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00:00THE NUMBERS WE JUST GOT, SECOND DAY IN A ROW THAT WE HAVE FEWER THAN 1000 NEW INFECTIONS IN SHANGHAI BUT THREE CONSECUTIVE DAYS OF NO COMMUNITY SPREAD OUTSIDE OF QUARANTINE. THAT IS GOOD NEWS FOR BUSINESSES IN SHANGHAI. WHAT IS THE MOOD OF AMERICAN COMPANIES IN SHANGHAI? > > GOOD MORNING. AMERICAN COMPANIES ARE LOOKING FORWARD TO RESUMING OPERATIONS AS SOON AS POSSIBLE. SINCE MID APRIL THE LOCAL GOVERNMENT HAS RELEASED SOME LISTS AND OUR COMPANIES ARE ON IT SO THEY ARE ALLOWED TO GRADUALLY RESUME OPERATIONS UNDER CERTAIN CONDITIONS IN A CLOSED LOOP SYSTEM. SO WE ARE STILL TRYING TO GET BACK TO WORK. SOME MAJOR COMPANIES, MAJOR AUTOMAKERS ARE GETTING BACK TO WORK BUT THERE ARE STILL A LOT OF CHALLENGES TO OVERCOME LIKE THE CLOSED LOOP SYSTEM. STEPHEN: THE CLOSED LOOP ALLOWS COMPANIES TO KEEP PRODUCING. BUT THE SUPPLY CHAIN ISSUES. YOU CAN ONLY MAKE SO MANY WIDGETS IF YOU CANNOT GET THE SUPPLIES IN AND OUT OF THE FACTORIES. SO HOW HAVE THE SUPPLY CHAIN DIRECTLY AFFECTED THE COMPANIES? > > TAKE AUTOMAKERS AS AN EXAMPLE. YOU -- IF YOU NEED 100 PARTS TO MAKE A CAR AND THE AUTOMAKER WOULD HAVE TO GET ALL OF THE PARTS READY, IT RELIES ON MANY PARTS SUPPLIERS. MANY OF THEM ARE NOT EVEN IN SHANGHAI. SO WE ARE TALKING ABOUT A REGIONAL SUPPLY CHAIN TO MANAGE. WHEN YOU HAVE MAJOR COMPANIES ON A WHITE LIST LIKE AUTOMAKERS, YOU STILL HAVE TO INCLUDE THEIR SUPPLIERS. OTHERWISE YOU ARE ABLE TO MAKE A CAR. SO I THINK THE GOVERNMENT IS AWARE OF THIS SITUATION AND THEY HAVE A STRATEGY CALLED ONE PLUS M, M BEING THE NUMBER OF SUPPLIERS THEY HAVE TO BE INCLUDED BEARDS OF THIS IS A WAKE-UP CALL FOR ALL OF US TO LOOK AT THE SUPPLY CHAIN AND HOW TO MANAGE IT IN THE CURRENT ENVIRONMENT. STEPHEN: YOU TAKE A PULSE CHECK OF THE DIFFERENT MEMBERS. HOW MANY HAVE LEFT AND HOW MANY HAVE LEFT BECAUSE OF THE DIFFICULT OPERATING SITUATION. DO THEY LEAVE FOR A PERSONAL REASON OR ON BEHALF OF THE COMPANY TO SEEK OTHER AREAS OF PRODUCTION OUTSIDE OF CHINA BECAUSE OF THIS LOCKDOWN AND THE THREAT FUTURE LOCKDOWNS COULD HAPPEN? ARE YOU SEEING THAT A SIZABLE NUMBER OF EXECUTIVES ARE NOT WILLING TO COME TO CHINA OR ARE LEAVING CHINA? > > AT THIS POINT I THINK COMPANIES ARE STILL ASSESSING AND REASSESSING OPERATIONS IN CHINA. CERTAINLY THIS IS A TIME FOR ROTATION. SOME EXECUTIVES WILL LEAVE CHINA AT SOME POINT. SOME OF THOSE POSITIONS MIGHT BE LOCALIZED. WHEN YOU LOOK AT COMPANIES, THERE ARE TWO TYPES. ONE IS IN CHINA FOR CHINA. THEIR CUSTOMERS ARE IN CHINA. SO THERE IS NO WAY TO MOVE THE SUPPLY CHAIN OUT OF THIS COUNTRY BECAUSE YOU WANT TO BE CLOSER TO YOUR CUSTOMERS. BUT THERE IS ANOTHER TYPE THAT WILL BE PART OF THE GLOBAL SUPPLY CHAINS AND IN THE PAST MONTH OR SO AND OBVIOUSLY FROM -- SOME OF OUR NUMBERS EXPERIENCED HUGE