As Beijing’s Zero-COVID policy continues to cause disruptions to the global supply chains, Japan has begun to encourage its companies in China to move production and distribution back home.
Japan’s multinationals are impelled to undertake a broader reassessment of supply chains. They seek to move back home with tax incentives, subsidies, and other benefits, reported Nikkei Asia. The pandemic has changed the outlook of many countries towards their current set-up of supply chains and they are considering options to move out of China and diversify themselves.
Due to rising COVID-19 infections in China and the enforcement of the Zero-Covid policy by Xi Jinping, global supply chains have taken a hit as Shanghai is the main export centre of China.
In 2021, the port handled 20 per cent of China’s freight traffic, local media reported. As a result of the lockdown, many companies were forced to shut down their factories. For example, a lockdown is declared in Changchun city which is a major auto manufacturing hub for brands like Toyota and Volkswagen.
Chen Xin, who owns a garment painting factory in Guandong province said that he is unable to deliver most of his orders due to the logistics crisis. In his opinion, the impact of Chinese government policies is much greater than the problems caused by pandemics.
If the lockdown continues prominent economists have warned of bigger impacts on the global supply chain, he added.
China’s zero covid policy has given rise to global consequences since most of the manufacturing hubs for international brands are located in China.