Global economic aftermaths of China’s Covid-19 Lockdowns

Federico Giuliani

Sars-CoV-2 appeared for the first time in Wuhan located in Hubei province of China. Gradually the world witnessed rapid spread of virus to many countries engendering the death of millions . Vaccines were developed and several quarantine measures adopted to contain the deadliest pandemic. Now it’s the year 2022 where the world is going back to normal life. But it is like all the new hopes are in the drain as there is a tremendous rise of new covid cases in China caused by the omicron variant. As per the national reports there are around 20,000 cases reported daily in China.

Omicron in China

Since there is an increase in infections, the government has announced tough quarantine measures to curb the spread. Two viral videos in China expose COVID chaos under the “Zero Covid Policy” .One is in Shanghai where people are seen screaming from their balconies at home. Shanghai , the financial capital of the country has reported over 20,000 cases per day. It is around 14 days where the city has been in complete lockdown. Other video records healthcare workers violently beating people in pursuant of quarantine rules. Regardless of symptoms, the policy is based on putting everyone locked at their home. The key question is whether these witless rules will affect only Chinese citizens?

Well, the answer is no and this could create significant damages to the world. For instance, it is a tough time for truck drivers as RT PCR tests including covid control measures are made mandatory at the local borders in addition to shipping ports . Truck drivers play a crucial role in the Chinese economy. You cannot have production in the factories without any resources. Major shipping requirements are transported via these people. They deliver required electronic items, raw materials…etc to the factories and transport goods back to the ports.

Quarantine regulations have delayed their work and a number of containers are left stranded on the ports. Owing to the lockdown their hardships are at worst a nightmare which was unexpected. Dong Zhigang, a truck driver, has finished his job in the coastal city of Nantong. Normally it is only a four hour drive to his hometown in Jiangsu province. But now it is nine days and he is still locked down in his truck. Not only Dong, every one among them is going through similar harder times. Loadstar, a news publisher for the global logistics industry reported that some cities in China restrict trucks from Shanghai before entering their town. Likewise authorities had encapsulated a miserable life in the lives of truck drivers .

Shipping and ports

As per Bloomberg data, 477 cargo ships are waiting at the off sea to enter Chinese ports. Similarly 72 vessels were spotted at the Qingdao port, the largest sea port in the country. Cost of shipping has gone high during past years. Now, the freight charges are expected to spike due to the delays and the waiting times at the ports. Maersk, the world’s second largest shipping company, has suggested that lockdown will severely impact truck services and transport costs would perceive a rise at an unexpected level. It is said that 90% of the world’s goods are carried over sea. As freight charges increase it could create economic repercussions on global trade. Businesses will may not tolerate this unfortunate development and they will divert the cost on customers .

Logistics companies have advised vessel operators to offload the products at other ports due to heavy traffic restrictions at the Shanghai port. Ultimately customers have to bear the additional shipment and storage charges. Thus China is going through its worst outbreak which will impact freight costs and global inflation. More than the pandemic it is the bad decisions of the Chinese government to be blamed. And to make matters worse, there is the risk of supply chain issues that are accelerating across the country and world. Because Shanghai is one of the main export centers in China.

In 2021 the port handled 20 percent of China’s freight traffic. If the delays continue for an unexpected period other ports may not be capable of filling the void. Some factories have tried to maintain the production at a closed loop system with measures like workers secluded inside but it seems difficult to keep the momentum due to the high covid curbs. As a result of the lockdown many companies were forced to shut down their factories. For example, a lockdown is declared in Changchun city which is a major auto manufacturing hub for brands like Toyota and Volkswagen. Apple supplier Foxconn has also suspended its production amidst the tightened restrictions. Chen Xin, who owns a garment painting factory in Guandong province said that he is unable to deliver most of his orders due to the logistics crisis. In his observation the impact of Chinese government policies is much greater than the problems caused by pandemic. If the lockdown continues prominent economists have warned of bigger impacts on the global supply chain.

In China it is like a crime to be diagnosed as Covid positive. The way the government treats people is more heinous than the rest of the world. Moreover zero covid policy has far reaching consequences globally. Several containers are piled up at the ports .There are no reasonable means for the truck drivers to distribute their goods.Since most of the manufacturing hubs for international brands are located in China, it seems difficult for the production.Government has adopted a zero tolerance policy towards the businesses, citizens. No matter whether you are contributing to the GDP or not, the arbitrary irrational decisions of authorities prevails. Many analysts are considering a situation similar to that which happened two years ago. Some analyts think that now it could be time for nations to reduce their dependence on China for smartphones and other products, if theese are the risks.