Companies in Shanghai: lockdown with long-term consequences

The lockdown in Shanghai and other Chinese cities is having an impact on global supply chains. European companies are now faced with the question of whether to continue investing in China.

A company stands and falls with its employees. Many no longer want to stay in China. According to the Chamber of Commerce, this has already been indicated due to the strict entry and quarantine regulations over the past two years of the pandemic. The lockdown in Shanghai will exacerbate this again, said Bettina Schön-Behanzin from the European Chamber of Commerce in Shanghai. More than 26 million people there have not been allowed to leave their homes since the lockdown began at the end of March.

This regulation last applied indefinitely. The authorities have now announced at least a gradual relaxation: The residential areas are divided into three risk categories – depending on when new infections with the corona virus last occurred there. In areas where no positive cases have occurred within two weeks, the curfew will be lifted and residents should be given the opportunity to do “appropriate activities” in their neighborhoods again. However, isolation and distance rules apply – and the districts concerned could be sealed off again in the event of new infections.

Corona measures increase emigration

Schön-Behanzin describes the situation in Shanghai under the conditions of the complete lockdown as a “kind of emergency. It’s a ghost town. You see no people, no cars on the streets and there is a mood of fear here.” Schön-Behanzin expects an exodus of foreigners who want to leave Shanghai and other cities in China as soon as this is possible again.

Among other things, the conditions in the state quarantine centers to which those who tested positive in China are brought scared many. “Of course, there are also these topics that go through all social media here, that children are separated from their parents if they are positive,” reports Schön-Behanzin. “That has now been partially withdrawn again, in special cases the parents can accompany their children. But I think you can imagine how much that worries people here. And of course that means that families with children, that expats, who have lived here for a long time, that people pack their bags here.”

Companies ask the question of existence

The future of the otherwise so international financial and commercial city of Shanghai is uncertain – for companies it is not possible to plan. They have been struggling with lockdowns, restricted or shut down production and interrupted supply chains for weeks. Fewer and fewer employees are willing to sleep in the factory or office for several days or even longer during a lockdown in order to keep production going.

According to the European Chamber of Commerce, companies are faced with the question of how they should continue to exist under the strict corona measures and to what extent future investments should be planned in China or elsewhere in Asia.

Lockdown implications for global supply chains

According to several economic experts, the strict lockdown in Shanghai will also affect the global economy and global supply chains, which will also be felt in Germany. Above all, an important part of the electronic goods is produced in Shanghai and the surrounding area. This could temporarily restrict the range of consumer electronics and intermediate electronic goods.

The port in Shanghai is the world’s largest container port and Germany’s most important partner port. It is currently still being operated despite the lockdown. However, traffic to and from the port is restricted due to the lack of truck drivers and the need for special permits to drive from another region to Shanghai or from one district to the next.