Lockdown in Shanghai: Work Resumption for Industrial Enterprises

The weeks of gridlock in Shanghai's economy and society have already brought significant negative impacts at various levels (local, national as well as international). Besides Shanghai, numerous other cities in China are in a lockdown of varying degrees, but due to Shanghai's outstanding importance for the Chinese as well as the global economy, the situation in the city of 26 million people is in particular focus. The local government of the eastern Chinese economic and financial metropolis has already tried to avert damage to affected companies as best it can through various emergency measures. However, the long-term benefits of these measures remain to be seen.

According to official figures, a gradual decline in new infections has been observed in recent days. In the course of this, the government has started to allow qualified companies to resume operations under strict conditions.

A list of selected companies, mostly from key industries such as semiconductors, automobiles, machinery, chemicals, logistics and biomedicine, was published by the Shanghai Commission for Economy and Digitalization in mid-April. The list is to apply in two phases, initially to 666 and then to a further 1,188 companies, with a good third of foreign companies (247 companies) included in the first phase. For all other companies not yet on the white list, permission to resume operations can be granted upon application.

On May 3, 2022, Shanghai government published a revised version of the "Guidelines for Resumption of Work for Industrial Enterprises in Shanghai" which contains some revised provisions as well as new regulations. Spread over 26 articles in 6 areas, stipulations are made mainly with regard to work organization and epidemic prevention. In detail, the following applies:

Compared with the first version of the guideline, which was aimed exclusively at affected companies, the new version introduces "4 party responsibilities", namely, in addition to companies, governments at different levels, government departments and employees of the company. The main responsibility of companies is to draw up a comprehensive risk prevention and occupational health and safety concept in accordance with the principle of closed-loop production, which must be submitted to the competent authority for approval.

Companies must divide the premises into 4 different zones (green, blue, yellow, red) that are strictly separated from each other and between which movements of people should be avoided as much as possible and practicable. The division is determined by the risk potential of the respective zone:

In addition, companies need to prepare different management measures for different operational areas. Classification should be made by traffic areas (e.g. entrances and exits, loading and unloading areas, warehouses), production and business areas (e.g. workshops, offices and meeting rooms), social areas (e.g. canteen, dormitories, fitness rooms), public sanitary facilities (e.g. toilets and washrooms, waste disposal) and other public areas (such as roads, paths and outdoor areas). Meticulous hygiene and disinfection measures should be carried out regularly, especially in high contact risk areas (such as passageways, stairways, lifts, toilets, etc.). Companies are encouraged to hold all meetings, discussions, etc. online whenever possible.

Special arrangements are to be made for new and returning staff. They should not only be physically isolated from other employees during an initial "rest period", but must also undergo two daily covid tests (antigen test in the morning, nucleic acid test in the afternoon). For all other employees, the type and frequency of testing is determined by the protected area (closed, controlled, monitored) in which the company is located.

Newly introduced in the second edition of the guidelines is the employer's obligation to take comprehensive measures not only for hygiene and epidemic control in the company, but also for occupational health and safety. The occupational health and safety concept must also include planned measures for the education and training of employees in this regard. Although this already applies according to general labour law regulations, it is necessary due to the far-reaching restructuring of operational procedures, as this can also result in new dangers for employees.

Also noteworthy in this context is the newly inserted provision according to which companies must take care of the mental health of their employees, which is likely to be affected by the high stress level due to the current emergency situation.

Special routes, storage facilities and personnel are to be set aside for all materials, goods, etc. entering the premises from outside. All drivers and escorts in company delivery vehicles must now always have a negative nucleic acid test report within the last 48 hours, in addition to general hygiene measures (protective mask, gloves, disinfection).

Furthermore, a provision was added according to which companies are now explicitly obliged to collect personal protective equipment and dispose of it separately.

Before restarting operations, companies must carry out a comprehensive risk analysis in the company, identify particularly critical areas and related hazards, and then draw up a detailed emergency plan with concrete measures to eliminate the risks. Sufficient precautions must also be taken for occupational health and safety so that no additional hazards are created for employees despite the high economic pressure on companies. This also includes a reasonable shift schedule and sufficient rest periods.

Finally, the revised guidelines include a completely new section dealing with services provided by the respective authorities to the affected enterprises. All districts of the city must publish information on the responsibilities, requirements and procedure of work resumption and actively guide enterprises on the way towards resumption.

Enterprises that meet the requirements for resumption of operations can apply to the competent authority for a corresponding digital certificate, which employees not yet in operation can present to their respective neighborhood committee together with other information and documents (ID, confirmation of employment, negative covid test, etc.) in order to be allowed to leave their residential area for resumption of operations. The guidelines also emphasize - in very general terms - that small and medium-sized enterprises in particular should be offered assistance in the procedure. Another important innovation is the explicitly mentioned possibility to apply for a digital passport for inter-provincial transport of goods at the local competent authority. In the same breath, however, the guidelines threaten (unspecified) sanctions and inclusion in a "blacklist" in case of misuse of the transport passport.

In exchange, for the first time, workers in factories with "closed-loop" management are now given the opportunity to return to their areas of residence at the company's request and upon submission of two negative covid tests.

In practice, we have observed that it is extremely difficult for many companies to get the application for business resumption approved. According to a recently published flash survey by the German Chamber of Commerce in China, a quarter of the 460 companies surveyed consider the main problems to be a lengthy and complicated approval procedure, difficult-to-fulfil requirements or risks perceived to be too high when resuming operations.

Moreover, even after resumption of operations, most businesses can only operate on a significantly limited scale, not least because of the still insufficient supply of urgently needed goods and raw materials. Therefore, the main hope of affected companies at present is that existing supply chain restrictions will be quickly removed so that they can return to normal operations as soon as possible. In the meantime, qualified companies should familiarize themselves with the available options, even if this means operating under heavily restricted operations at present.