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Chinese factories are returning, but global supply chain remains uncertain

Scott Tong Apr 28, 2020
Workers in face masks at a car seat factory in Shanghai. Noel Celis/AFP via Getty Images

Chinese factories are returning, but global supply chain remains uncertain

Scott Tong Apr 28, 2020
Workers in face masks at a car seat factory in Shanghai. Noel Celis/AFP via Getty Images

At the startup Wire, which sells and leases electric scooters, the next-generation model is almost ready to ship out from the factory in China. Almost.

“We have like 90% of the components available to us, but there are just a couple of pieces that we can’t get,” said co-founder Nick Drombosky. “All it takes is one missing part to not have a finished product.”

In the manufacturing world, you need everything to make anything. In March 2011, the deadly tsunami that struck eastern Japan took out the one plant in the world that made one ingredient for auto paint. This held up the industry for months.

Drombosky doesn’t actually know when his parts will come in.

“At the end of March, we got emails from pretty much everyone we’ve ever done business with in China,” he said. “It was like a copied-and-pasted message saying, ‘Everything’s great here. The Chinese government’s done an amazing job handling this epidemic, and our factory is fully reopened.’ And then you would email them back saying, ‘OK, can I get this?’ And they’d say, ‘Well, not yet.’ “

“It was like a copied-and-pasted message saying, ‘Everything’s great here … our factory is fully reopened.’ “

Nick Drombosky, Wire co-founder

One limitation may be factory workers, who are overwhelmingly migrant workers from rural China. Some are struggling to return to the plants.

“Either because of transportation disruptions, or in many cases they couldn’t find a place to live,” said Dexter Roberts, journalist and author of The Myth of Chinese Capitalism: The Worker, the Factory, and the Future of the World. “The locals there see them as outsiders and are worried about the virus, and didn’t want them to come back.”

Cranking up the global manufacturing machine is not just about China. A typical car assembled in China contains some 30,000 parts coming in from multiple countries, many still facing the peak of the pandemic.

“If these different countries are in different stages of the disease, have different policies about lockdown, I think these reopenings are not going to be smooth,” said Susan Helper, economist and supply chain scholar at Case Western Reserve University.

Still, many analysts think things could have turned out far worse. Many businesses carried just enough spare inventory. Middlemen put goods on planes instead of ships to speed them to market. And demand for Chinese products fell off when the rest of the world suffered from COVID-19.

Also auspicious: Chinese factories went down for just three weeks or so.

“Had the delay been months as opposed to weeks, I think the impact would have been more acute.”

Shawn DuBravac, IPC economist

“Had the delay been months as opposed to weeks, I think the impact would have been more acute,” said economist Shawn DuBravac of the electronics manufacturing trade group IPC.

DuBravac said every time there’s a manufacturing disruption — from a virus, a natural disaster or a trade war — supply chain professionals learn new lessons. One solution widely discussed is to bring some manufacturing closer to home in key industries like medical supplies.

For now, however, China remains a critical manufacturing hub, given its skilled workforce, experience with foreign investors and world-class highways and ports. Just about every sector has exposure to the world’s second-largest economy.

“If you think you’re immune, you’re operating under a delusion,” said Thomas Derry, CEO of the Institute for Supply Management. “Everyone is exposed. Even if you think you’re not directly impacted, you’re indirectly impacted.”

COVID-19 Economy FAQs

So what’s up with “Zoom fatigue”?

It’s a real thing. The science backs it up — there’s new research from Stanford University. So why is it that the technology can be so draining? Jeremy Bailenson with Stanford’s Virtual Human Interaction Lab puts it this way: “It’s like being in an elevator where everyone in the elevator stopped and looked right at us for the entire elevator ride at close-up.” Bailenson said turning off self-view and shrinking down the video window can make interactions feel more natural and less emotionally taxing.

How are Americans spending their money these days?

Economists are predicting that pent-up demand for certain goods and services is going to burst out all over as more people get vaccinated. A lot of people had to drastically change their spending in the pandemic because they lost jobs or had their hours cut. But at the same time, most consumers “are still feeling secure or optimistic about their finances,” according to Candace Corlett, president of WSL Strategic Retail, which regularly surveys shoppers. A lot of people enjoy browsing in stores, especially after months of forced online shopping. And another area expecting a post-pandemic boost: travel.

What happened to all of the hazard pay essential workers were getting at the beginning of the pandemic?

Almost a year ago, when the pandemic began, essential workers were hailed as heroes. Back then, many companies gave hazard pay, an extra $2 or so per hour, for coming in to work. That quietly went away for most of them last summer. Without federal action, it’s mostly been up to local governments to create programs and mandates. They’ve helped compensate front-line workers, but they haven’t been perfect. “The solutions are small. They’re piecemeal,” said Molly Kinder at the Brookings Institution’s Metropolitan Policy Program. “You’re seeing these innovative pop-ups because we have failed overall to do something systematically.”

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