Thursday September 29, 2022

Coronavirus lockdowns in China cause European tech companies to lose steam

According to a recent report from the European Chamber of Commerce in China, 23 percent of European companies operating in China are considering moving. This is due to supply chain disruptions and other disruptions in China that have been caused by strict COVID-19 lockdown rules. The authors stated that China’s 2022 introduction of stricter COVID-19 containment rules, which saw full or partial lockdowns in at most 45 cities, has caused a lot of uncertainty for businesses. Eighty-five per cent struggled to access raw material and components for production. 89 percent reported that they were having difficulty transporting those materials, 87 percent were having trouble delivering finished product domestically, and 83% were having difficulties shipping them internationally.

As COVID exploded in China’s cities, goods leaving Shanghai’s port fell 25% and Chinese road freight traffic dropped 40% between mid-March 2022 and early April 2022. The report states that this is affecting companies’ upstream as well as downstream operations. Between mid-March and early April 2022, Chinese road-freight traffic fell by 40%. This was due to COVID rising in China’s cities.
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75 percent of respondents to the survey thought China was slightly or significantly less attractive for investment in the IT and telecoms sector. This compares with 76 percent in automobile, 78 percent on machinery, 78 percent on transportation and logistics, 100 percent in aviation, and 76 percent in automotive. The Chamber stated that European businesses need to be more predictable in order to restore confidence in China’s market.

China’s tech executives are worried about this outcome and have warned the public of “severe losses” if China’s notoriously tight lockdowns continue and factories close. While this system may have worked for some, it has not been the case for others, such as Foxconn. So, right now, the focus is on getting freight to customers in the most efficient way possible. We’ll get more efficient over time. “I would like to see the fundamental rates reset on both, I’m referring to both ocean and air. Both have been subject to significant inflationary pressure, partly due COVID and other reasons. (R)Get our Tech Resources

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