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From Sony to 7-Eleven, Shanghai lockdown hits companies hard

Supply chain ripple effects close Mazda plants in Japan

Residents wait for a food delivery behind a gate to a residential area in Shanghai. The city lockdown has taken a severe toll on consumer spending.    © Reuters

TOKYO/SHANGHAI -- The COVID-19 lockdown in Shanghai, now in its third week, has shut down 7-Eleven convenience stores and kept Sony and Apple supplier plants idle, underscoring the costs of Beijing's rigid "zero-COVID" policy.

Sony Group has shuttered a Shanghai factory that makes televisions, projectors and cameras for Japan and other Asian markets since the first day of the lockdown. And there is no clear time frame for reopening. Volkswagen has idled a plant in the city, and Japanese food maker Ajinomoto has closed two seasoning and amino acid production facilities.

The lockdown, first implemented March 28 in eastern Shanghai before expanding to the rest of the city, began easing slightly on Monday, as restrictions were loosened in neighborhoods that saw no cases for two weeks. But 80% of residents -- more than 20 million people -- remain largely confined to their homes, and other areas could be put back under lockdown if infections reemerge.

The city logged a record 27,719 cases on Wednesday, suggesting that a full reopening remains a long way off. Shanghai generates nearly 4% of China's gross domestic product, more than any other city, and the broad restrictions on economic activity there are starting to do real damage.

Shanghai also produces 6% of China's exports, according to the government's statistical yearbook for 2021, and the effect of plant closures is rippling across cross-border supply chains. 

Mazda Motor is halting operations Thursday and Friday at its main plant in Hiroshima and another in Yamaguchi Prefecture, as suppliers stop production and parts shipments from China by air and sea run late. Mitsubishi Motors has suspended a production line at its flagship Okazaki factory in central Japan from Monday through Friday.

Retailers and service sector companies are struggling as well. The lockdown has severely crimped consumer spending, on top of delays in product deliveries and difficulty staffing stores.

Fast Retailing, the Japanese company behind the Uniqlo casualwear chain, has closed 94 stores in Shanghai, and nearly all of the 150 7-Eleven locations in the city have been temporarily shuttered.

Chinese President Xi Jinping had touted his government's track record in shutting out the virus as he seeks a third term as Communist Party leader at this fall's twice-a-decade party congress. But public frustration is mounting with the strict quarantine policies that have been at the core of the containment strategy.

The growing alarm among foreign companies over the consequences of the zero-COVID push also worries Beijing.

"We are helping foreign enterprises, especially those in areas severely hit by COVID-19, to solve problems they encounter in the resumption of work and production, personnel entry into China, as well as logistics and transportation," Commerce Ministry spokesperson Shu Jueting said Thursday.

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