Covid curbs force US firms in Shanghai to cut annual forecasts

Shanghai — More than half of US multinational companies in Shanghai have reduced their annual revenue projections due to the recent Covid-19 outbreak in the city, according to a survey by the American Chamber of Commerce in Shanghai published on Friday.

Responses to the survey, conducted with 167 companies operating throughout China including 76 in manufacturing, found 82% of manufacturers reported slowed or reduced production due to a lack of employees, inability to obtain supplies, or government-ordered lockdowns.

More than half, or 54%, have cut 2022 revenue projections following the outbreak, though 38% said it was too early to estimate the impact.

Some manufacturers, particularly in the automotive industry, have resorted to operating with a “closed-loop”, wherein employees remain confined to the premises to keep production lines running, while outside suppliers are sealed off.

Eric Zheng, president of the American Chamber of Commerce in Shanghai, said that such arrangements are acceptable for a few days but “not sustainable” long term.

“Even if your employees are within the factory bubble, your trucks have to come and go sending inputs and outputs, but that’s not possible,” said Zheng.

“I hope this is only a temporary, drastic measure to stop the spread.”

The city of 26-million people has been battling its largest outbreak for nearly a month and this week most of Shanghai was put under lockdown as cases continued to surge.

AmCham Shanghai said that only half of the respondents were satisfied with China’s pandemic efforts, and 77% had expressed dissatisfaction with the length of quarantines.

The outbreak and subsequent curbs have disrupted life.

A growing number of local companies have also disclosed how the Shanghai lockdown is weighing on them, ranging from suspended operations and stagnant sales, to drying liquidity and delayed financial disclosures.

Shanghai-based power transmission equipment maker Sieyuan Electric said the pandemic has disrupted operations, logistics and raw material supplies, affecting its first quarter and full-year performance.

East Money Information said it was highly uncertain if its annual shareholder meeting can be held at its Shanghai headquarters on April 8, and is suggesting shareholders participate online.

Shanghai Shizhong Intelligent Parking Corporation said the lockdown has forced it to halt parking services, directly hitting performance. 

Reuters