Dongfeng Automobile Parts Enterprise was one of the first companies in Wuhan to resume. After the plant was granted permission, He Wei, head of the enterprise, went to the factory and sent out products which had been in storage for more than two months. “It cost us 29,900 yuan (US$4,222) in delivery fees, nearly five times higher than normal,” he told NewsChina.
He said he felt lucky because if work resumed even 10 days later, the economic losses would have been enormous. “I wasn’t afraid of the lockdown. I was worried most about the different times the lockdowns were ended [in different places],” he said. One company in Wenzhou, Zhejiang Province had canceled its orders because it resumed work earlier. The pandemic had caused unprecedented pressure he had not seen since the global financial crisis of 2008.
Work resumption in Wuhan was postponed several times. Han Leming (pseudonym), a member of the People’s Political Consultative Conference of Wuhan Economic and Technological Development Zone, is in frequent contact with local enterprises and is fully aware of the epidemic’s impact on businesses. “About 30 to 60 percent of enterprises are facing bankruptcy due to lack of orders since the epidemic started,” he said.
According to a survey conducted by Luo Zhi, director of Wuhan University’s New Private Enterprise Economy Research Center, more than 97 percent of enterprises in Wuhan completely or partially halted production during the epidemic, 57 percent of enterprises are on the brink of bankruptcy, and 40 percent of enterprises have seen their market share decline. She delivered a report to the local government which cautioned that “More than half of the city’s small- and medium-sized enterprises (SMEs) are likely to be closed if work resumption is later than late March.”
Enterprises above a designated size in Wuhan resumed work earlier than SMEs. Designated size in China means firms with an annual revenue of 20 million yuan (US$2.82m). “Work resumption rate is not the same as production resumption rate. Many enterprises which have resumed work have not started production at full capacity,” Han said. He added that there are many factors affecting the work resumption rate, including declining orders and higher logistics costs.
“During the lockdown, enterprises were eager to start back up, and every day many applied to resume, but not all of them could be approved,” said Qian Deping, deputy director of the Construction Management Office of the Wuhan National Bio-industry Base, also known as Biolake.
Occupying an area of 518 square kilometers, Biolake is home to 100,000 enterprises in eight key sectors, including opto-electronic information, biological medicine and high-end equipment manufacturing. Even after Biolake firms reopened, they faced problems including staff shortages and a lack of orders.
“The epidemic is the biggest crisis and challenge for me since I established the company,” Yi Kaijun, general manager of Hongshi Technology, told NewsChina. “We pretty much halted production during the epidemic. Orders worth at least 150 million yuan (US$21m) were affected and our sales volume dropped by 80 percent year-on-year.”
Hongshi is one of the few suppliers of iris recognition chips in the world. During the epidemic, the company invented a smart community epidemic prevention system based on its iris recognition technology.
“Except for anti-epidemic products, sales of products on other assembly lines were seriously affected,” he said. Because of difficulties in the supply chain and logistics, orders placed before the Chinese New Year in January could not be manufactured, and now there are no new orders.
The global spread of the pandemic has affected international supply chains and logistics, making it more difficult for SMEs to resume production. “We need special raw materials and reagents from abroad but the logistics are the main hindrance now,” Wu Ke, CEO of vaccine developer BravoVax, told NewsChina.
As of April 3, all enterprises above the designated size at Biolake have resumed production, and close to half of SMEs have resumed production, mainly in the area of epidemic prevention.