Coronavirus Leads to China’s Corporate Ghost Towns
This article was created in partnership with Compliance Week and was originally published in the Identifying & Mitigating Coronavirus Risk eBook.
China’s economy may be stuck in neutral for months by mandated quarantines, business shutdowns, and resistance from local authorities to issue work resumption permits. Aaron Nicodemus reports.
Kent Kedl, a partner with Control Risks, a global risk consultant group specializing in global risk analysis in Greater China and North Asia, and an expert on U.S.-China relations, says many offices in Shanghai are shut in the wake of the coronavirus outbreak. Factories in the region are open, but most are operating with skeleton staffs.
“In crisis planning, you always have a plan for supply chain resiliency,” he said. “Usually, the worst-case scenario is losing a critical supplier. No one has ever thought you need a plan for a national supply chain going down.”
While the country’s leaders in Beijing are pushing for factories to fully reopen, local authorities are much more reluctant to issue the necessary permits, he said. In order to reopen, factories need to obtain a work resumption permit from the local government. Obtaining the permit requires the company to have all employees pass a health screening process, have supplies like masks and sanitizer in place, and hit a number of other benchmarks.
Vicky Yu, quality & compliance manager for Asia Quality Focus, a Shenzen-based quality control service provider for local and foreign companies, advised companies “to set up local team or leader to lead the compliance and preparation of work resumption.” The leaders should keep employees informed at each stage of the process, she said.
As a result of the government restrictions, most white-collar workers are working remotely, Kedl said. A few offices are open in shifts, with only a fraction of the workers arriving on any given day. Local authorities take the temperature of all employees when they arrive at work and when they leave, Yu said.
The coronavirus outbreak in China, which began in late 2019, has infected more than 80,000 people worldwide and has killed nearly 3,000, according to the New York Times. Feb. 26 marked the first time more new cases were reported to the World Health Organization from outside China than from inside, the newspaper reported. More than 40 countries have reported coronavirus infections, including, for the first time, a country in South America: Brazil.
As a result, companies are seeking to protect their employees. Nestlé SA, the giant Swiss food and beverage company, announced it will ban all business travel by its 29,100 employees until March 15, to avoid contracting or spreading the coronavirus.
“Nestlé shares global concerns over the spread and impact on public health of coronavirus (2019-nCoV). We take our responsibility for our employees and to the communities in which we operate seriously and continue to follow the advice of public health organizations,” the company said. “As a precaution, we have asked all of our employees worldwide not to travel for business purposes until March 15, 2020. We will review this measure in light of external developments.”
In January, several multinational firms banned or limited employee travel to China. Kraft Heinz, JP Morgan Chase, Ford Motor Co., Hershey, Apple, and others suspended business trips to China, according to the Wall Street Journal. Some have since expanded bans to other hard-hit countries like South Korea and Italy. Even if an employee travels to China, he must self-quarantine for 14 days, Kedl said. “It really puts a crimp on a company’s ability to move employees around,” he said. Kedl, who has lived in China since 1994, said it's more serious than any other flu epidemic China has faced. “People are nervous. They are self-quarantined. Shanghai is a ghost town. It’s really weird,” he said. He was excited to see a traffic jam outside his apartment the other day—but it quickly cleared, “and it was back to the zombie apocalypse.”