“Global markets may still be underestimating the impact, because a lot of attention is still focused on the Russian-Ukrainian conflict and the US Federal Reserve’s rate hike,” Lu Ting, Nomura’s chief China economist, and colleagues wrote in a note last week.
The port of Shanghai, which handled more than 20% of Chinese freight traffic in 2021, has essentially ground to a halt. Food supplies stuck in shipping containers without access to refrigeration rot.
Incoming goods are now stuck at Shanghai marine terminals for an average of eight days before being moved elsewhere, a 75% increase since the last round of lockdown began. Export storage time has decreased, but this is likely due to the lack of new containers being sent to the docks from warehouses, according to Supply Chain Vision Platform Project 44
Air freight companies have canceled all flights in and out of the city, and More than 90% of trucks
Support for import and export deliveries currently out of business.
Shanghai produces 6% of China’s exports, according to the government’s 2021 Statistical Yearbook, shutting down factories in and around the city More supply chains are rumble.
Sony and Apple supplier factories in and around Shanghai are down. Quanta, the world’s largest laptop maker and MacBook maker, has stopped production altogether. The plant accounts for about 20% of production capacity for Quanta’s laptops, and the company previously estimated it would ship 72 million units this year. Tesla has closed its Shanghai Giga factory, which produces about 2,000 electric cars per day.
China’s Ministry of Industry and Information Technology said in a statement on Friday that it had sent a working team to Shanghai to work on a plan to resume production at 666 major factories in the closed city. Tesla executives hope they will be allowed to reopen their doors by Monday, ending the longest temporary factory shutdown since it opened in 2019. The automaker has lost more than 50,000 production units so far, According to material seen by Reuters
“The impact on China is significant, and the implications for the global economy are very significant,” said Michael Herson, head of practice at Eurasia Group for China and Northeast Asia. “I think we’re going to have more economic and social volatility and turmoil at least for the next six months.”
Prolonged disruptions to China’s manufacturing and shipping could help speed up the switch Biden administration initiative
It aims to reduce US dependence on Chinese products and supply chains.
But the mission comes with serious immediate economic repercussions.
In a report released last week
The World Trade Organization has warned that a worst-case scenario involving the decoupling of global economies, spurred by Russia’s invasion of Ukraine, could reduce long-term global GDP by 5%.
This is highly unlikely given the deep financial ties between China and the United States. Investments in stocks and bonds for each other reached $3.3 trillion by the end of 2020, according to Data from the rhodium group
“These are very intertwined economies,” Hirson said. “This integration is not something that can be easily reversed because it would be very costly for the United States and the global economy.”
US economic leaders still believe that secession
is already going on. Co-founder of Oaktree
Howard Marks wrote in late March that “the pendulum [has] It swung back toward local sources” and away from globalization. President of BlackRock
Larry Fink echoed the same sentiment in a letter to the company’s shareholders. He wrote: “The Russian invasion of Ukraine put an end to the globalization we have lived through for the past three decades.
at Address to the Atlantic Council last week
US Treasury Secretary Janet Yellen said
It closely monitors China’s political and economic ties with Russia. “Going forward, it will be increasingly difficult to separate economic issues from broader considerations of the national interest, including national security,” she said.
While she said she hopes to avoid a “bipolar divide” between China and the United States, “the world’s attitude toward China and its willingness to embrace further economic integration may be influenced by China’s reaction to our call for assertive action on Russia.”
Meanwhile, a third of China is stuck in quarantine and its economy is suffering.
Analysts no longer believe that China’s target for 2022 is 5.5% economic growth, The country’s least ambitious goal in three decades
realistic. Revised World Bank
It estimated the growth of the Chinese economy this week to 5%, but it indicated that
Restrictive policies that can go down to 4% continue.
The economic burdens come at a Politically perilous moment
. This fall, Chinese President Xi Jinping will petition for a third term as the nation’s leader, breaking with the tradition of a maximum of two terms.
Correction: An earlier version of this story misspelled the number of people under lockdown across China.