SYDNEY – From locking in workers to hoarding medicines, beds and disinfectant, China’s factories are going to great lengths to keep the machines running – and the global supply chain intact – as an onslaught of Covid-19 cases looms.

The world’s second-biggest economy is rapidly dismantling restrictions that largely kept the virus at bay for almost three years. The resulting eruption in infections is set to be a key test for a vast network of factories that account for almost one-third of the world’s manufacturing output. Those plants are now taking extraordinary steps to ward off infections.

Sinopec, for example, likens the task ahead to fighting a war. The Chinese oil refining giant has gone over plans to hold output steady with some staff more than 30 times, isolating certain employees from the rest of the workforce and scrapping leave. Electric vehicle maker Nio has secured several truckloads of medical supplies and equipment for staff as part of a plan to keep its lines humming.

Outbreaks have the potential to cripple production or tear through employee rosters, threatening the global supply of everything from cars and golf carts to kitchen appliances and, of course, iPhones.

The same battle to ward off Covid-19 was fought what now seems like an aeon ago in facilities across the United States and Europe. Those efforts provide a cautionary tale for China on the difficulty of keeping out the virus from factories completely.

“The experience in the rest of the world is that you cannot stop it,” said Mr Maximilian Butek, head of the German Chamber of Commerce in Shanghai. “Companies risk getting all employees infected and having no one in the factory.” Across China, the chamber’s directors include executives from Volkswagen, drugmaker Bayer and industrial giant Siemens.

Rapid reversal

After years of testing and tracking its citizens for the coronavirus, China abruptly abandoned that approach in December with the end of zero-Covid. The rapid reopening could result in some five million people hospitalised and as many as 700,000 deaths, according to Dr Sam Fazeli, Bloomberg Intelligence’s chief pharmaceutical analyst.

Already, infections are coursing through China’s financial industry, seeing traders at city firms call in sick. Factories, mostly located in manufacturing belts or secondary metropolitan hubs, are next in line.

Details of contingency plans provided by a range of companies with plants in China paint a varied picture of preparedness for an almost inevitable surge in cases.

Closed loops back

Many Chinese manufacturers are turning to so-called closed-loop systems, a model first deployed during the Beijing Winter Olympics in 2022 to isolate athletes from the wider population and reduce the chances of infection. They were then used during the Shanghai lockdown by companies such as Tesla to keep employees free of Covid-19 and maintain production.

But it is not clear whether that approach – which saw violent pushback from workers at the world’s biggest iPhone factory in November – will be enough this time round, once cases start to snowball.

Zhejiang Geely Holding Group, the carmaker better known as Geely, is keeping workers at its factories in China on-site and sleeping in dormitories. But the company, which has more than 30 sites across China, does not plan to suspend production if there are infections.

Covid-19 has already ripped through a workshop at BMW’s Shenyang factory, infecting most of a production line, according to a source with knowledge of the situation. A new group of employees was called in to replace the sickened staff in December, the source said.

China’s sudden transition from a nation determined to eliminate Covid-19 to one that is resigned to live with it poses particular challenges for manufacturers. They, of all companies, need a certain volume of working staff to meet delivery targets. Unlike banks and trading houses, where employees can just as easily work from home, products cannot be assembled without people on-site.

Manufacturers in North America showed early in the pandemic how the virus can lead to production chaos at first, and then supply chain disruption later. Infections at US car factories forced closures in the first few months of the crisis. Then a global chip shortage, triggered by the pandemic, led to yet more output cuts.

Already, 2022’s prolonged lockdown in Shanghai did so much damage to manufacturing that it led to a global shortage of the critical contrast agent used in medical scans.

Now, companies on the front line as China reopens are hoping to learn from how other businesses protected themselves and handled infections.

“It’s still hard to predict the exact number of infected cases,” Mr Qin Lihong, co-founder and president of automaker Nio, told reporters this week. “We are looking forward to having some other companies as good examples.”

But the new reality for many employees at Chinese companies is a brutal schedule that requires them to work, eat and even sleep in small groups – all for the sake of production continuity.

Longi Green Energy Technology, the world’s largest solar equipment manufacturer, has most of its front-line workers living in dormitories, the company said last week. Close to 1,000 staff at Sinopec’s Yanshan oil refinery in Beijing are also living where they work in order to keep operations stable, according to a statement from the company.

In some cases, China’s years-long, relentless effort to stamp out the virus, and the induced fear of getting infected, has made it harder for companies to get workers back.

Kinghike Vehicle, an electric golf-cart maker in Shandong province in eastern China, is trying to convince staff that becoming infected may not be as bad as they think, and reinforcing the message that they can stay at home if they test positive.

“Our human resources department is preparing employees mentally so they know that catching the virus is not that horrible,” said general manager Hermann Zhai. China, he said, should have reopened “a long time ago”. BLOOMBERG