US firms are concerned about revenue because of a Covid lockdown in a Chinese city
Key Takeaways:
- Due to the recent COVID-19 outbreak in Shanghai, more than half of U.S. multinational companies in China have lowered their annual revenue projections.
- Due to the outbreak, more than half (54%) of companies have lowered their revenue forecasts for 2022, though 38% say it's too early to tell.
- According to AmCham, only half of respondents were satisfied with China's pandemic efforts, and 77 percent were unhappy with the length of quarantines.
According to a joint survey released on Friday by the American Chambers of Commerce in Shanghai and Beijing, more than half of U.S. multinational companies in China have lowered their annual revenue projections, owing primarily to the recent COVID-19 outbreak in Shanghai.
82 percent of manufacturers reported slowing down or reduced production due to a lack of employees, inability to acquire supplies, or government-ordered lockdowns, according to responses to the survey, which was conducted with 167 companies operating throughout China, including 76 in manufacturing.
More than half (54%) have lowered their revenue forecasts for 2022 due to the outbreak, though 38% say it's too early to tell.
Some Shanghai manufacturers, particularly in the automotive industry, have resorted to using a "closed-loop" system. Employees are confined to the premises to keep production lines running while outside suppliers are shut out.
According to Eric Zheng, president of the American Chamber of Commerce in Shanghai, such arrangements are acceptable for a few days but "not sustainable" in the long run.
"Even if your employees are inside the factory bubble, your trucks must come and go, sending inputs and outputs," Zheng explained.
"I'm hoping this is just a band-aid solution to stop the spread."
The lockdown was implemented in two phases, with the eastern part of the city being targeted first, followed by the western part.
According to AmCham, only half of the respondents were satisfied with China's pandemic efforts, and 77% were dissatisfied with the length of quarantines.
Many local businesses have spoken out about how the Shanghai lockdown is affecting them, ranging from halted operations and stagnant sales to depleted liquidity and delayed financial disclosures.
The pandemic has disrupted operations, logistics, and raw material supplies, affecting the company's first-quarter and full-year performance, according to Shanghai-based power transmission equipment maker Sieyuan Electric Co.
East Money Information Co said it is unsure if its annual shareholder meeting on April 8 will be held at its Shanghai headquarters and recommends that shareholders participate online instead.
The lockdown has forced Shanghai Shizhong Intelligent Parking Corp to halt parking services, directly affecting performance.