China COVID Update
As you have seen from the news that due to the continuously increasing new COVID cases in Shanghai, China government announced to lock down Shanghai to control the spreading, the lockdown happened in two stages: lockdown Pudong side from 3/28 – 4/1 and lockdown of the Puxi side from 4/1 to 4/5. The transportation will be suspended and the firms and factories must halt operations, work in a full isolation environment inside the factories or work remotely. Up to now, the lockdown has not been released.
I talked to our clients, the Chinese banks, the foreign banks in Shanghai, and the AMCHAM (American Chamber of Commerce in Shanghai) to understand their current situation, please refer to the below summary for your information:
- The financial factor markets in Shanghai are running normally, e.g. the stock exchange, foreign exchange, bond, gold, insurance, energy, & future market
- The Chinese banks closed the network, however, they have limited staff to live and sleep inside the office for the mandate operation. Most of the staff work from home. So for the banking business side, it runs ok, but depending on each bank’s system set up and policy on the laptop; it is possible that some types of business may be impacted.
- For the customers, they can do most of their business through online banking including the domestic remittance and cross border remittance (the bank verify the supporting documents through online banking)
- It has an impact on clients’ imports/export especially the Bill of Lading (B/L) in original due to the restrictions on the delivery service
- The importers’ banks are unable to receive the documents including the original B/L due to no delivery service and their offices were closed. Thus they are unable to do the Letters of Credit (L/C) document checking and pass the original documents including B/L to their clients. Meanwhile, the importers are unable to pick up the goods at the Shanghai Port unless they obtain the related approval from the government. According to the news report, currently, the government approved the green passes for delivery or transportation to essential businesses only.
- On Apr 3, the Shanghai International Port Group Co., Ltd. said the Shanghai Port is still operating normally and there is no congestion of container ships. Since March 28, the average waiting time for container ships at Shanghai Port is less than 24 hours.
- Information from The American Chamber of Commerce (AMCHAM) in Shanghai
- Based on direct discussion by some of AMCHAM members with core operators at the terminal itself, it seems that there is indeed nothing extraordinary about the congestion there. Still, the issue remains the truck power, given that the trucking situation is still extremely stressed, we may indeed eventually see some sort of congestion at the major terminals.
- It said that tracking services in and out of Shanghai will be severely impacted by as much as 30% due to a full lockdown.
- As of Apr 5, which is the 5th day of lockdown in Puxi; they see 2/3rds of Port Shanghai volume still there and Port Shanghai still running OK. But if the lockdown lasts to mid of April, this 2/3 will be gone as well.
- A letter sent by epermarket.com (who is a supermarket) to their customers mentioned the delivery issue in Shanghai: The need to obtain the Essential Business certificate and green passes for workers and vehicles to resume delivery. However, this hasn’t released many staff from their homes due to factors beyond their control. Currently, they only have less than 20% of their operations staff that is active.
- With the lockdown of Shanghai, some shipments moved to Ningbo Port which is close to Shanghai in Zhejiang province.
- However, it is reported on April 4 that many new Covid cases were found in Ningbo port as well, the local government required all the staff in the port and the truckers need to do Covid tests every day and only the test reported with the negative result can go into the port. This may impact Ningbo port.
- Due to the isolation policy, many staff/workers are unable to work in the office/plant, after the lockdown, some of the clients have to shut down their plant
- With the recovery of the US economy, the demand from the US is increasing, however, their production capacity or their suppliers’ production capacity is unable to meet the order from the US
- Due to the restriction on the transportation and lockdown, the clients are unable to deliver their goods to clients either in the US or in China, it also impacted the purchase and delivery of the raw material
- Due to the global supply chain issues, the production capacity in the US cannot meet the sales volume in China