Chinese companies are reeling from a coronavirus wave that is threatening to close down factory production lines and bring chaos to supply chains as truck drivers succumb to Covid-19, disruptions which analysts say will bring short-term pain but speed up China's exit from Pandemic Isolation.
The Omicron variant of the virus ran rampant through several big cities after the sudden U-turn on the zero- Covid policy. According to some estimates, over half of Beijing's 21 million inhabitants are infectious.
Officials and companies were surprised by the surge. The chief executive of a large nursing home in the capital said that the government had asked large state-owned enterprises to increase production of fever medication.
While office workers switch to working from home, many factories in regions with a widening outbreak are not able to keep up with staff calls for sick.
A boss of a printed circuit board factory in the eastern province ofShandong said only 20% of his staff came to work on Friday. There were one after another who tested positive. They said that they were worried that they would have to close the factory.
The sudden surge in cases has left companies with no direction on how to handle them. Factory bosses are either relaxing all controls or reverting to the old handbook of isolating workers after operating under strict guidelines.
One manager at a car assembly plant in the northern province of Hebei said his group plans to bring back the closed loop system, whereby staff live and work on-site during Covid outbreaks, in order to keep production going.
He said that there would be no workers left.
Under zero- Covid, factory bosses have dropped restrictions such asPCR testing and fencing off workers from the rest of the population.
The president of the EU Chamber of Commerce in China said that the closed loop model is no longer viable for manufacturers. The lack of measures to suppress the spread of the exit wave made these strategies useless.
The dramatic turnround in Covid control measures can be seen in the rapid removal of restrictions in the world's largest Apple factory. After a Covid outbreak resulted in them being locked in dormitories, workers at the Apple contract manufacturer staged a walk out.
A worker who asked to remain anonymous said that by the beginning of December, the metal barriers that had kept the staff confined to the Zhengzhou campus had been dismantled. Now we are free. They said that there are no metal fences in place anymore.
They said that Covid-positive workers could be isolated in the dormitory. Production is returning to normal after the company recruited new workers and others who had protested returned to work, according to the employee.
The company did not reply to the request.
Workers will be in short supply after the lunar new year. The Omicron outbreak has brought forward the annual movement of migrant workers from the coastal provinces back to poorer regions in the west.
Chen Long, a partner at the Beijing-based research provider Plenum, said that sectors that rely on migrant workers are struggling. There will be little activity until the end of January.
Factory bosses are dealing with supply chain issues as well. The rising number of Covid-positive truck drivers will be a factor. Drivers were subject to strict testing which hampered supply chains but kept sick drivers off the roads.
Some plants would have to slow production because of a lack of components. He said this was all about inventories and stocks.
Delivery delays were experienced by the chief executive of WPIC Marketing + Technologies.
There are multiple stops where the drivers exchange cargo. He said that it only took one driver to call in sick.
There were delays in sending packages to customers after many delivery drivers tested positive. She said that the delivery system is very slow.
After three years of being isolated from the rest of the world, investors are hoping that the period of short-term pain will speed up China's opening up.
Most cities will have passed the peak by the middle of January if the virus continues to spread. February will be a good month for the restart of activity. This period of short-term mess will be looked at by investors. The question is how quickly things will normalise after this wave, and it looks like it could be quicker than expected.
After the initial wave of infections is over, there will be no revenge spending from Chinese consumers.
Many workers have had their salaries slashed in the years to come. Consumer confidence isn't very high. A lot of small and medium-sized businesses have stopped operating.
There are signs of a rebound in domestic and international travel even without a sudden resurgence in consumer confidence.
The go home demand during Chinese new year could be better than previously thought, according to analysts at Citigroup. Qunar's data shows an eight-fold increase in airline tickets booked in the week after Covid restrictions were loosened.
International travel is in high demand. The travel site Ctrip saw a surge in flight searches on New Year's Eve after restrictions were lifted.
It was recommended.
The first wave of Chinese exports to benefit from more freedom to travel is being led by a manager at a clothing manufacturer. A group of 100 exporters went to Japan at the beginning of December for a week long trip organised by the city's commerce department.
The Asia Fashion Fair has not been attended in person since the beginning of the Pandemic in 2020. I was excited to meet clients for the first time.
Five million dollars in orders were secured from seven Japanese companies. The Japanese market contributes half of the revenue.
There will be an influx of foreign executives who have been unable to travel to China because of inboundQuarantine restrictions. Three years have passed since people with businesses came here. He said that a lot of investments haven't happened because of it.
There are additional reports by Sun Yu and NianLiu in Beijing.
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