The Chinese city of Shenzhen – the nation’s tech hub – has gone into a week-long lockdown intended to slow an outbreak of COVID-19, and sent the world’s tech-dependent industries into a whirlwind of worry about the impact on supply chains.
Shenzhen’s local government yesterday announced the lockdown, and ordered the following restrictions on the city’s 17.5 million residents:
Employees of enterprises, except those responsible for the supplies of daily essentials like water, electricity, fuel, gas, communications, food and public sanitation, are required to work from home, or suspend production and operation activities.
Business venues, except supermarkets selling daily necessities (including the agricultural produce markets), pharmacies, medical institutions, catering enterprises that provide takeout services, will be closed.
This matters because Shenzhen is a hub for China’s technology and logistics industries. The city is home to Huawei, Tencent, and many other large Chinese tech companies. The famed Huaqiang Electronics World – a sprawling mall specializing in electronics components and accompanying online marketplace – is a top-tier sourcing option for any manufacturer. And plenty of manufacturers can be found in and around Shenzhen.
Those markets, factories and logistics facilities are now closed.
COVID-19 case numbers in the city are thought to be quite low – perhaps not much more than 1,000.
Shenzhen’s citizens will nonetheless participate in three rounds of COVID-19 testing this week, and the city authority’s announcement states “adjustments will be made according to the new situation.”
What those adjustments will be is unknown, but China has a policy of COVID elimination so don’t expect swift relaxation of restrictions. Shenzhen is half an hour from Hong Kong, where cases have spiked into the tens of thousands in recent days.
Beijing will simply not permit a breakout in Shenzhen or any other mainland city – nearby Foshan and Dongguan, each home to around 7.5 million people and also tech manufacturing players, are clearly at risk to a Shenzhen breakout.
The impact on supply chains is also hard to predict, because Shenzhen did not lock down in 2020, but avoided subsequent community transmission. While the first wave of the pandemic did mean the city was deprived of many workers, the effect of a city-wide shutdown is likely to be more severe than previous restrictions.
And with big tech’s books bulging with back orders that may not be fulfilled for a year, plenty of people outside China will be hoping Shenzhen gets on top of this outbreak quickly.