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How face masks are reminding the world of China's manufacturing dominance

Inkstone

發布於 2020年03月12日16:03

The Liu family factory has been making diapers and baby products in the Chinese city of Quanzhou for over 10 years. In February, for the first time, it started making face masks, as demand soared spectacularly due to the coronavirus outbreak.

The business " which employs 100 people in the southeastern province of Fujian " has added two production lines to make up to 200,000 masks a day.

And while the decision was primarily commercial, "encouragement" from the Chinese government " in the form of subsidies, lower taxes, interest-free loans, fast-track approvals for expansion and help to alleviate labor shortages " made the decision an obvious one, said Mr Liu, who preferred only to give his family name.

"The government is advocating an expansion in production," Liu said. "With faster approvals, producers need to prioritize the government's needs over exports."

Two women hold signs telling people visiting Beijing's Summer Palace to wear masks and not stand too close to one another.
Two women hold signs telling people visiting Beijing's Summer Palace to wear masks and not stand too close to one another.

The factory is one of thousands of refitted pop-ups around China that are making masks and other protective equipment for the first time, part of a massive industrial drive to respond to the spread of the coronavirus.

Before the outbreak, China already made about half of the world's supply of masks, at a rate of 20 million units a day.

That rose to 116 million as of February 29, according to China's state planning agency.

This exponential jump is the result of a wartime-like shift in industrial policy, with Beijing directing its powerful state-owned enterprises to lead the nationwide mask-making effort, and the country's sprawling manufacturing engine following their lead.

"For me, this is the big advantage of China, the speed," said Thomas Schmitz, president of the China branch of Austrian engineering giant Andritz, which has seen a big uptick in demand for its wet wipe-making machines in recent weeks, also due to the virus.

"When you need to run, people know how to run, and this is something which has been lost in other countries since their industrial heydays."

In late February, China was producing 116 million masks per day to meet demand.
In late February, China was producing 116 million masks per day to meet demand.

Chinese oil and gas major Sinopec upped production of mask raw materials such as polypropylene and polyvinyl chloride in January.

This week, it set up two production lines in Beijing to produce melt-blown non-woven fabric, intended to make 4.4 tons of the material each day. The fabric can then be used to produce 1.2 million N95 respirators or six million surgical masks a day.

More than 2,500 companies in China have reportedly started making masks, among them 700 technology companies, including iPhone assembler Foxconn and smartphone makers Xiaomi and Oppo.

The result resembles "the war effort" in the middle of the last century in the United States and western Europe.

It is a reminder of what can happen in a centrally-planned economy with a strong manufacturing base. The mobilization also brings into sharp focus some of the geopolitical issues that have characterized China's at-times difficult relationship with the rest of the world, particularly the European Union and US, over the past couple of years.

China's dominance in manufacturing has become all the more evident as the rest of the world scrambles to shore up their own dwindling medical supplies, leading many to wonder why the world is so dependent on it for vital supplies.

Global demand for surgical masks has risen sharply and some countries cannot produce sufficient supplies without help from China.
Global demand for surgical masks has risen sharply and some countries cannot produce sufficient supplies without help from China.

The Italian government, which is dealing with the highest number of coronavirus cases and deaths after China, is to accept shipment of 1,000 ventilators, 2 million masks, 100,000 respirators, 200,000 protective suits and 50,000 testing kits from China.

The World Medical Association is unable to specify how many masks are required to supply frontline medical staff in virus-hit areas, but said, "this crisis should be a wake-up call for politicians and societies to make the necessary investment in emergency preparedness and to look into the vulnerability of our supply chains."

The US only has 1% of the 3.5 billion masks it would need to counter a serious outbreak, Bloomberg reported.

While China has no quota on the volume of masks that had to be siphoned off for local consumption, the government has said domestic demand needs to be prioritized.

Businesses are free to export but overseas demand has yet to explode as it has in China, said Fujian factory owner Liu.

Wendy Min, sales director of Pluscare, a manufacturer based near the virus's epicenter in Hubei province, said her company is making 200,000 masks per day, much of the stock is sold to the government, with exports still restricted by the partial lockdown of workers and cargo transport.

"We previously exported to Europe, South America and other parts of Asia," Min said. "But at the moment we can't export. We are trying to discuss this with the government, but we cannot wait any more " we have to export soon."

An influx of Chinese-made masks, though, is likely to be welcomed in other virus-stricken parts of the world.

Workers in an airport in Sao Paulo, Brazil wear protective masks. A Brazilian mask manufacturer said the company is reliant on raw materials that come from abroad.
Workers in an airport in Sao Paulo, Brazil wear protective masks. A Brazilian mask manufacturer said the company is reliant on raw materials that come from abroad.

Miguel Luiz Gricheno, CEO of Brazilian mask manufacturer Destra, said that his company is making 30,000 masks a day, but cannot meet local demand due to a lack of supplies, including the non-woven fabric from which masks are made.

"In disposable masks, most Brazilian companies are paralyzed due to the lack of raw materials," Gricheno said. "With the arrival of the coronavirus in Brazil, the demand has increased a lot but the main raw material comes from abroad."

However, a short-term supply fix will not answer underlying questions about how so many countries found themselves in such dire straits, meaning the geopolitical fallout of the coronavirus will be extensive.

One of the great flaws of globalization is that everyone wanted things cheaper, but did you compromise your health care infrastructure in the process?Stephen Roach, a professor of economics at Yale University

Decades of weak industrial policy helped elect US President Donald Trump, who said he would bring manufacturing jobs back to America at China's expense.

While he has waged a bruising two-year trade war with China, the current situation shows just how difficult it will be to change the global manufacturing processes, which are so heavily controlled by China.

"In the guise of trying to improve efficiency and create value for price-sensitive consumers, we've created a global production network that is very difficult to unwind," said Stephen Roach, a professor of economics at Yale University and a veteran China watcher.

"One of the great flaws of globalization is that everyone wanted things cheaper, but did you compromise your health care infrastructure in the process?"

US President Donald Trump was elected in part because the US manufacturing industry had fallen on tough times.
US President Donald Trump was elected in part because the US manufacturing industry had fallen on tough times.

Reuters reported that Trump is considering invoking the emergency provisions of the Defence Production Act, which would allow the government to instruct companies to alter production to help address the domestic shortage of medical supplies like masks.

If a company is producing 20% N95 masks and 80% standard masks, the White House could order them to rejig the ratio, an unnamed official said.

The New York Times reported on Wednesday that the White House is preparing an executive order that would allow the government to buy medical supplies from overseas in the hope that it will incentivize companies to make them within the US.

But these changes still do not give Trump the sort of sweeping powers enjoyed by Chinese counterpart President Xi Jinping.

"When you have a pluralistic, democratic situation that Trump is overseeing, it becomes more unwieldy" to take the steps necessary to address a crisis situation, said Harry Broadman, chair of the emerging markets practice at the Berkeley Research Group and a senior US government official in the 1980s and 1990s.

"That is why I think Trump looks at Xi with envy, because he doesn't have to deal with a disparity of views or democratic interests," Broadman said.

"I think Trump is at heart a bilateral guy, as you saw with the phase one (US-China) trade deal and the state-to-state purchases. That is why he likes dealing with Putin and Xi, because each of them can move mountains. I think Trump is very envious of that ability."

Copyright (c) 2020. South China Morning Post Publishers Ltd. All rights reserved.

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