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Shanghai’s plan to reboot the supply chain will hit workers the hardest

Shanghai’s plan to reboot the supply chain will hit workers the hardest

Like many people in Shanghai, Joyce has spent weeks shut at home since the latest COVID-19 lockdown was imposed on March 28. The software industry executive, who asked to be identified only by her first name to avoid attention from the authorities, says she has suffered from food shortages, and the compound where she lives has resorted to “group buying,” where different individuals are responsible for sourcing as much of a certain product as possible for the community.

“A lot of people are struggling with being confined at home, because they have literally no income,” she says. Group purchases “are three to four or five times more expensive than the normal days, and Shanghai is not cheap.”

Faced with this dire situation, the central government in Beijing has made it a priority to restart Shanghai’s industrial sector. Liu He, the Chinese vice premier, announced this week that the government would aim to stabilize the country’s supply chain by helping 666 companies in COVID-ravaged Shanghai reboot their operations. Doing that while the city continues to battle China’s worst COVID outbreak since the pandemic began may prove an enormous challenge—and may not succeed in curbing the disruption that the global supply chain could feel for weeks or months to come.

The government announced the “white list” of Shanghai companies it would help to reopen on April 15, out of the 50,000 or so that operate in the area. The list includes domestic and foreign firms that provide key inputs to the supply chain, such as manufacturers of semiconductor components, automotive parts, and medical supplies. Tesla’s Shanghai factory has reportedly reopened already, with workers shut in a closed loop, but with many component supplies still closed it is unclear how much of the production line is operating.

The government may feel that it has no option but to kickstart industrial activity, even though the situation in Shanghai is not yet fully under control. On Monday, China’s National Bureau of Statistics released economic data showing that although the economy expanded 4.8 percent in the first quarter of 2022 compared to the same period in 2021, in March economic activity slowed in Shanghai and other cities subjected to lockdowns.

“People here have mixed feelings” about the reopenings, because they see them as partly a public relations exercise, says Joyce. “Most companies will ask people to live at the factory, but how are you going to do it? People may not be allowed to go home.”

Some factories have been able to continue operations while minimizing the risk of COVID outbreaks by operating with workers shut inside a “closed loop,” meaning that they have to remain inside a plant, eating there and in some cases reportedly sleeping on the floor, for days or even weeks at a time.

Many workers would need permission to leave the compound where they live and then risk not being allowed to return. Some factory managers are unsure whether workers will show up. One, at a Shanghai electronics factory, who asked not to be named because of the risk of upsetting the authorities, says his factory has been successfully using the closed-loop approach. But he worries that it may be difficult to find enough workers for each new shift.

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