Apple supplier Foxconn shuts plants as Covid outbreak in China grows

Apple supplier Foxconn has stopped production at two of its factories in Shenzhen after authorities imposed a lockdown on the city of 17.5mn, as China confronts its worst Covid-19 outbreak since the start of the pandemic.

Factories in the tech and manufacturing hub that borders Hong Kong have been ordered to close, residents have been told to stay home and public transport and restaurants shuttered after China reported more than 5,000 locally transmitted coronavirus cases across the country at the weekend.

Rapidly rising case counts were reported in the north-eastern province of Jilin, as well as in Shanghai, where some neighborhoods have been put into lockdown, and other cities around the country.

In a sign of how seriously Beijing is taking the growing outbreak, Liang Wannian, one of China’s top officials overseeing pandemic policy, and who had been in Hong Kong to advise on the city’s own outbreak, returned to the mainland.

The lockdown in Shenzhen is scheduled to last for six days and could compound disruptions to global supply chains that have contributed to rising inflation in the US and Europe.

Foxconn said the company had adjusted production at other plants to “minimize the potential impact”.

Two workers from Foxconn’s Longhua and Guanlan Technology Parks said they were given three days off with the possibility that this would be extended to March 20. Workers were prohibited from leaving the massive industrial parks that combine dormitories and production facilities, according to an internal notice seen by the FT.

The two Shenzhen plants are big production hubs for Apple’s iPhones and workers said they had been assembling the latest iPhone 13 model.

The worsening outbreak is testing President Xi Jinping’s zero-covid strategy, which has required citywide lockdowns, mass testing and meticulous contact tracing whenever an infection is detected.

“The outbreaks impose downside risk to China’s economy, at least in the next few months,” said Zhang Zhiwei, an economist at Pinpoint Asset Management, noting the government could cut interest rates and step up spending to help cushion the blow.

The factory shutdowns will “exacerbate the risk of stagflation and global supply chain problems”, he said.

Christian Gassner, head of a Shenzhen-based furniture manufacturer, said the shutdown was causing havoc but he was hopeful the lockdown would only last a few weeks.

“Companies in Shenzhen are literally screwed right now. They need to stop operations, the companies cannot operate and suppliers in Dongguan cannot deliver, ”he said, referring to a nearby manufacturing center.

The exact cause of the China outbreaks is unknown but some have blamed Hong Kong, which is struggling to deal with a surge of cases that has overwhelmed hospitals and morgues.

Health authorities were forced to apologize on Friday after the bodies of virus victims were stored next to living patients in the city’s hospitals.

Chang Rongshan, a virologist at Shantou University, told Chinese healthcare publication DXY that the Hong Kong outbreak was like floods pounding a dam, an allusion to its border with Shenzhen.

Nian Liu contributed reporting from Anhui

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