Closure Of Chinese Factories Continues To Stress Global Supply Chains

Thousands of the companies all across the world are waiting for reopening of factories and production units in China starting Monday. However if the closures continue over concerns of spreading of coronavirus, many of the major brands of the world – from car makers to tech giants, will find it difficult to maintain inventory because they are dpened3ent on Chinese plants either for entire products or critical product parts.

Chinese authorities had ordered closedown of all factories in the country in the wake of the fast spread of the virus to prevent the spreading. A crucial role in the global supply chain and world economy is played by China – also often referred to as the factory to the world.

One of the largest tech companies that could face trouble offering products to its customers if there is an extension of the closedown is Apple which will struggle to replenish its iPhone inventory because factories of Foxconn and Pegatron – the the two major assemblers of the smartphones, is located in China. Spread of the coronavirus has forced Apple to temporarily closedown its stores and office in China.

Most production units close down for more than a week every year in China because of the Lunar New Year holiday which has been asked to be extended by Chinese authorities to try and curb the spread of the coronavirus till at least February 10.

”I am quite sure Monday is not realistic, even if virus data are suddenly suggesting that might just be possible. Many people are thinking April is more realistic for the virus peak,” said Michael Every, head of financial markets Asia-Pacific for Rabobank.

The extended shutdown in China’s manufacturing sector has already impacted businesses all across the world. Shortage in supply of parts from China has forced the fifth largest auto maker of the world Hyundai to halt production at its South Korean factory.

Warnings of disruption to production and supplies have also been issued by some other car makers such as Tesla, Volkswagen and Toyota.

”Every factory faces this same issue,” said Iris Pang, Greater China economist at ING. ”The shutdown affects not some particular companies but manufacturing as a whole as it is still uncertain how many factory workers will return to their factory after the extended holiday”.

The impact of the fast spread of the coronavirus is having an economic impact n China as well as in many industries of the world with the manufacturing sector of China being impacted first, followed by global airlines and now global supply chains.

Fear of the spreading of the coronavirus has also resulted in the closure of theme parks and casinos in China including those of Disneyland theme parks in Shanghai and Hong Kong. Those tow parks will be closed for two months.

While stores and outlets of major food chains, including those of Starbucks and McDonalds, have been closed down temporarily in China, authorities have also asked this week to close down casinos in Macau, the world’s biggest gambling hub.

(Adapted from BBC.com)



Categories: Economy & Finance, Geopolitics, Regulations & Legal, Strategy, Sustainability, Uncategorized

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