Retail in Asia


What does easing Covid curbs mean for China’s supply chain

Shanghai has been in lockdown for the past two months, restrictions have finally been lifted on 1st June. Plans have also been put in place to revive the city’s economy, which has been affected heavily, such as speeding up the issuing of local government bonds and accelerating building project permits.

SEE ALSO : China retail sales down 11 percent in April

The shutdown of Shanghai, home of the biggest port in the world, has impacted supply chains in a variety of industries, from technology and automobiles to beauty and fashion.

Under Armour is one of the garment brands that has been impacted. Earlier this month, the US fitness wear brand stated that it was canceling some orders affected by China-related supply chain delays.

“Everybody’s inventory is coming in a somewhat disjointed fashion,” said Patrik Frisk, CEO of Under Armour. “You could say that in general it has been hard in our industry to get the right stuff to the right place at the right time. We might have stuff that you can get into the channel, but it’s not necessarily always co-ordinated.”

In addition to production, several multinational businesses with a presence in China have seen sales decline as local outlets have been forced to close. In the first three months of 2022, Adidas’ China sales recorded a year-on-year drop of 35 percent. The drop was attributed to a “difficult market climate” in China, according to the company.

Deliveries of stock from China have slowed down during the latest lockdown. The delays are a result of a combination of factors. Shanghai’s huge port operations ground to a snail’s pace at the start of the lockdown six weeks ago, and have yet to return to their former capacity.

Local lockdowns, according to suppliers, have had a direct impact on some factories in Shanghai as a result of China’s strict restrictions, which require the closure of entire districts when a positive Covid-19 test is discovered.

Suppliers are finding it particularly difficult to make long-term choices because they are unsure whether China will impose more limitations if it continues to pursue a zero-Covid policy.

SEE ALSO : COVID outbreak in Hainan prompts temporary closure of duty free stores

However, following the lifting of the restrictions there are concerns that once China returns to full capacity, ports in Europe and the United States will be overwhelmed, causing even longer delays for shipments. Suppliers appear to be facing new hurdles after two years of dealing with the twin logistical disasters of Covid and Brexit.