Volkswagen Pares Back Operations In Shanghai Due To Lockdown

Volkswagen (VW) has scaled back its operations in Shanghai, which has been shut down owing to an outbreak of Covid-19 infections.

On Thursday, the German automaker partially shut down its facility in the Chinese city, citing supply problems.

Over a dozen companies have cancelled their ambitions to list their stock in the major financial centre.

Economists are worried that a slowdown in Shanghai will have an impact on the world’s second largest economy’s growth.

Official data released on Thursday showed that China’s manufacturing and services sectors declined quicker than predicted this month.

The purchasing managers’ index (PMI) of the National Bureau of Statistics fell from 50.2 in February to 49.5 in March.

On a 100-point scale, a reading below 50 indicates contraction.

The PMI data is a summary of market conditions compiled by polling top executives in important industries about their expectations for a variety of parameters such as new orders, production, and employment.

VW announced late Wednesday that it would close part of its Shanghai production owing to a “shortage [of] parts from suppliers.”

When coronavirus infections were on the rise in the city earlier this month, the carmaker shut down the factory before resuming operations 48 hours later.

“What we have lost so far in production can be recovered, [for example] via additional shifts, once the situation eases,” a VW spokesperson said earlier this month,

VW did not indicate how long the latest closure would last, and did not respond to a request for more information from the BBC.

Its facility in Changchun, China’s far east, has been closed for several weeks.

Meanwhile, more than a dozen companies have postponed plans to offer stock on Shanghai’s STAR Market, which focuses on technology.

The STAR Market has been dubbed China’s answer to the Nasdaq trading platform in New York.

According to Reuters, the proposals, which were made public in stock exchange filings, effect more than $9 billion (£6.9 billion) in financing.

The lower economic data, according to Iris Pang, Greater China chief economist at ING, “reflects the impact of lockdowns for mass Covid testing on production, new orders, and delivery times.”

“There is, without doubt, some uncertainty reflected in these numbers – mainly on supply chains,” she said. “But we are slightly more optimistic than the market in general.”

However, according to UBS’ top China economist Tao Wang, lockdowns in Shanghai and other Chinese cities may have “minimal impact” on production in the long run.

Most factories were continuing to operate, she added in a research report, either keeping staff on the job or moving output to unaffected locations.

But she added that “logistics delays and port congestion in Shenzhen may have had some temporary impact on trade, especially China’s semiconductor components imports via the Shenzhen-Hong Kong route.”

Shanghai’s lockdown is the country’s largest since the coronavirus outbreak began.

To avoid economic destabilisation, Chinese authorities had avoided shutting down the city of nearly 25 million people until today.

It has been fighting a new wave of illnesses for nearly a month, despite the fact that case counts are low by international standards.

The eastern section of Shanghai, which includes the city’s financial centre, has been cordoned off for Covid testing.

On Friday, the western part of Shanghai will be put under lockdown.

Because of the gradual approach, half of the city will be able to stay open.

(Adapted from BBC.com)

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