China’s battle to contain the Omicron coronavirus variant risks choking already stretched global supply chains, manufacturing managers and analysts have warned, threatening production of goods ranging from smartphones to furniture.
Beijing is determined to prevent any large-scale transmission of Covid-19, especially as it prepares to host the Winter Olympics next month, and has rushed to impose restrictions to maintain its zero-Covid target.
A lockdown in the central city of Xi’an is set to enter its third week, forcing about 13m people to remain in their homes. Measures including mandatory testing have been imposed in Tianjin, a port city of 14m about 100km from Beijing, several cities in Henan province, home to the world’s largest iPhone plant run by Taiwan’s Foxconn, and parts of Zhongshan and Zhuhai, manufacturing hubs close to Hong Kong.
The curbs are a test for multinational companies and whether they have become better equipped to deal with disruption to their manufacturing capacity than during the earlier waves of the pandemic.
“With Covid, the lunar new year holiday and the Olympics all coming together, we could be looking at a perfect storm,” said Ambrose Conroy, chief executive of Seraph, a US-based supply chain consultancy. “Companies are a bit better prepared for short-term lockdowns now, but a broader shutdown over a few weeks would wreak havoc. ”
An executive at a Taiwanese manufacturer in Shenzhen said a lockdown in the southern Chinese manufacturing hub would be “worse than 2020”.