Coronavirus recovery: Why it’s so hard for China’s factories to get back to work

Date: Tuesday, February 18, 2020
Source: Fortune

China's industrial complex is cautiously returning to work following a prolonged shut down that began with a four-day national holiday on January 25 but was extended for two weeks as China attempted to contain the spread of the deadly Covid-19.

Policymakers ordered factories back into action on February 10, wary that the prolonged hiatus would threaten China's economic growth. However, more than a week later, production lines remain eerily silent as millions of workers under restricted movement due to a virus that has infected 73,000 and killed close to 2,000 struggle to get back to work.

Commutable disease

According to China Labour Bulletin, China’s 288 million migrant workers—often rural residents who travel to cities in search of work—constitute over a third of China’s total work force, and 30% of them hold jobs in manufacturing. As China scrambled to contain the viral spread, local governments shut down train lines and bus routes, essentially stranding the millions of laborers who had returned to their home towns to celebrate Chinese New Year.

“As far as we know from the workers we have talked with, many of them are still in their home town and many of them are finding it very difficult to get back to the city they work in,” said Roy Leung, policy and education officer at Hong Kong-based labor advocates Worker Empowerment.

According to analysts at Nomura, as of February 13 only 21.3% of migrant workers had returned to the cities where they work, compared to a “return rate” of 84.9% at the same point last year. The Japanese finance firm used data from Baidu’s Migration Index—a map launched in 2016 by Chinese search engine giant Baidu to track travel patterns across the Lunar New Year holiday—for its estimate.

Despite the labor shortage, factories—including those owned by giants like Tesla, Airbus, Toyota and General Motors—are starting to reopen but are a long way from returning to full capacity. A survey conducted last week by the American Chamber of Commerce of 109 companies along the Yangtze River Delta—an economic corridor that generates 20% of China’s GDP—found that 78% didn’t have sufficient staff to resume full production.

“The biggest problem is a lack of workers as they are subjected to travel restrictions and quarantines, the number one and number two problems identified in the survey. Anyone coming from outside the immediate area undergoes a 14-day quarantine,” Chamber president Ker Gibbs told Reuters.

Health and safety

As the central government pressured factories to return to work, regional authorities—wary of spreading contagion—issued guidelines on how to handle workers who do return. Common precautions include establishing temperature checks at factory entrances, ensuring surgical masks are worn, and encouraging employees to eat lunch alone to reduce the risk of transmission. But these measures are hard to enforce.

According to Leung, some factories have simply used carboard boxes to partition cafeteria tables, creating solo-dining spaces, while other factories are requiring employees to bring their own surgical masks—despite widespread shortages on the protective gear. Even greater problems exist in employee dormitories, where staff often bunk up to 12 in a room, sometimes sharing one bathroom for the entire floor.

“Small factories typically aren’t able to provide dormitories but larger manufacturers like Foxconn still provide some staff with cheap accommodation. In bigger companies, I would say 40-50% [of workers] live in dormitories and ensuring a clean living space will be more important than sterilizing the factory floor,” Leung said.

Taiwan’s Foxconn, which manufactures iPhones and iPads for Apple, operates 12 factories across China and employs over a million people, making it China’s single largest private employer. According to Reutersonly 10% of Foxconn’s laborers had returned to work as of February 10, when the manufacturer was given permission to reopen—provided factories check employee temperatures twice a day and disinfect work surfaces daily.

Foxconn didn’t respond to Fortune's interview requests, but it has denied the Reuters report in a statement filed to the Taipei stock exchange. The statement also denied the report that Foxconn is targeting 50% production by the end of the month. The manufacturer didn’t provide details on its actual production goals, however the fallout from its slowdown is already taking effect.

In a memo to shareholders Monday, Apple CEO Tim Cook said the Californian company would miss its revenue projections for March, writing that “worldwide iPhone supply will be temporarily constrained.”

 

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