China’s lockdowns are raising concerns about the impact on supply chain and freight traffic

Millions under lockdown amid worst COVID-19 surge in China since pandemic began

Millions under lockdown amid worst COVID-19 surge in China since pandemic began

Several companies in China’s manufacturing hubs in the south and north-east have suspended operations amid the country’s most sweeping COVID-19 lockdowns since the pandemic began in Wuhan.

China on Tuesday reported more than 5,000 COVID-19 cases, the highest since early 2020, and the country put the entire northeast Jilin province under lockdown this week — the first such lockdown of an entire province since Hubei, where Wuhan is located, became 2020 isolated from the rest of the country.

Jilin is a manufacturing hub, particularly for auto companies, and automakers Toyota and Volkswagen said they have halted production in the capital, Changchun.

The current surge, fueled by the Omicron variant, has spread to many cities in China, and 19 out of 31 provinces have reported cases. In the southern province of Guangdong, two key cities for the economy, the technology hub of Shenzhen and the manufacturing hub of Dongguan, have both been locked down.

Apple supplier Foxconn said it has halted operations at its Shenzhen plant. Langfang in northern Hebei province, home to a facility of Foxconn’s Hon Hai Precision Industry company, has also announced a lockdown. The measures mean that workers have to stay at home and production remains suspended. The Taiwanese electronics maker said it intends to divert production to other facilities on the mainland, but as the current surge spreads, those options are likely to narrow.

China largely managed to keep supply chains functioning normally for much of 2020 – having contained the first outbreak by the summer – and also throughout 2021, when a “zero COVID” strategy was pursued, Rapidly containing outbreaks based on international travel restrictions and testing and tracing helped the Chinese economy post robust export performance while much of the world remained locked in lockdown cycles. China, unlike much of the world, has avoided a major second wave.

How the current surge is affecting China’s supply chains and industrial production will add to concerns among its key trading partners, including India, which are already preparing to deal with the spillover effects of Russia’s war in Ukraine.

Of particular concern is the impact on China’s major ports. Shanghai, the world’s largest, has imposed lockdowns in several neighborhoods but the port maintained normal operations on Tuesday. Shenzhen, another major port, is also operational, although the city itself has been under lockdown.

If lockdown restrictions spread, affecting both access to ports and workers, as happened in 2020 when COVID-19 measures resulted in record queues for container ships, analysts fear there could be disruption to cargo traffic, which could lead to both bottlenecks and rising freight costs at the time.

The current surge has certainly put China’s elimination strategy to its biggest test yet, although official media have made it clear that the “dynamic zero-COVID” strategy is here to stay and China is unlikely to open up anytime soon.

“China has already found an approach to dynamically eradicate COVID-19 infections while maintaining the country’s economic vitality,” the official Xinhua News Agency said in a comment on Tuesday.

“It enjoyed a strong recovery with growth of 8.1% in 2021, becoming the only major economy to post growth in 2020. Thanks to this policy, China, the second largest economy and the main supplier of many manufactured goods, has been able to supply important finished goods to the world, including goods urgently needed by many countries to fight the pandemic,” she added.

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