A recent rise of COVID-19 cases in China is significantly threatening supply chain processes worldwide.
“We can think of no risk to the global economy, excluding nuclear warfare, that is greater than the risk of a COVID outbreak in China that shutters industrial production,” Carl B. Weinberg of High-Frequency Economics said in a report quoted by the Associated Press. “Uncountable manufacturing supply chains pass through China.”
Serving as a large contributor of the global trade market, the country has not yet reported massive delays, but while the risk is relatively low if the lockdowns and restrictions are confined to one specific area, there is a much greater threat of disruption if additional locations shut down, the Associated Press reported.
“The lockdown of Shenzhen creates significant risks of supply chain disruptions,” said Rajiv Biswas, chief Asia economist for IHS Markit, in an email. The risk of global disruption “would escalate if authorities in Shanghai also decide to implement a lockdown.”
Despite reporting lower rates of COVID-19 infections than other countries, the country has implemented various changes in response to the increase, fully complying with the no-COVID policy, which places strict safety measure restrictions across all industries.
According to the Associated Press, several major cities are making efforts to respond to the crisis by shutting down and identifying every infected person. Shenzhen has suspended its cross-border freight service at the crossing bordering Hong Kong, and the agency tasked with gathering documentaries from customers at the ports has closed, while the port of Lianyungang prohibits foreign sailors from leaving their ships, Reuters reports.
“The risk here is whether COVID will be found at Yantian Port,” said Iris Pang, chief China economist for ING, as quoted by the AP. “If the port has to be suspended, it will affect a lot of electronic imports and exports.”
Reuters reported that the Chinese economy has exceeded its economic indicators for January and February of 2022, rising its industrial output by 7.5%, but the regime's response to COVID-19 cases dims projections for the future.
"Indeed, every data point has been rebounding, mainly because policy effects kicked in early this year, with loosening in the infrastructure and property sectors,” Qu Qing, chief economist at Jianghai Securities, said.
CNBC reported that a readout Friday of a top-level government meeting chaired by Chinese President Xi Jinping said, “Officials at all levels must give top priority to epidemic response. Anyone who fails to perform their duties and responsibilities and thus leads to a drastic escalation will be investigated and held to account right away in accordance with discipline and regulations.”
This comes as China has been increasingly locking down cities in line with their attempt to maintain a zero-COVID strategy. For example, China’s steelmaking hub Tangshan has been almost entirely shut down.