Correction: An earlier version of this story misspelled the number of people under lockdown across China.
Nearly 400 million people in 45 cities in China are under complete or partial lockdown as part of China’s strict non-proliferation policy. Together, they account for 40%, or $7.2 trillion, of the annual gross domestic product of the world’s second-largest economy, according to data from Nomura Holdings.
Analysts ring warning bells, but say investors are not properly evaluating how seriously Global economic repercussions It may be one of these lengthy isolation orders.
“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 most disturbing is Indefinite closure in Shanghaia city of 25 million people and one of the premier manufacturing and export centers in China.
Quarantines there have led to food shortages, inability to access medical care, and even reported killings of pets. They also left The world’s largest port is understaffed.
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 to 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 weekThe 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] Swings 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 that “the Russian invasion of Ukraine put an end to the globalization we had witnessed over the past three decades.
at Address to the Atlantic Council last weekUS Treasury Secretary Janet Yellen said he is 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 hoped 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 affected 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.
according to Research from the Chinese University of Hong Kong.
Analysts no longer believe that China’s target for 2022 is 5.5% economic growth, The country’s least ambitious goal in three decadesrealistic. 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.
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