Multinationals express firm faith in nation

Global companies in Shanghai work to ensure production amid lockdown

Multinational corporations in Shanghai have implemented contingency plans to maintain production as the city’s authorities have introduced measures to help businesses in the city return to normal operations.

While supply chain challenges remain, most executives of multinationals said that their long-term confidence in China remains intact.

A number of global manufacturers have entered into “closed-loop management” in Shanghai since late March, prior to the city’s lockdown, when staff members were mobilized to stay on site and their health was closely monitored.

Chemical giants such as AkzoNobel, Evonik, Suez and Clariant have adjusted their production portfolios and personnel arrangements in a bid to ensure that deliveries to clients would be minimally interrupted by the lockdown.

For German company Covestro, this translates into nearly 900 employees and contractors staying at its Caojing plant in Shanghai Chemical Industry Park and strictly following the government’s antiepidemic rules.

As of today, the company’s largest site worldwide is running at a high capacity and is gradually recovering from recent weeks when logistics constraints hampered production, according to Holly Lei, Covestro senior vice-president and president of Covestro China.

“As the city began to prioritize the resumption of industrial production, we also witnessed a rebound in outbound logistics, including exports, as well as the improved availability of materials as road logistics improves and work recovers at our suppliers,” she said.

Since the middle of April, governments at the central and local levels have been striving to restore business operations, identifying key industries to resume operations first and outlining directives to balance out economic growth and epidemic prevention and control.

A 10-point circular was published on April 18 by the central authorities as part of the effort to help iron out supply chain glitches.

The document, issued following a national teleconference on keeping industrial and supply chains stable, which was attended by Vice-Premier Liu He, said that the authorities would issue sufficient travel permits that can be recognized across the nation and ensure that nucleic acid test results within 48 hours will be recognized in different regions.

In addition, the Shanghai Commission of Economy and Informatization — the local industry regulator — issued measures to ensure that major enterprises in the integrated circuit, automobile, equipment manufacturing and biomedicine sectors can resume operations in closed-loop management.

Tesla CEO Elon Musk said its Gigafactory in Shanghai has resumed production “at fairly high levels”, boosting hopes that the electric carmaker could produce 1.5 million vehicles this year, more than 50 percent higher than its output in 2021.

“Giga Shanghai is coming back with a vengeance,” he told analysts during a call on April 20, following the release of Tesla’s first-quarter earnings. “I think we will see record output per week from Giga Shanghai this quarter, albeit missing a couple of weeks.”

He predicted that second-quarter production would be roughly on par with the first three months.

Musk also forecast that production had started to resume among Tesla’s suppliers, and predicted a substantially higher output in the third and fourth quarters.

Many multinationals playing the long game relish the vast market potential in China.

For instance, industrial conglomerate Honeywell said that it believed in “the strong resilience of the Chinese economy and the government’s unwavering pledge to high-level opening-up”.

“The COVID-19 pandemic will not affect our commitment to long-term development in China,” said William Yu, president of Honeywell China.

“With our core business perfectly aligned with China’s market demand, including digitalization and sustainability, we pay close attention to developing key verticals and continue to invest in growth industries.”

Meanwhile, French cosmetics group L’Oreal said that its plant in Hubei province was unaffected while its site in Suzhou, near Shanghai, was only partially impacted.

“At this critical stage of the Shanghai COVID-19 epidemic and the upcoming work resumption, L’Oreal will spare no effort to overcome all difficulties together with the market,” said Fabrice Megarbane, president of L’Oreal North Asia and CEO of L’Oreal China.

The company registered doubledigit growth in the Chinese mainland in the first three months, achieving a growth rate far exceeding the average of the beauty market, said Megarbane, calling the achievement “a delight”.

“L’Oreal’s work resumption has received lots of help from the government and the local community. Their timely response has fully reflected China’s friendliness and care for foreign enterprises, and the increasingly optimized business environment of the Chinese market,” he added.

Other consumer enterprises such as Skechers are also unequivocal about the long-term prospects in China. The footwear-and-apparel maker is betting on the growing interest in a healthy lifestyle among consumers as a result of the pandemic and national policies bolstering the development of sports and well-being.

“We are still very confident about the Chinese market,” said Willie Tan, CEO of Skechers China, South Korea and Southeast Asia. He pointed to China as the cradle fostering “numerous new consumption scenarios, products, and services regarding the sports and health industry”, thus catapulting the segment on a rapid growth trajectory.

“The market’s demand for sports and leisure products is still increasing, signifying a large potential for our future growth,” Tan said.