China’s COVID lockdowns hit its trading partners
Shutting down Chinese cities to contain the spread of COVID-19 is scolding imports and exports, economists say. They say these problems are slowly raising prices overseas while reducing demand in the world’s largest market for inbound goods.
The affluent port city of Shanghai, with a population of around 25 million, began rolling out phased closures last month as COVID-19 cases rose to more than 200,000 on Tuesday. These restrictions followed the closure of China’s tech megalopolis, Shenzhen, in March.
Seaports in both cities have slowed due to a lack of workers and a quarantine of incoming crews of cargo ships from overseas, analysts said. Shanghai is the world’s largest container port and Shenzhen ranks fourth.
In Chinese factories, the backbone of the national and global economy, ‘limited’ labor quantities and suspended transportation means operators can only ‘rely on on-site inventory to hardly meet production line needs,” Taipei-based market research firm TrendForce said in an April 11 research note emailed to VOA.
All or parts of local BMW, Tesla and Volkswagen auto factories are temporarily closed in the Shanghai area, Chinese media said.
High prices and supply chain disruptions have followed the wake of COVID-19 around the world over the past two years.
“There are strong concerns that this could further disrupt global supply chains as well as shipping,” said Rajiv Biswas, chief Asia-Pacific economist at IHS Markit in Singapore.
China’s 2020 outbreak “crippled economic activity” and caused that country’s GDP to plummet 6.8% in the first quarter, the United Nations Economic and Security Review Commission said. United States and China. He pointed to a slump in consumer demand and a slowdown in factory work. Global transportation and shipping has been “turned upside down,” the report says.
China’s second big wave of COVID-19 – after the world’s first in early 2020 – has pushed up the prices of Chinese exports sold overseas due to supply chains, said Jonathan Ravelas, chief strategist of the market at Banco de Oro UniBank in the Philippines.
Global inflation stands at 3.18%, according to market research firm Statista, well above the 1.5% preferred by central bankers. Past supply chain issues are one of the reasons.
Consumers in inflation-weary countries like the Philippines are looking for cheaper goods or buying in bulk, Ravelas said. Inflation in the Southeast Asian country stood at 4% in early April, compared to 3.6% in 2021.
“Filipinos, from time to time we see high inflation, so I guess that’s where the resilience of the Filipino family is,” Ravelas said. Rice prices jumped in 2018, for example, and the Philippine government lowered tariffs to keep prices low. “You’re going to buy products that fit your budget,” he said.
Rising prices for raw materials as well as coal and fuel will ripple through parts of Asia if Chinese lockdowns persist, Biswas said.
Less consumer demand in China
Back in China, consumers are expected to buy fewer goods due to lack of exit permits, Biswas said.
Sporadic shutdowns that last “a while” could dampen Chinese demand for imports, Biswas said. He said this would mean lower demand for raw materials and components for manufactured goods.
Expectations at the port of Shanghai have lengthened, he said, and 2021 has already been marred by “very long delays”. Industrial production has also slowed this year, his company found.
At the Shanghai-based port of Waigaoqiao, it is now taking longer to find a berth, a spokesman for shipping company Maersk said this week. “All warehouse operations have been closed until further notice,” the spokesperson added. “The efficiency of Maersk trucking services to and from Shanghai has been further affected due to the lockdown.”
Related effects from China’s shutdowns so far this year could shave a percentage point off its 2022 economic growth forecast, said Alicia Garcia Herrero, chief Asia-Pacific economist at the bank. French investment Natixis.
“Chinese imports are going to collapse, so the impact on any major exporter to China is going to be very obvious, except for raw materials,” Garcia said. “Not machines, not anything that China can actually produce on its own, basically. Cars, all that stuff, it’s going to be terrible.
The World Bank predicts economic growth of 5.1% in China this year, compared to 8.1% in 2021.
Business travel suspended
Foreign businessmen traveling to China already face two-week hotel quarantines. Town-by-town shutdowns over the past two months are adding to the risk of separation for parents and children, the US State Department said in an advisory on Monday. He specifically recommends staying away from Shanghai and northeast China’s Jilin province.
The State Department said it ordered the departure of non-emergency U.S. government employees and their family members from the Shanghai District “due to an increase in COVID-19 cases and the impact of restrictions related to the PRC’s response”.
Chinese officials have defended their measures to stop COVID-19.
“China’s anti-epidemic policy is based on science and works effectively,” Chinese Foreign Ministry spokesman Zhao Lijian said at a press briefing on Tuesday. “We have every confidence to contain the new wave of COVID-19 in Shanghai and elsewhere.
“Many foreign nationals, including US citizens in Shanghai, join Shanghai residents in solidarity to fight the virus and overcome the current difficulties,” Zhao added.