Volkswagen Scales Back Production After Shanghai lockdown

Volkswagen (VW) has scaled back its activities in Shanghai, which has been shut down owing to an outbreak of Covid-19 infections.

On Thursday, the German automaker partially shut down its facility in the Chinese city, citing supply problems.

Over a dozen firms have canceled their ambitions to list their stock in the main financial center.

Economists are worried that a slowdown in Shanghai will have an impact on the world’s second biggest economy’s development.

Official statistics released on Thursday revealed that China’s manufacturing and services sectors declined quicker than predicted this month.

The purchasing managers’ index (PMI) of the National Bureau of Statistics fell from 50.2 in February to 49.5 in March.

On a 100-point scale, a value below 50 indicates contraction.

The PMI data is a summary of market conditions compiled by polling top executives in important sectors about their expectations for a variety of parameters such as new orders, output, and employment.

VW said late Wednesday that it will close part of its Shanghai production owing to a “shortage [of] parts from suppliers.”

When coronavirus infections were on the rise in the city earlier this month, the carmaker shut down the facility before resuming operations 48 hours later.

“What we have lost in production so far may be regained, [for example] via more shifts, provided the situation eases,” a VW spokeswoman said earlier this month.

VW did not indicate how long the current shutdown would remain, and did not reply to a request for more information from the BBC.

Its facility in Changchun, China’s far east, has been shuttered for many weeks.

Meanwhile, more than a dozen businesses have postponed plans to offer stock on Shanghai’s STAR Market, which focuses on technology.

The STAR Market has been dubbed China’s counterpart to the Nasdaq trading platform in New York.

According to Reuters, the proposals, which were made public in stock exchange filings, effect more than $9 billion (£6.9 billion) in financing.

The lower economic statistics, according to Iris Pang, Greater China chief economist at ING, “reflects the impact of lockdowns for mass Covid testing on output, new orders, and delivery timeframes.”

“These statistics, without a doubt, indicate some uncertainty – primarily in supply chains,” she added. “However, we are significantly more upbeat than the market as a whole.”

However, according to UBS’ top China economist Tao Wang, lockdowns in Shanghai and other Chinese cities may have “minimal impact” on output in the long run.

Most factories were continuing to function, she added in a research report, either keeping staff on the job or moving output to unaffected locations.

“Logistics delays and port congestion in Shenzhen may have had a brief impact on commerce, particularly China’s semiconductor component imports via the Shenzhen-Hong Kong route,” she noted.

Shanghai’s shutdown is the country’s largest since the coronavirus outbreak began.

To avoid economic destabilization, Chinese authorities had avoided shutting down the city of over 25 million people until today.

It has been fighting a new wave of illnesses for over a month, despite the fact that case counts are low by worldwide standards.

The eastern section of Shanghai, which includes the city’s financial center, has been cordoned off for Covid testing.

On Friday, the western part of Shanghai will be put under lockdown.

Because of the gradual approach, half of the city will be able to stay open.

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