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China's industrial core at standstill as cities extend shutdown

Shanghai and Suzhou bar operations for another two weeks

Chinese Premier Li Keqiang on Jan. 27 visits the site of a new hospital being built to treat patients of a new coronavirus on the outskirts of Wuhan, one of China's major manufacturing hubs.   © Reuters

BEIJING -- The coronavirus outbreak in China is hitting the country's manufacturing nerve centers, as measures including an unusual decision to extend the Lunar New Year holiday lengthen plant shutdowns in industrial centers.

The Chinese government said Monday that the weeklong holiday would be extended by three days to Feb. 2 to curb the spread of the virus. Some local governments have gone further, such as Shanghai, which on Monday ordered all but certain essential companies, including utilities and supermarkets, not to resume business before Feb. 9.

The restrictions threaten to hit not only domestic manufacturers, but also foreign companies operating in the country -- which are concentrated in big cities like Shanghai -- and global supply chains that rely on Chinese output.

The city of Suzhou, a technology hub located northwest of Shanghai, on Sunday barred businesses from resuming operations before Feb. 8, according to China Central Television. More than 1,500 Japanese-affiliated businesses including Panasonic and Kobe Steel operate in the vicinity.

Sumitomo Electric Industries, which produces automotive cables in the area, said it is considering whether to extend its own shutdown to Feb. 8.

Travel restrictions being adopted by a growing number of local governments pose problems as well. Provinces such as Shandong and Shanxi have directed migrant construction workers who went home to visit family not to return to their workplaces, Chinese media reports.

Foxconn has decided not to reopen its smartphone component production site in Shanxi Province until Feb. 3, nearly a week longer than originally scheduled, according to a source familiar with the situation.

Formally known as Hon Hai Precision Industry, Foxconn has facilities there that can open as scheduled, but "the concern is whether migrant workers will come back" to staff them, the source said.

The impact is especially severe in Wuhan, the epicenter of the outbreak, where authorities have shut down nearly all transportation. Automakers clustered in the city are struggling to rework their production plans in response to the lockdown.

Honda Motor, for example, handles about half its Chinese production at factories in Wuhan operated with a local partner. It had planned to resume operations Feb. 3, but the Japanese automaker now says it has not set a reopening date at this time.

Honda also has manufacturing facilities in Guangzhou. But a parts maker affiliated with the company sources some parts from Wuhan, and it says a prolonged shutdown there could affect Honda's Guangzhou operations as well.

The outbreak comes on top of recent moves by manufacturers to shift production from China to Southeast Asia in response to the U.S.-China trade war.

"A prolonged break will hit domestic production," said an executive at a Chinese information technology equipment manufacturer, adding that accelerating the shift abroad "will be a consideration."

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