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| A woman undergoes COVID-19 testing in Beijing, Thursday. Yonhap |
By Lee Kyung-min
The recent COVID-19 lockdowns in China are posing a major threat to Korean firms, many of which are suspending operations of their manufacturing plants in the world's second-largest economy, according to industry watchers and economists, Thursday.
Not only large conglomerates, but also small and medium-sized local producers of semifinal and final goods relying on China for parts import are expected to feel the pinch of the acute disruptions to global value chains.
Experts say Korea should diversify trading partners and establish viable alternate supply methods to reduce the immense current dependence on China, a repeated call ringing hollow to businesses that are highly averse to making unnecessary and costly investments.
"We have decided to lower production capacity at our China plants for the time being," a Hyundai Motor spokesperson said.
The sudden shock to the manufacturing process is driven mostly by operation suspensions of key auto part wiring harness factories in China's Shandong province.
Shandong is among a handful of regions under lockdown alongside Jilin, whose 24 million residents were placed under quarantine, Tuesday, after the northeastern province accounted for the majority of the record-high over 5,000 new cases. It is the first lockdown of an entire province following one in Wuhan and Hebei at the beginning of the pandemic.
The automotive giant is closely monitoring the wiring harness supply disruption, a crisis that wreaked havoc previously on the manufacturing in February 2020. At the time, it suspended an assembly plant in Ulsan due to the shortage of the key part made almost exclusively in China.
"We do not expect a disruption as great as the one two years ago, but will continue to monitor the situation closely to limit further complications," the official said.
According to the Ministry of Trade, Industry and Energy and Korea Trade-Investment Promotion Agency (KOTRA), about 320 Korean firms including car parts factories are operating in Weihai, Shandong.
"Some factories are experiencing disruptions due to a lack of raw and input materials amid movement bans, with workers ordered to work from home," a KOTRA official said. "We have opened a hotline at an emergency help center for firms in China to help with the sudden turn of events."
The ministry plans to allow simplified customs clearance as part of the pan-government assistance, coupled with delaying the application of a 52-hour limit on the workweek.
It will hold a meeting next Monday with semiconductor and display manufacturers over the impact and policy directives to navigate the unexpected supply chain disruptions.
Korea Institute for International Economic Policy (KIEP) research fellow Yeon Won-ho said the lockdown is unlikely to be lifted any time soon.
"The strictest health rules will continue throughout the year, until after Chinese leader Xi Jinping's term extension is determined by the Communist Party National Congress in autumn," he said. "A change of COVID-19 response measures could follow before the year's end or early next year, in the form of vaccine policies."
Another key point of discussion in the coming months will be whether China will remain a viable investment partner, in light of the ongoing Russia-Ukraine crisis.
"A tectonic shift will be in order to cut ties with countries governed by a lack of predictability and unlawful practices," he said.
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