(This article was originally published on March 18, 2022 and was last updated on March 21, 2022.)
The southern Chinese manufacturing hub of Dongguan has imposed strict COVID-19 control measures. Many businesses have been ordered to suspend operations or operate at a reduced capacity, factories without any prevalence of COVID-19 are required to limit their production, and those who can are required to work from home. The restrictions will have a significant impact on businesses, but compliance and maintaining a positive relationship with authorities will be beneficial in the long run. We explain what the COVID-19 measures are, and the steps businesses can take to limit their impact.
With China hit by the worst COVID-19 outbreak since the initial wave of the pandemic in early 2020, Dongguan, a manufacturing hub in the southern province of Guangdong, released several measures to contain the further spread of the virus.
In industrial parks that haven’t reported any cases, factories can maintain basic production by committing to follow stringent epidemic control measures as the government tries to minimize economic disruption while maintaining its “zero-COVID” policy. Nevertheless, such measures will still take a toll on China’s manufacturing industry and global supply chains.
In this article, we introduce the current pandemic control measures implemented in Dongguan, briefly explain the rationale behind them, and offer some advice to businesses based on our on-the-ground experiences.
According to the recently released Circular No. 55 and No. 56, the below measures by the Dongguan epidemic prevention and control authorities have been adopted to contain the spread of Omicron in the city:
The above COVID-19 prevention and control measures took effect on March 20, 2022, and are subject to further adjustment according to the epidemic situation.
As mentioned earlier, factories are allowed to maintain basic production in towns and streets (or industrial parks) without local COVID-19 cases, on the premise that they strictly implement epidemic prevention measures. According to the Guidelines for Industrial Enterprises in Dongguan for Epidemic Prevention and Control (Third Edition), to maintain production, enterprises are required to conduct closed-loop management. Among other measures, the Guidelines require that factories:
The management measures will be adjusted according to the epidemic situation.
Despite the government’s improved effort to minimize disruptions to production, many of the factories in Dongguan are still badly affected by the lockdown measures.
Even if production can be maintained, enterprises may find it difficult to ship their products to customers. Logistics capacity has been heavily curtailed due to truck delays as drivers wait to get tested. The shipping rates have also risen considerably since the start of the pandemic and will be further exacerbated by continued lockdown measures. All of these could worsen the already fragile global supply chains.
However, before China shifts from its “zero-COVID” policy, there is very little room to argue with the authorities about the current COVID-19 prevention and control measures. Rather, those who actively cooperate with the competent authority and adopt effective COVID-19 prevention and control measures as required will be better positioned to preserve their businesses.
Below we outline some suggestions for maintaining operations based on our on-the-ground experience:
To some foreign investors, as stated in a New York Times report, “the outbreak itself may be less unnerving than the unpredictability of government measures”. However, before China gets ready to “live with COVID”, such lockdown measures can be expected whenever there are significant flareups. With Omicron being harder and more complex to control than previous variants, businesses are advised to optimize their supply chain management and develop corresponding plans in advance in order to adjust to this new normal.
China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done so since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at email@example.com.
Dezan Shira & Associates has offices in Vietnam, Indonesia, Singapore, United States, Germany, Italy, India, and Russia, in addition to our trade research facilities along the Belt & Road Initiative. We also have partner firms assisting foreign investors in The Philippines, Malaysia, Thailand, Bangladesh.
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