Concern is growing worldwide as China struggles to put down its purported worst COVID-19 outbreak in two years, shutting factories and locking down some of its busiest manufacturing hubs to try to curb the spread of the illness.
Semiconductor developer Intel, Apple, and automakers Toyota and Volkswagen are among the latest companies forced to halt some production in China as products have piled up at warehouses while firms complied with China’s stringent COVID policies.
The expanding list of affected provinces covers most parts of China; health authorities said they’re bracing for more.
“Our country’s outbreak prevention situation is grim and complicated, and the challenges of containing the outbreak have grown,” Lei Zhenglong, a senior official with the National Health Commission, said at a March 15 press conference.
Concerns about COVID as well as about China’s Russia ties triggered panic selling, sending stock prices in Hong Kong and mainland China tumbling for two days in a row.
“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. “Uncountable manufacturing supply chains pass through China.”
White House press secretary Jen Psaki said on March 14 the Biden administration is monitoring the lockdown of Shenzhen “incredibly closely.”
“What we’re looking at is, of course ... the impact on some of these ports around the impacted areas of China,” she said during a press briefing.
The surge in COVID cases doesn’t bode well for China to reach its ambitious economic growth target of 5.5 percent.
Fu Linghui, the spokesperson for China’s National Bureau of Statistics, was cautious in speaking about the effects of the nationwide COVID resurgence. The changing outbreak situation has created some “uncertainties” and how it affects economic recovery remains to be watched, he said on March 15.
China’s FAW Group, which is headquartered in Changchun and has joint ventures with Toyota, Volkswagen, and Audi, announced a four-day suspension at its factories in the city. The production halt could result in a loss of 480,000 vehicles during the period, according to Chinese media.
Dongguan, a key industrial base in southern coastal Guangdong Province, has paused all public transportation in the city and allowed only factory activity in areas where no cases have been identified—although no workers will be allowed to step outside their company premises in the coming week.
Most warehouses in Shenzhen have temporarily paused the processing of shipments, according to Chinese reports.
For now, international ports in Shanghai and Shenzhen are running as normal, although market data from Refinitiv show that the number of vessels waiting at Pearl River Delta and Yangtze Estuary ports has doubled.
The effects of these shutdowns might not be immediately felt.
“We are likely to see the impacts in a month, or more, when those products were meant to arrive in factories and retail stores,” Daniel Stanton, a marketing professor at Bradley University, told The Epoch Times.
The cost of the lockdowns depends on how long these policies will continue, he said.
“If the shutdowns are short, then companies might be able to mitigate the problems with their safety stock inventory or by using faster modes of transportation,” he said. “But, the longer the shutdowns last, the harder it will be to mitigate the effects on the supply chains for all of the products that are made in these regions.”
Given China’s enforcement of its “zero-COVID” policy, the lockdown could be lengthy if outbreaks continue to worsen. The last major lockdown, in the north-central Chinese city of Xi’an, began three days before Christmas and continued for more than a month.
