European trade group warns China lockdowns disrupting production

European businesses operating in China are struggling to cope with lockdowns that are hurting production and threatening supply chains. 

The European Union Chamber of Commerce in China warned of disrupted output Wednesday during a media event, where Joerg Wuttke, the trade group’s president, said erratic enforcement of Covid Zero rules is making it difficult for firms to adjust operations.

Business has been punished as China’s Covid outbreak worsens. The country reported more than 20,000 new daily cases for Tuesday, driven by surging infections in Shanghai where 25 million residents have been confined to their homes in a prolonged lockdown intended to stem the spread of the virus.

While large manufacturing companies have been able to keep operations going by adopting a so-called closed loop system—in which employees were kept at factory locations and tested regularly—that plan hasn’t gone without snags. Even with permission to operate amid restrictions, work can be “very, very difficult,” said Bettina Schoen-Behanzin, the chair of the chamber’s Shanghai chapter. 

And smaller firms “may face bankruptcy when they cannot deliver their products to the customer,” said Klaus Zenkel, chair of the group’s South China chapter.

American firms have also reported problems stemming from the outbreak and attempts to contain it in recent days. The virus and lockdowns dented production or disrupted supply chains for more than half of U.S. firms that responded to a survey published last week. 

Problems with supply chains have so far been limited, though. While a lockdown in the technology and trade hub Shenzhen last month hurt factory activity, Zenkel said firms in that area, where he is based, are in better condition now. The city lifted its lockdown after successfully bringing an outbreak there under control. 

And in Shanghai, home to the world’s largest port, shipping volumes rebounded in March and there was only a slight drop in ship traffic this last week.

There were 161 ships anchored in the port and nearby anchorage in the week to Wednesday, according to data compiled by Bloomberg , down from a week earlier but higher than a month ago, before the outbreak in Shanghai really got underway.