COVID-hit Chinese factories eye gradual recovery after Lunar New Year break

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SHENZHEN, China, Jan 19 (Reuters) – Christian Gassner, whose furniture components factory in the southern Chinese city of Shenzhen had a bad end to 2022 amid COVID-19 outbreaks, he is finally seeing the light at the end of the tunnel.

About two months ago, many workers stopped to avoid potential lockdowns before the Lunar New Year, then in December, after the pandemic controls came out, almost all those who remained fell ill, disrupting production.

Having recovered, they are now in their hometowns with their families for the holidays – and Gassner is looking forward to finally getting back to normal when they get back to work.

Other owners and managers are equally keen to continue what they expect will be a gradual recovery for the Chinese factory sector, which accounts for nearly a third of the world’s manufactured goods and is a key driver of growth for the its second largest economy.

The government’s sudden abandonment of movement restrictions in December was followed by major disruptions from disease. But the people who run factories expect that the sudden U-turn will at least lead to a recovery that will be faster than that which would follow a gradual withdrawal of controls.

Economically, the country must finally leave behind a pandemic that suppressed domestic demand and disrupted global supply chains for three years.

“There is a theory that China was trying to have as many people as possible get COVID in a short time to switch,” said Li, an executive at an auto parts maker with factories in Shanghai and the city of East Hefei. on condition of partial anonymity as he was not authorized to speak to the media.

“That’s what this feels like.”


Li’s factories had to struggle last month, when up to a third of their workers were laid off by COVID at the same time.

Some of the office staff were filled on the assembly lines. Many workers with mild symptoms offered to continue, and asked to defer the week of sick leave they were entitled to until later, in case they needed time to care for any family members who fell ill. .

“It was pretty stressful,” Li said. “Production took a hit.”

It was a similar shock to many Chinese manufacturers.

In December, exports decreased by 9.9% over a year earlier while producer prices decreased by 0.7%. A manufacturing survey showed the worst drop in activity since the start of the pandemic in February 2020.

Gassner doesn’t think all his workers will return immediately after the holiday, which for many Chinese lasts for weeks on either side of Lunar New Year’s Day – January 22 this year. the year. But he expects his business, which makes motors and actuators for furniture, to gradually rebuild its workforce, and crucially, its clientele.

“Many blue-collar guys have parents or grandparents who died, or who will be caught in the first big wave in their cities. Life has changed for them,” said the factory director. Therefore some will not rush to leave their cities of origin.

“But if China is open there will be more opportunities. There are customers I haven’t seen for three years, who are now complimenting that they are coming.”

Forward-looking indicators point to a progressive recovery – not an instantaneous one, and even less one that will suddenly take the country back to a pre-pandemic pace. The manufacturing survey’s future output sub-index rose to its highest since February, but the sub-index for future orders fell.

China’s economic growth slowed to 3% last year, one of the weakest performances in half a century, and is expected to reach 4.9% this year – still slower than trends pre-covid.

The country of 1.4 billion, the last major nation to switch to treating COVID as endemic, is reopening to a world of higher inflation and borrowing costs and softening demand, including in partners main commercial the United States and Europe.

Ni Hong, who works in the finance department of an electric vehicle component maker in the central city of Chongqing, no longer expects major disruptions from COVID, as 85% of factory workers have already have been infected.

But her company has no plans to add to last year’s wages.

“We are afraid that the upstream companies will not place orders,” said Ni.

Its peers in the industry say that its factories may even need to cut jobs later this year if external demand weakens.

“If the US economy goes into recession, then it will be very damaging for us,” he said. “We depend on American consumers at the end of the day.”

(Reporting by David Kirton in Shenzhen; Additional reporting by Ellen Zhang and Eduardo Baptista in Beijing and Josh Horwitz in Shanghai; Editing by Marius Zaharia and Bradley Perrett)

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