Shanghai’s plan to reboot the supply chain will hit workers the hardest

Joyce has been out of her home for weeks since the latest COVID-19 lockdown was imposed. The software industry executive, who asked to be identified only by her first name to avoid attention from the authorities, says she has suffered from food shortages and the compound where she lives has used group buying.

A lot of people are struggling with being confined at home because they have no money. Group purchases are three to four times more expensive than normal days, and Shanghai is not cheap.

Faced with this dire situation, the central government in Beijing has made it a priority to restart Shanghai’s industrial sector. Liu He, the Chinese vice premier, announced this week that the government would aim to stabilize the country’s supply chain by helping 666 companies in COVID-ravaged Shanghai reboot their operations. Doing that while the city continues to battle China’s worst COVID outbreak since the pandemic began may prove an enormous challenge—and may not succeed in curbing the disruption that the global supply chain could feel for weeks or months to come. Advertisement

Out of 50,000 or so companies that operate in the area, the government will help to reopen them on April 15. The list includes domestic and foreign firms that provide key inputs to the supply chain. It is not clear how much of the production line is operating with many component supplies still closed.

Even though the situation in Shanghai is not yet under control, the government may feel that it has no choice but to restart industrial activity. The National Bureau of Statistics released data on Monday showing that the economy expanded in the first three months of the year, but in March economic activity slowed in some cities.

Joyce says that people here have mixed feelings about the reopenings, because they see them as a public relations exercise. People may not be allowed to go home.

Some factories have been able to continue operations while avoiding the risk of a COVID outbreak by shutting down the plant and keeping the workers inside.

Many workers would need permission to leave the compound and not be allowed to return. Factory managers are unsure if workers will show up. The electronics factory that was asked not to be named has successfully used the closed-loop approach. He is concerned that it may be hard to find enough workers for each shift.