China faces supply problems and falling demand as COVID surge

By: MRT Desk

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China faces supply problems and falling demand as COVID surge

As China’s massive surge of COVID-19 infections begins its march through a country roughly the size of Europe, the ripple effect on businesses accelerates.

From its original epicenter in the north, including the capital, Beijing, COVID-19 infections are spreading across the country and cases are affecting the workforce at manufacturing nodes, including the Yangtze River Delta near Shanghai.

Retail and financial services companies have been hit hard by staff shortages, and manufacturers are not far behind, according to an international business organization operating in China.

“The retail and customer-facing sectors are in serious trouble. Obviously, they are short on staff available to work because of illness, so many of our big retailers aren’t even opening their doors,” said Noah Fraser, CEO of the Canada-China Business Council.

With mass testing halted after China abruptly abandoned its zero-COVID case policy this month, official data no longer reliably captures the number of new cases. As of Wednesday, the country had only reported 5,241 deaths from COVID-19 since the pandemic began.

Some estimates, however, predict that the wave currently sweeping the country could infect up to 60% of China’s 1.4 billion people.

“Case counts are starting to increase outside of big cities, which, of course, means the virus is shifting, and we’re going to see more disruption in the future,” Fraser said.

Even before COVID-19 infections began to hit Chinese businesses, the world’s second-largest economy was already depressed by its efforts to crack down on infections, as strict movement controls and constant quarantines hampered consumption and production.

In November, Chinese factory output and retail sales posted their worst results in six months, before most restrictions were lifted in early December.

Retail sales fell 5.9% year-on-year amid broad-based weakness in the services sector, while auto production plunged 9.9%, following an 8.6% rise in October.

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