Many Japan, German Firms Still Shut Despite Shanghai’s Promises

The majority of Japanese factories in Shanghai are yet to resume any production and many German firms are still closed as well, with the city’s lockdown still damaging business activity even as the local government claims that production is getting back on track. 

Almost two-thirds of Japanese factories haven’t resumed any production yet, while another 28% are running at less than 30% capacity, according to the results of a survey of Japanese firms in the city. None of the 54 companies with factories in Shanghai are back to planned levels of output, and only 37% of firms had permission to resume output.

The number of German firms in the city that are operating is very limited too, according to Maximilian Butek, the executive director of the German Chamber of Commerce in China, Shanghai, with many companies struggling to get permission to restart. “Functional supply chains as well as the lack of sufficient amount of lorries and drivers make operations difficult, even if permissions for work resumptions are granted.”

That situation is at odds with the claim from the city’s government that more than 70% of industrial firms had resumed production as of Wednesday, and show that it will take a lot longer for economic activity to return to normal. More than half of the Japanese firms said they are unable to source any supplies, indicating supply chain problems that have clogged the port and slowed exports continue to be serious.

Almost 90% of Japanese companies said their biggest problem was logistics, followed by securing workers and also securing dormitories where staff can sleep so that companies could run in a “closed loop“ separated from the outside. That is similar to the results from a separate survey of European firms, which showed that more than 90% of respondents said Covid Zero measures have hurt supply chains, with 85% saying they struggled to get raw materials or parts for manufacturing. 

“Most of the German companies in China do not have sufficient facilities, such as dorms, to provide a safe and appropriate environment for factory workers to sleep and live in the factories, nor can they guarantee sufficient medical care in case of accidents or emergencies,“ Butek said. The sentiment among companies worsens as the lockdown continues and there are already cases of international customers seeking new suppliers outside of China, he said. 

“The majority of investments are put on hold—new investments are difficult to justify as long as the zero case policy remains the strategy for the authorities,“ he said. Even once the lockdown is lifted “it will take some time for companies to be fully able to return to normal operations.”

The vast majority of the Japanese firms said they are working to restart production in Shanghai and surrounding areas. However, 35% said they would also increase production in Japan to replace lost output, while almost 20% are looking to boost output in third countries. 

The survey was conducted April 27-30 by the Shanghai Japanese Commerce & Industry Club and follows an earlier report on the damage from Shanghai’s lockdown on Japanese firms in the city.