Zero-Covid China harms industrial SMEs ? and itself

Zero−Covid policy: China harms industrial SMEs − and itself − with travel restrictions

https://www.thenewsmarket.com/news/zero-covid-policy--china-harms-industrial-smes---and-itself---with-travel-restrictions/s/46e46a01-be6d-4e21-b44e-717a74895597

Release Date: 07 July 2022

 

There is growing anger amongst industrial SMEs about the strict and unpredictable Chinese entry restrictions. Many members of VDMA, Europe’s largest mechanical engineering industry association, are complaining about harassing conditions, which are also to the detriment of Chinese customers. They are demanding that the quarantine requirement for vaccinated persons be lifted.  

Frankfurt, 7 July 2022 - China's strict zero-covid policy – in place since the beginning of the pandemic – and the associated extreme restrictions on entry are increasingly proving to be a threat to trade and investment in medium-sized mechanical and plant engineering. Long and unpredictable quarantine periods under sometimes undignified conditions, little reliance on statements by regional Chinese authorities and the extremely low number of flights to the People's Republic mean that skilled workers from Europe are virtually no longer travelling to the country, for example to carry out necessary installations or maintenance work on machinery. "This is not only an enormous nuisance for our member companies with economic consequences. China is also cutting into its own flesh with this restrictive entry policy, because it is blocking access to services as well as to new technologies," says Ulrich Ackermann, Head of VDMA Foreign Trade. "We call on the government in Beijing to abolish the quarantine for adequately vaccinated business travellers as well as the cumbersome and non-transparent visa requirements. Companies also need a significantly expanded range of flights to China again in order to be able to fulfil their contractual obligations there," he emphasised.

We call on the government in Beijing to abolish the quarantine for adequately vaccinated business travellers as well as the cumbersome and non-transparent visa requirements. Companies also need a significantly expanded range of flights to China again in order to be able to fulfil their contractual obligations there.

Ulrich Ackermann, Head of VDMA Foreign Trade

The extent of the anger among SMEs about the restrictive entry policy is shown by a large number of corresponding statements from the VDMA membership:

For example, Arno Gärtner, CEO of the textile machinery manufacturer KARL MAYER GROUP, says: "The strict travel restrictions are a major challenge for our international group...Smooth close cooperation has become considerably more difficult and projects are delayed. It is difficult to find anyone who wants to travel to China under the current conditions."

Dr Ingo Cremer, CEO of CREMER Thermoprozessanlagen, adds: "The current quarantine situation, in our opinion inhumane, is choking off business with China. Bad quarantine hotels are like jail for our service staff...You could get the impression that China doesn't want 'foreigners' in the country."

Restrictions also hinder exports

Since the beginning of this year, exports of mechanical and plant engineering to China, which are closely related to the travel restrictions, have also fallen noticeably. From January to April inclusive, exports to the People's Republic fell by 8.5 per cent to 5.9 billion euros. Exports to the United States, on the other hand, increased by 13 per cent to 7.3 billion euros in the same period. The USA thus further expanded its top position in the export country ranking of the mechanical and plant engineering industry. "China is and remains an important market for medium-sized companies as well," explains VDMA department head Ackermann. "But in view of all the obstructions, more and more companies will re-evaluate the business risks on the ground and start looking for alternative sales markets and production locations in Asia," he adds.

 

Abolish quarantine measures for fully vaccinated people

Statements by VDMA member companies on Chinese entry conditions:

1.    Ali Bindernagel, Chairman FRIEDRICH KOCKS:

"Our professionals had to spend a total of 616 days in quarantine on 29 trips to China. This is psychologically very stressful, also because the quarantine period is always changed at short notice. Sudden lock-downs at the place of work entail the risk of no longer being able to leave or reach the construction site. If the Corona test result is positive, there is the threat of camp accommodation without adequate care or language support. In addition, there are inappropriate medical examinations at the destination, for example a lung CT, as well as access restrictions to restaurants, supermarkets and public facilities. All this not only leads to extremely long lead times for China trips and difficult coordination with clients, but also to extreme cost increases for flights and due to the additional quarantine time.
We therefore demand that China waive PU invitations for visa applications, a shortened quarantine period, accommodation in hospital and not in Corona camps if infected with Corona, and a resumption of scheduled flights to China."

