Some Chinese companies that are closed due to the 2019 novel coronavirus outbreak are expected to resume operations as early as this week.
However, the move has caused concern over likely person-to-person transmissions, fanning fears that the virus would spread even further, as it has not been effectively contained.
Local governments and businesses in China should decide carefully when to resume operations, and evaluate whether they have the facilities to test suspected cases and sufficient protective gear for employees.
Hon Hai Precision Industry Co, the biggest assembler of Apple Inc’s iPhones, on Friday told its employees in Shenzhen, China, not to return to work today as planned and await further instructions, Bloomberg reported, citing a text message it saw.
Amid a shortage of medical equipment in China, the company on Thursday began trial production of protective masks and medical clothing to be used at its Shenzhen plant, Reuters reported.
However, not all companies have the resources to take such measures.
The reopening of Chinese businesses — which are crucial to the global supply chain and markets — might lead to logistics disruptions and higher operational costs, as suppliers in a dozen cities are under lockdown while mandatory quarantine rules are implemented in more cities.
A shortage of personnel and raw materials is likely to be the biggest problem affecting the supply chain after the resumption of work.
Even though some Taiwanese businesses had relocated part of their operations to Vietnam or elsewhere before the outbreak, they would still face supply chain disruptions, as many of their components, materials and even personnel come from China.
China is also facing growing suspicion over its pledge to buy more US goods under the “phase one” trade deal it signed with Washington early last month, as well as whether Chinese companies would declare force majeure to get out of long-term contracts with their overseas partners.
Chinese President Xi Jinping (習近平) assured US President Donald Trump during a telephone call on Thursday that China would meet its pledge to buy US$200 billion of US goods over the next two years, although there might be some initial delays, US National Economic Council Director Larry Kudlow told the Wall Street Journal on Friday.
However, it is not known whether Beijing would request exceptions from the trade agreement, depending on how its efforts to contain the virus pan out.
French oil company Total on Thursday became the first global energy supplier to reject a force majeure notice from a liquefied natural gas buyer in China, which wanted to back out of a contract amid the outbreak, Reuters reported.
More Chinese companies making similar declarations to avoid their contractual obligations could have an adverse affect on global energy and commodity prices.
The outbreak is causing problems that are beyond companies’ control. Economists have warned that it presents a risk to business operations, manufacturing supply chains and the outlook of global markets.
However, it also tests Beijing’s crisis management capabilities and draws global attention to its public governance, and if China acts irresponsibly or inappropriately, its behavior might have an even greater negative effect on the international marketplace and the global outlook than the disease itself.
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