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Companies feel impact after China’s blockade of Covid

According to the National Health Commission, Sunday’s cases have doubled from the previous day, reaching about 3,400 in more than half of China’s 31 states, leaving both Shenzhen’s high-tech hubs and Shanghai’s financial centers in various closed states. rice field.

In Shenzhen, with a population of 17 million, after 66 new incidents were reported on Sunday, the government said all “insignificant businesses” would have to shut down or require employees to work from home. rice field. It’s 7 days, but we’ll evaluate the condition later to determine if an extension is needed.

Delivery of medical, food and fuel was still permitted, but the city government says adults in the city will need to undergo three PCR coronavirus tests over the next few days.

According to data and statements from the National Health Commission of China, flare-ups were revealed only by mass inspections and Omicron variants that took longer to reach China compared to more open countries. It is caused by symptomatic cases.

In China, official data show that about 85% of the population has been vaccinated with the Chinese vaccine at least twice. Health officials said last week that this high vaccination rate is increasing the number of asymptomatic cases. When it occurs in a particular area and is tested for a wider population, much more people are tested positive than they are symptomatic because of the effectiveness of the vaccine.

China, on the other hand, has been giving adults a third immune shot for months, but unlike Western vaccines, it is reasonably effective with the inactivated SARS-CoV-2 virus. I’m just using a homemade vaccine. In a study published last month, raw mRNA vaccines showed disappointing results for Omicron mutants.

Foxconn, a tech component maker —


Apple
(Ticker: AAPL) and


Samsung Electronics
(005930. South Korea) — Said that operations in the city were suspended. Shenzhen has two core production facilities, China Headquarters and Foxconn.


Hon Hai Precision Industry
(2317. Taiwan).

Headquarters of the most publicly valuable trading company in China,


Tencent Holdings
(700.Hong Kong) is also in Shenzhen along with phone makers Huawei and Oppo, but none of them support it. Barron’s A request as to whether their activities have been affected.

The outbreak in the city last year clogged nearby ports and raised prices for goods shipped to the United States and Europe. The effects of this series of incidents have just been reported.

“Frequent data already show the impact of recently introduced measures. Daily road congestion in 100 cities in China has dropped sharply in the last few days. Currently, congestion is around the same time in 2020. At the same level as Burak Cetinok, Head of Research, Arrow Shipbroking Group, Barron’s Monday..

The outbreak in Shanghai began more than a week ago, with about 500 symptomatic cases so far in March, local governments closing schools and trapping people in homes in some areas. I did.

Rapid and harsh containment methods again question China’s so-called Zero-Corona strategy and its impact on supply chains and business operations.

“Delaying the shipment of the final product requires only one missing link in the supply chain. If there is a new Covid challenge from Shenzhen, this poses a global challenge to the manufacture and supply of the final product. Bring it, “said Patrick Moorhead, founder and chief. Talked to Moor Insights & Strategy Analysts, Analysts Barron’s Monday.

Shanghai and Shenzhen are not the areas most affected by the current wave, nor are they the only commercial centers affected. The entire northeastern part of Jilin Province was closed on Monday after reporting nearly 1,000 new cases the day before. Changchun, the capital. Changchun is called “Detroit of China” because of its position as the country’s major automobile production center.

At China’s large annual legislative summit last week, former Deputy Minister of Commerce Chen Jian said the country needs to diversify its supply chain so that it doesn’t malfunction so easily, adding: I did. I’m not sure. “

At the same event, Prime Minister Li Keqiang hinted at a more targeted virus containment approach called “dynamic removal.”

“I have spoken many times with the international business community, multinational executives, and business leaders who have expressed their desire to maintain business exchanges as needed,” he said. Maintain an orderly and smooth flow of goods and personnel. “

Not all blockades in China have caused significant disruption to the supply chain, and ports appear to be weak links. The large, one-month blockade of Xi’An’s inland city in December did not appear to have had a noticeable impact on Samsung’s operations.


Micron Technology
According to Chinese media reports, the blockade was lifted and (MU) and Powertech Technology (Taiwan: 6239) opened a branch.

In contrast, last year several ports were closed, some due to a single-digit virus incident, which caused shipments to stop for weeks, causing spillover around the world. The two busiest ports, Salt Pans and Port of Ningbo, are close to Shenzhen and Shanghai. Each.

“Slow port operations can lead to further congestion and limited sea freight capacity, which also means higher freight rates,” said Cetinok of Arrow Shipbroking.

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