Zhejiang's manufacturing hit as companies suspend operations

CFP

Several companies in one of China's biggest manufacturing hubs have suspended operations as authorities try to contain a COVID-19 outbreak, halting production of goods from batteries to textile dyes and plastics, and half a million people quarantined.

The outbreak has disrupted activities in parts of Zhejiang, an eastern province with a large industrial sector, where many goods are manufactured for export.

The province reported 44 of China's 51 domestically transmitted coronavirus cases yesterday, bringing the total since late last week up to nearly 200. More than 540,000 people have been put in quarantine in Zhejiang alone, officials have said.

At least 20 listed companies have shut down operations as tens of thousands of citizens were placed in quarantine, some domestic flights were suspended, and several sporting events canceled.

The outbreak in three Zhejiang cities – Ningbo, Shaoxing and Hangzhou – was developing at a "relatively rapid" speed, health authorities said over the weekend.

The province reported 44 locally transmitted cases with confirmed symptoms on December 13, official data showed yesterday, taking the total to 217 just over a week since the first case was reported on December 6. Prior to the current outbreak, the province had reported just one local case this year.

Companies reporting suspended production yesterday included Zhejiang Mustang Battery Co Ltd, Guobang Pharma Ltd and textile dyes maker Zhejiang Runtu Co Ltd.

Ningbo-based Mustang Battery said it expected the outbreak to be brought under control very soon, and the production suspension was a temporary measure that "will not have a long-term negative impact on the company's growth."

Zhejiang Runtu said all its units in the Zhejiang Shangyu Economic Development Zone, which accounts for 95 percent of its revenue, had been halted since December 9 and it expected a negative impact on its fourth quarter results.

They joined Ningbo Homelink Eco-Itech, Zhejiang Zhongxin Fluoride Materials, Zhejiang Jingsheng Mechanical & Electrical and Zhejiang Fenglong Electric.

The companies said they halted operations after local governments in one district in Ningbo and another in Shaoxing curtailed all production bar essential manufacturing. The orders cover all companies in the affected areas, but only listed firms are required to disclose any impact on their business.

More than 50,000 people have been quarantined at centralized facilities across the coastal province of 64.4 million, while a further nearly half a million people were being monitored.

Zhejiang is one of China's leading provinces in terms of GDP and exports.

"The shutdown of Zhejiang factories will impact on the supply chains of various sectors, especially fiber and textiles," Zhaopeng Xing, senior China strategist at ANZ Research, told AFP.

He expects the flare-up could take up to 40 days to subside, with manufacturers possibly resuming work only after the Lunar New Year holiday in February.

"The impact will be similar to what happened in September and October, when power rationing was implemented," said Xing, who expects Zhejiang's COVID woes to have a "mild impact" on Chinese GDP.