Fiona Yu, a partner at Chinese investment firm Northern Light Venture Capital, who also lives in Shanghai, says the lockdown has been challenging but manageable. She believes that people can get enough food, if not exactly what they would like. “I think most people, especially young people, are willing to go to work,” she says.
But Yu says some of the companies her company has invested in have encountered difficulties. Some have had to shut down their operations due to a shortage of hardware components. A few entrepreneurs have even been forced to sleep in their labs to avoid disrupting important biotech experiments. “They suffer, but they do it,” she says.
Shanghai is a particularly important producer of key components for the automotive and electronics industries, as well as a vital hub for the shipping industry. Restarting factories will bring revenue to some workers, but the biggest benefit will be to the global supply of products. At least 249 of the 666 companies the government has set aside for reopening are automakers, according to Everstream Analytics, a company that provides supply chain data.
China is now experiencing some of the most draconian government-imposed measures in the world as it struggles to maintain its ‘zero covid’ strategy against the contagious Omicron variant of the virus.
Numerous cities and districts in China have been partially or completely shut down in recent weeks, but the situation in Shanghai, where Covid was able to spread before it was dealt with aggressively, was particularly serious. Reports came in that residents of one of China’s wealthiest and most cosmopolitan cities were starving and being denied hospital treatment for serious illnesses. The city has seen more than 400,000 Covid infections, a huge number by Chinese standards, but only 17 deaths, according to official figures – a figure some experts are questioning.
In addition to the hardships suffered by the people of Shanghai, the lockdown has closed factories and curbed transport links. Hundreds of flights have been cancelled, roads have been abandoned with truck drivers forced to follow tests and strict quarantine rules, and shipping containers have been stranded at sea. Windward, a company that collects and analyzes ship data, found in early April that one in five container ships in the world was waiting outside congested ports, with nearly 30 percent waiting to access Chinese ports, from Shenzhen in the south to Beijing in the north. As of April 11, there were about 197 ships outside Shanghai and Ningbo, up 17 percent from the number a month earlier, according to Bloomberg data.
Shanghai’s struggles could also lead to product shortages around the world, putting further pressure on a global supply chain already hard hit by a combination of factors, including unprecedented demand for goods due to the pandemic, trade disputes between the US and China, and most recently the Russian invasion of Ukraine.
Even with the government’s efforts, the global electronics industry may be particularly affected by the situation in Shanghai. “Under the most realistic scenarios, full normalization of manufacturing operations at major electronics suppliers will not be possible until late April or early May,” said Everstream CEO Julie Gerdeman.