DISRUPTIONS IN TERMS OF SUPPLY CHAINS AND SOME OF THEM MIGHT HAVE TO MOVE OUT OF THE COUNTRY TO MEET CERTAIN DEMANDS BUT THAT COULD BE A TEMPORARY SITUATION BECAUSE CHINA AT THIS POINT STILL HAS THE ECOSYSTEM TO PROVIDE PRODUCTS OF MEMBERS. SO I THINK MOST MEMBERS ARE STILL IN A REASSESSING STAGE AT THIS POINT. KATHLEEN: I WANT TO FOLLOW UP ON THAT. REASSESSING, BUT REASSESSING A LONG HELD POSITION THAT IT WAS WORTH BEING IN CHINA. IS IT POSSIBLE, EVEN WITH LOCKDOWNS IT IS THE CRACKDOWN OF PROPERTY DEVELOPERS. IT IS ALL OF THE PULLING BACK THE CHINESE GOVERNMENT HAS DONE TO BIG COMPANIES IN CHINA OVER THE LAST COUPLE OF YEARS. AND HOW DO YOU CHANGE MINDS? DOES THE GOVERNMENT CARE OR JUST LET THE FOREIGNERS GO? > > OUR COMPANIES ARE IN CHINA FOR COMMERCIAL REASONS AND I THINK IN THE PAST, THE FOCUS WAS MORE ON EFFICIENCY, THE SO-CALLED JUST-IN-TIME SUPPLY CHAIN CONCEPT AND IN THE PAST FEW YEARS, OBVIOUSLY GIVEN THE U.S. CHINA TRADE WAR AND THE COVID SITUATION AND COMPANIES ARE OBVIOUSLY TAKING ANOTHER LOOK AT THEIR SUPPLY CHAIN STRATEGY. MAYBE THE FOCUS WILL MOVE AWAY FROM EFFICIENCY TO MORE RESILIENCE. SO WE ARE FINDING A BALANCE BETWEEN THEM. SO I THINK THAT IS WHAT COMPANIES ARE GOING THROUGH RIGHT NOW. CERTAINLY THE COVID SITUATION IS A WAKE-UP CALL. HAIDI: WE ARE NOT EXPECTING BORDERS TO REOPEN. HOW DIFFICULT HAS IT BEEN FOR BUSINESS LEADERS TO DO VIRTUAL BUSINESS WITHOUT BEING ABLE TO TRAVEL AND HAVE NEGOTIATIONS IN PERSON? > > IT IS CHALLENGING. WHEN YOU CANNOT EASILY TRAVEL AND WHEN YOU HAVE REGIONAL EXECUTIVES THAT CANNOT VISIT YOU IN CHINA, IT IS AN ISSUE. WE HAVE RAISED THE ISSUE WITH GOVERNMENT AUTHORITIES AND AT SOME POINT THEY ARE GOING TO HAVE TO EASE CONTROLS. SINCE EARLY 2020, IT HAS BEEN 2.5 YEARS AND EXECUTIVES CAN ' T TRAVEL. IF THEY DO, THEY HAVE TO GO THROUGH QUARANTINE MEASURES. IT IS NOT SUSTAINABLE. SO HOPEFULLY LATER THIS YEAR THEY WILL EASE MEASURES SO THAT OUR COMPANY EXECUTIVES CAN TRAVEL. [TALKING OVER EACH OTHER] HAIDI: STEPHEN ENGLE CONTINUES TO JOIN US LIVE AT THE SUMMIT THROUGHOUT THE DAY. A LOT COMING UP, INCLUDING STRATEGY ANALYSTS. WE WILL GET DETAILS ON THE TURNAROUND IN CHINA TECH. BOEING ' S BIGGEST AIRLINE CUSTOMER IN CHINA HAS MOVED JETS FROM THEIR FLEET PLAN, CITING UNCERTAINTY ON DELIVERY. DANNY LEE JOINS US. WHAT DO WE KNOW SO FAR? > > THE CHAIRMAN TOLD INVESTORS THEY WOULD GO FORWARD UP TO

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AmCham Shanghai President on Supply Chains

Eric Zheng, President at AmCham Shanghai, discusses the impact of China's lockdowns on supply chains. He speaks with Stephen Engle, Haidi Stroud-Watts and Kathleen Hays on the sidelines of the JPMorgan Global China Summit on "Bloomberg Daybreak: Asia". (Source: Bloomberg)

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