Shanghai Lights Up Again... Korean Companies Breathe a Sigh of Relief (Comprehensive)

Lifting of COVID-19 Lockdown After Two Months
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[Asia Economy Reporters Sunmi Park, Hyunseok Yoo, Chaeseok Moon] "I stayed at home for two months. Most Korean companies with offices in Shanghai have switched to a normal work attendance system as of the 1st. There is a mood to speed up the concretization of second-half strategies following the normalization of logistics and supply chains." (Korea Trade Association Shanghai Branch staff)

As Shanghai, China attempts economic normalization two months after being locked down under the 'Zero COVID' policy, Korean companies that suffered from logistics and supply chain disruptions and production halts have also breathed a sigh of relief. Although it will be difficult to fully return to pre-COVID-19 conditions immediately, there is growing optimism that normalization will gradually proceed as logistics issues are being resolved.

According to the industry on the 2nd, Shanghai, which began lockdown on March 28, lifted all lockdown measures the day before. After 65 days, residents are free to move outside residential complexes, and restrictions on cars and motorcycles have been removed.

Employees affiliated with Korean companies have also shifted from remote work to normal office attendance. Jinwoo Park, manager of the Korea Trade Association Shanghai Branch, explained, "Since most Korean companies have switched to normal attendance, they plan to engage in communication and meetings among Korean companies that were not possible before, review second-half strategies, and prepare for the Shanghai International Import Expo scheduled to be held offline on November 1." He added, "Some Korean company factories were on the 'white list' of companies permitted to resume operations under strict regulations during the lockdown, but with the complete lifting of the lockdown, regulations are expected to be significantly eased."

The domestic electronics and display industries are placing their greatest hopes on the resolution of logistics and supply chain disruptions. An electronics industry official said, "The direct impact of the lockdown was not significant, but if manufacturing and logistics in China normalize, it will have a positive effect on the global economy." Another industry source said, "Electronic products faced issues with parts supply from China, but we minimized disruptions by using stockpiled inventory. With the lifting of the lockdown, these risk factors have disappeared."

A display industry official also stated, "There were production disruptions and restrictions on transporting finished products due to irregular parts supply from partners, but gradual recovery is expected. The lockdown impact is currently in the final worrying phase, and improvement is anticipated in the second half of the year."

Expectations Rise in Heavy Chemical and Aviation Industries

Major heavy chemical companies also showed generally positive reactions. In particular, the steel industry is anticipating a rise in iron ore prices following China's economic normalization. Generally, when iron ore prices rise, steel companies' performance improves. According to Korea PDS, a raw material market analysis firm, on the 1st, the price of September iron ore contracts on the Dalian Commodity Exchange (DCE) traded at 901.5 yuan per ton, marking the highest price in over a month since 903 yuan per ton on April 21.

A steel company official with a local Chinese subsidiary said, "Even during the Shanghai lockdown, we prepared detailed transportation plans every one to two weeks for logistics related to the Chinese subsidiary and operated factory work systems flexibly. During the lockdown, restrictions such as no movement outside confirmed destinations, no driver disembarkation, and prior submission of transportation plans were eased, so logistics difficulties are expected to be resolved."

The aviation and shipping industries, which reduced cargo flights during the Shanghai lockdown, also expressed expectations for flight normalization. An aviation industry official said, "Flights were reduced by about half since the end of March, but now they have returned to normal schedules." A shipping industry official said, "No significant changes have been detected yet, but if production at factories around Shanghai increases, there could be an increase in cargo volume."

There are also expectations that the Chinese government's large-scale consumption promotion activities to boost consumer sentiment, which was dampened by the Shanghai lockdown, will act as a boon for Korean consumer goods companies operating in China. The Korea Trade Association Shanghai Branch said, "The biggest shopping event in China’s first half of the year, the ‘618 Shopping Festival,’ is approaching, and Korean consumer goods companies are expected to benefit from 'revenge consumption.'" In March this year, after lockdowns were lifted in Guangzhou and Shenzhen, large-scale subsidies were provided mainly to food service and tourism companies, which were relatively heavily affected. Tax exemptions and reductions were offered to affected companies, and consumption coupons and discount events were implemented intensively to stimulate consumption among consumers in affected areas.

Active government support measures for affected companies are also expected to follow. The city government has stated that it will alleviate financial burdens and resolve difficulties for small businesses through various corporate financial support policies targeting companies affected by COVID-19 lockdown measures. It is expected that tax benefits will be provided to more than one million companies in the future.

This content was produced with the assistance of AI translation services.