Thousands of Hong Kong factories in a Dongguan town in Guangdong have been caught in limbo by a lockdown in the district, with the flow of people and goods stalled amid a surge in Covid-19 infections.

Danny Lau Tat-pong, honorary chairman of the Hong Kong Small and Medium Enterprises Association, told the Post his two factories in Dongguan’s Dalang town might be forced to halt production, as the lockdown had prevented goods vehicles from entering or leaving town.

Mainland Chinese authorities had imposed the measures as four more Covid-19 cases were reported in Dongguan on Wednesday, taking the number of infections detected since Tuesday to eight.

Lau Pak-ho (left) and his father Danny Lau, honorary chairman of the Hong Kong Small and Medium Enterprises Association.

Lau, managing director of curtain wall frame manufacturer Kam Pin Industrial (HK) Limited, which employs some 200 workers in Dalang, said his business would be in serious trouble if the lockdown continued for a longer period.

“Since Tuesday, the whole town has been subject to a lockdown while its 300,000 residents need to undergo compulsory testing every day with vehicles being restricted from coming in or going out,” he said.

“This has created a very bad situation for us and other factories in this town. On one hand we can’t deliver goods to our clients who may pursue damages from us if they suffer losses.”

Lau said that without getting new supplies for raw materials, his factories’ stock reserves could only last a few days, adding: “If this lockdown continues, we’ll be forced to suspend our production and staff will be without work.”

He pointed out that thousands of factories there were also facing the same crisis, saying he had been urging Dalang authorities to relax restrictions and grant access to goods vehicles.

Residents in Guangdong have to undergo regular Covid-19 testing under a lockdown.

Joe Chau Kwok-ming, president of the Hong Kong General Chamber of Small and Medium Business, said December was the busiest month of the year as factories needed to fulfil production orders before mid-January when workers would go back to their hometowns for the long Lunar New Year break.

“The impact is significant. These factories may suffer tremendous losses if they are forced to suspend production,” he said. “They will then fail to deliver the goods on schedule and get their payment. This will affect cash flow and lead to other financial problems.”

Hong Kong businessman Li Kit-chi, who operates a factory in Dalang manufacturing daily necessities products, expressed fear over failure to deliver goods to clients.

“I am really worried,” he said. “If we can’t get new supplies of raw materials, then we’ll be forced to halt our production. My clients may end up cancelling their orders.”

The city’s residents, especially businessmen, have been eagerly awaiting the reopening of the border between Hong Kong and the mainland under a quarantine-free travel scheme.

Dalang town in Dongguan has been included in a list of places that do not qualify for Hong Kong’s quarantine-free “Return2HK” and “Come2HK” schemes.

The final decision on border reopening rests with the central government, however, and this would also be affected by the latest Covid-19 situation in Guangdong province.

A source had told the Post the current outbreak in Guangdong – initially the only entry point to the mainland from Hong Kong under the border-reopening scheme – remained a concern.

Ivy Tse, founder and director of FreightAmigo, a one-stop supply chain finance platform, urged Dongguan factories to diversify production lines to other areas as an emergency measure.

“The lockdown in Dalang has served as a wake-up call for factories in Dongguan,” she said. “Many Hong Kong factories have diversified their production and set up some production lines in other areas such as Guangxi, so if one area is locked down, another production line can still run.”