Tesla plans to resume partial production
Shanghai still has 20,000, accounting for most of the new cases in China
Restrictions on movement in Xi’an, where Samsung’s semiconductor factory is located
▲Picture is that a resident is being tested for the novel coronavirus infection (COVID-19) in Shanghai, China on the 16th. Shanghai/EPA Yonhap News
Shanghai Municipal Government is seeking to resume production. However, as more cities such as Xi’an in Shaanxi Province and Suzhou in Jiangsu Province have applied the new lockdown measures, China’s economic recovery is looming.
According to Bloomberg News on the 16th (local time), the Shanghai Economic Information Commission issued the ‘Guidelines for the prevention and control of infectious diseases for the resumption of work and production of manufacturing enterprises in the region’. The committee explained, “Companies should establish a ‘closed-loop’ management plan in which workers live on site and are regularly tested for novel coronavirus infection (COVID-19), and apply to the quarantine authorities for approval to resume production.” A specific schedule has not been disclosed.
According to the National Health Commission of China, there were 26,016 new cases of COVID-19 in China today, and 24,820 in Shanghai, where the lockdown has entered its third week, still accounts for the majority of the infected.
Nevertheless, the city authorities are seeking to resume factory production because if the lockdown continues as it is now, the damage to the economy as a whole will grow out of control. The Chinese government has also taken action. The People’s Bank of China, the central bank, announced on the previous day that it would cut the reserve requirement ratio of commercial banks by 0.25 percentage points from the 25th. The Ministry of Industry and Information Technology said it was coordinating with related ministries to first resume production of 660 key companies such as automobiles, semiconductors and pharmaceuticals.
Tesla’s Shanghai Gigafactory plans to partially resume production from the 18th at the earliest. According to Bloomberg, the three-week shutdown disrupted Tesla’s production of more than 44,100 electric vehicles, accounting for 14.5 percent of the company’s total vehicle production in the first quarter of this year.
However, the impact of the COVID-19 lockdown on the Chinese economy is expected to become even more severe. Cities that play a pivotal role in manufacturing, along with Shanghai, have announced movement restrictions one after another. Japan’s Nihon Keizai Shimbun (Nikkei) warned that the number of factories suspending production could increase as the distribution network becomes more chaotic.
The city of Xi’an, Shaanxi Province, where Samsung Electronics’ memory semiconductor factory is located, will implement movement restrictions requiring 13 million citizens to avoid unnecessary going out from the 16th to the 19th. During this period, factory operations or business operations are not suspended, but concerns are growing that production may be disrupted.
The Zhengzhou Airport Economic Zone, a manufacturing hub in central China where the Foxconn factory that assembles iPhones is located, has been under lockdown since the 15th. The city of Suzhou, Jiangsu Province, requested that companies in six major districts, in principle, work from home the day before. If you want to enter the office or use public transportation such as buses and subways, you must present the COVID-19 PCR test result within 24 hours of being negative. Nikkei reported that more than 600 Japanese companies have entered Suzhou.
The logistics disruption is not limited to cities that are currently restricting movement. A movement to demand PCR tests or forced quarantine for a certain period of time from cargo truck drivers is spreading across China to prevent the influx of infected people. In many cases, local governments independently block highway entrances.
As the logistics network fails to operate properly, there are many cases in which parts necessary for production cannot come in or product shipments become difficult. According to a survey released by the Shanghai Japan Chamber of Commerce and Industry on the 15th, 14 out of 16 companies with manufacturing bases in the country are in a ‘stop operation’ status. If non-manufacturing is included, 36 out of 53 companies answered that “logistics with other regions have been suspended.”
