The Omicron variant of the Covid virus is making its way across several big cities in China after President Xi Jinping made a U-turn on his former zero-Covid policy of containment earlier this month.
The spread of infections, which has hit China’s capital city Beijing the most, is threatening widespread business disruption to the world’s second-largest economy and largest apparel exporter. According to figures from the Financial Times, more than half the 22m population is infected.
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The increase in infection rates means industry across China is facing disruption such as staffing shortages, which is leaving businesses vulnerable to closures, while sickness in the logistics sector is causing supply chain chaos.
Dr Sheng Lu, associate professor of fashion and apparel studies at the University of Delaware, tells Just Style: “The latest Covid outbreak in China has started affecting the global textile and apparel supply chain and deserves a close watch. One imminent challenge is a nationwide labour shortage, production delays, and even factory closures as Covid cases surge. When Covid-19 first broke out in China in early 2020, garment-exporting countries in Asia struggled to get enough raw textile materials as China was their top supplier. The same situation could repeat this time.”
Lu says another big concern is new uncertainties. “How soon would China’s Covid situation stabilise? Shall we worry about a severe economic recession in China? Will China’s Covid outbreak result in new variants that complicate the world’s pandemic situation? Will the Chinese government have another U-turn in its Covid policy?
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“Given these mounting uncertainties, fashion brands and retailers are likely to accelerate their “China exit” strategy and prioritise mitigating supply chain risks in their sourcing decisions.”
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By GlobalDataIndeed, Bob Antoshak, partner at Gherzi Textil Organization, recently told Just Style that the uncertainty that exists within China has contributed to sourcing strategies closer to consuming markets, as witnessed in a revival of sourcing in the Western Hemisphere and in support of the US retail market.
According to the FT, companies have now been left with no direction on how to handle the sudden surge in cases, after previously operating under strict guidelines handed down by local governments. Some factory bosses have dropped restrictions such as PCR testing and fencing off workers from the wider population. Experts have said factories could face worker shortages until February, after the lunar new year. The Omicron outbreak has brought forward the annual movement of more than 290m migrant workers from the coastal provinces back to poorer regions in the west, which occurs ahead of the festive period.
