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Economy

China factories limp back to life a month after coronavirus hiatus

Doors reopen but labor shortage prevents full recovery

A Mengniu Dairy factory in Beijing. China's factories have restarted operations after an extended Lunar New Year break, but have not reached normal levels of production.   © Reuters

GUANGZHOU/BEIJING -- China's factories have been back online for one month now after the Lunar New Year holiday was extended to cope with the outbreak of the new coronavirus, but a lack of workers has stopped them from returning to anywhere near normal operations.

The Chinese government has been pushing manufacturers to restart operations since late last month to mitigate the outbreak's economic blow, as the industry ministry pledged on Feb. 24 to provide priority support industries with a high degree of pull in the overall economy -- such as autos and electronics as well as shipbuilding and aircraft.

Companies heeded the call, despite the challenge of keeping its workers healthy as several hundred new patients were infected on the mainland each day. The top 16 automakers had resumed operations at 84% of their plants as of March 3. More than 90% of shipbuilders were back online by the end of last month in Zhejiang Province, China's shipbuilding hub, with staff levels at about 60%.

Still, many plants are operating at limited capacity, as the government's travel restrictions designed to contain the coronavirus keeps workers away. Major Apple supplier, Hon Hai Precision Industry, also known as Foxconn, said last week that it only had capacity to meet just over 50% of demand.

China's auto industry as a whole was operating at about 30% capacity at the end of last month, according to an industry group. While plants usually operate on a two-shift schedule, many are working with half that. Several auto parts makers in Hubei Province, the outbreak's epicenter, have also yet to come back online, wreaking havoc on supply chains.

Honda Motor affiliate F-Tech began gradually resuming operations at its parts factory in Zhongshan since mid-February, but the plant is still operating at only around 10% to 20% capacity. "We're open but doing no business at all because orders have plunged, and we don't know when we'll be at full production again," the company said.

Chinese factories heavily rely on migrant laborers from rural regions, who returned home for the Lunar New Year holidays. With the coronavirus squeezing travel, only 60% had returned to work as of Saturday, according to the Chinese government.

Meanwhile, businesses in Hubei Province are still largely banned from resuming operations, except those in tech fields like display panels and semiconductors.

Panel maker China Star Optoelectronics Technology has maintained production even through the Lunar New Year holidays. It is believed to have special permission from the local government, since restarting a halted line takes time and money. Huawei Technologies reopened its factories on Feb. 3, since telecommunications equipment is considered key infrastructure, a source familiar with the matter said.

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