Many European manufacturers in China have been forced to work with about half their usual workforce for two to three weeks, which has affected production somewhat, said Klaus Zenkel, the chairman of the chamber’s South China branch. As a precaution against lockdowns, many companies had stockpiled spare parts in warehouses prior to the Covid wave and relied on them to keep running.
But to cut costs, a few small suppliers of specific components have shut down operations early due to the Chinese New Year holiday, which begins on Jan. 21. Zenkel said.
The damage “zero Covid” has done to China’s once unbeatable attractiveness as a manufacturing hub may prove difficult to repair.
Lockdowns and closed borders slowed or disrupted the delivery of goods and prevented many companies from sending buyers to factories. Some international retailers, seeing risks in over-reliance on China, have instead turned to other countries for supplies. Walmart, for example, plans to increase imports from India to $10 billion a year by 2027.
Even Chinese exporters are trying to diversify.
In Yangjiang, Velong Enterprises, a Chinese manufacturer of knives, grill thermometers and other kitchen utensils for Walmart, Ikea, Target, Carrefour and other retailers, is expanding its operations in Cambodia, Vietnam and India. It has shrunk its workforce in Yangjiang from 1,700 to 1,200 through attrition and is considering potential plant locations from Mexico to Turkey, said Jacob Rothman, a co-founder and co-chief executive.
Companies like Velong find some savings when they venture out. The company pays workers in Cambodia half as much as workers in Yangjiang.
