way to manufacture in a timely manner.
China’s zero-Covid policy consequences
According to statistics, Shanghai exports 6% of Chinese goods per year. It is an important production and financial hub not only for China but also for the entire world. The Port of Shanghai, the largest in the world, has reduced its throughput due to quarantine measures, which will undoubtedly affect the global economy.
It is estimated that the recently introduced measures to combat the pandemic cost China up to $ 46 billion in economic output per month, which is equal to over 3% of GDP. It is unlikely China will reach its planned economic growth rate for 2022. Instead of 5.5%, it may be 4% if the government does not loosen its zero-Covid policy. We can expect social and economic disruptions in the near future for sure.