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Chinese Factory Shutdowns are forcing a sudden government shift in policy regarding COVID-19. Coupled with the Chinese New Year, concerns about the potential impact on global supply chains and international trade are haunting sellers. While some may have doubted the effectiveness of China’s zero-COVID approach, the sudden change could lead to significant disruptions in logistics and commerce. However, it remains to be seen whether these predictions of supply chain chaos are well-founded or simply the result of unnecessary panic and speculation.

Concerns linger about Chinese Factory Shutdowns and their ability to fulfill orders, given the rapid rise in COVID cases since the zero tolerance policy was pulled back.

According to Reuters, The World Health Organization (WHO) reported that hospitalizations in the People’s Republic rose by 70% in the week ending January 15th compared to the previous week. Numerous sources also indicate that there is a rapid increase in the number of sick people, causing a shortage of workers in factories during Chinese New Year, which is the most inconvenient time for such a situation.

How Covid is Causing Chinese Factory Shutdowns

At times, as much as 40% of a Chinese manufacturing facility’s labor force has been missing, either because of COVID infection, or staff staying away from job to prevent contagion. With the virus running widespread, members of factory management teams, as well, can end up being slim on the ground, placing production companies under severe pressure.

Chinese New Year and Covid’s Impact On Supply Chains

In any kind of typical year, companies around the world must factor the Chinese Factory Shutdown that happens in tandem with the new year. Nevertheless, this year, it will certainly be tough to prepare for scheduling before, throughout, and after the vacation – due the unexpected degrees of COVID infection. With so many people traveling across China, we are bound to see a surge of infections due to intersections of infection vectors at airports, trains, and gatherings. This could have rippled effect – where most specifically if a niche part of the labor force that are port workers are affected, this in turn could cause major impacts on sea freight supply chain. Ports could pause work. Ships could be moored off coast. And back ups in shipping ques could pile up.

How To Avoid Chinese Factory Shutdowns?

Well the worst is past us – in the years when zero-COVID was carried out, the closure of an entire plant was activated by simply one or two cases. This will certainly not be an issue any longer. However, it is essential to recognize that in a heavily populated country with a high number of infections, there is a substantial risk of a new COVID variant arising and reactivating the original zero-tolerance policy. While the Chinese New Year will pass, COVID is likely to stay. So, looking forward how are businesses coping with these seasonal shutdowns?

The current scenario highlights the difficulties that businesses face when trying to cut their supply chain connections with China. Chinese factory shutdowns, will likely reaffirm the decision of organizations like Dell and Sony to reduce their dependence on Chinese-made items. Businesses continue to re-evaluate their forward looking supply chain plans, by outsourcing production to neighboring countries in South East Asia instead. Finding new production and supply chain partners will be critical in the industrial diffusion necessary to decouple from traditional Chinese supply chains.