2.    Dr. Ingo Cremer, CEO CREMER Thermoprozessanlagen:

"The current quarantine situation, in our opinion inhumane, is choking off business with China. Bad quarantine hotels are like jail for our service staff. One could get the impression that China does not want any "foreigners" in the country. Deadlines can no longer be met, we have a cost explosion due to quarantine stays as well as extremely expensive flights - if flights are available at all. Chinese companies are postponing orders due to their own difficulties as a result of the lockdowns and domestic Chinese travel restrictions.
We would like to see the quarantine lifted for the fully vaccinated, or at least a say in quarantine hotels. We need more scheduled flights, waiving of government PU invitations, longer visa durations with multiple entries, and abolition of re-quarantine when people change provinces."

3.    Stefan Eirich, Managing Partner of Maschinenfabrik Gustav Eirich:

"Significantly longer project and construction site times result in additional costs. So do delayed process optimisations when commissioning new facilities. We have more difficult conditions in networks that affect digital services for customers. This also makes "remote support" more difficult. Due to entry restrictions for specialists for project consulting and project support in China, projects can be delayed or even lost to local competitors, because even our own employees in China do not always have sufficient process know-how for special applications. Access to European cutting-edge technology is made more difficult, especially in the case of niche technologies where there is still no expertise in China. The establishment of personal and thus resilient business relationships is made almost impossible.
For the Eirich Group and its customers, it would therefore be urgent that a significantly reduced quarantine period of 3 to 5 days be introduced for vaccinated persons, preferably combined with several tests. This would make selected and urgent visits possible again."

4.    Arno Gärtner, CEO KARL MAYER GROUP:

"Possible lockdowns and the strict travel restrictions are a major challenge for our international group. With a production site in China with around 1000 employees and a focus on the Chinese market, the strict travel restrictions are a critical factor for our business. Smooth close cooperation has become much more difficult and projects are delayed. It is difficult to find anyone willing to travel to China under the current conditions. Relaxing the quarantine measures is an important criterion to improve the situation again."

5.    Stefan Hantke, President and CEO Schneeberger Holding:

"China's zero-covid strategy has made entry into China virtually impossible, or only possible under the greatest possible hardship. As a result, we have not been able to start or put into operation the joint venture we founded in 2020 for two years. This joint venture was founded to build up special know-how for the semiconductor industry in the region for the region. Our Chinese customers are currently forced to accept longer times for projects, acceptances and transports for our systems.
Our wish is for the quarantine to be lifted as soon as possible for those who have been fully vaccinated and for scheduled flights to China to resume."

6.    Christof Lauffer, Managing Director of Maschinenfabrik Lauffer:

"The current restrictions on travel to China mean for us sometimes considerable restrictions and delays in the processing of existing projects - with all the associated negative effects on planning, timely implementation, financing, etc. At the same time, they mean a reduction in the usual service levels and response times for our customers. At the same time, in the worst case, these mean a restriction of the usual service levels and response times for our customers. We would therefore very much welcome a lifting of the restriction or facilitation of entry for fully vaccinated and/or recovered persons."

7.    Jan Lohoff, Managing Director & CEO iNOEX Group:

"The Covid-19 travel restrictions in China are a great challenge for our group. Although we are well positioned with our own sales and service company in China, the commissioning of major projects, new products and innovations by German service technicians in particular is currently very difficult. In particular, the restriction of travel at top management and specialist level currently makes knowledge and technology transfer almost impossible. This means that the Chinese market is losing out. We hope for shorter quarantine times, more frequent scheduled flights and easier visa conditions as soon as possible."

8.    Henning Simon, President NTN Wälzlager:

"As the German subsidiary of a Japanese group, we are suffering extremely from the upheavals in the global logistics market. We have had to learn that a single country like China can disrupt the global flow of goods in such a way that products that do not come from China are also affected. Logistics service providers will have to find appropriate solutions for this. We are already trying to use transport routes that do not go via China. In the past, many shipping routes from Japan to Europe always went via a stop in China (usually Shanghai). This will no longer be the case in the future and will thus also influence the logistics situation to and from China.

We have had to experience very painful and cost-intensive supply bottlenecks for products or primary materials from China several times now. To minimise this risk for the future, we will develop alternative suppliers outside China who will take over at least part of the existing business with us.

On the other hand, we have repeatedly validated and approved new Chinese suppliers in the past. Since the audits and on-site visits required for this are only possible to a very limited extent (remotely or with the help of local colleagues), we have currently put these activities on hold and are looking for alternatives outside China."

The VDMA represents more than 3,400 German and European mechanical and plant engineering companies. The industry stands for innovation, export orientation and medium-sized businesses. The companies employ around four million people in Europe, more than one million of them in Germany alone. Mechanical and plant engineering represents a European turnover volume of around 800 billion euros. In the entire manufacturing sector, it contributes the highest share to the European gross domestic product with a value added of around 270 billion euros.