China’s latest Covid lockdown in Shenzhen is already impacting the supply chains of technology and automotive firms..
Toyota, Volkswagen and Apple supplier Foxconn are among the firms affected by factory shutdowns following the surge of the virus which has left 12.5 million civilians placed under quarantine.
Manageable
Analysts told the BBC that the week-long lockdown could be managed but would be a problem if it extended to Shanghai and surrounding areas.
The region is a key manufacturing hub for notebooks, servers and smart devices, among other products.
Cases spreading
On Tuesday China reported a record high of more than 5,000 cases, mostly in its Jilin province.
Authorities in Langfang city, which borders Beijing, and Dongguan in the southern province of Guangdong have also imposed immediate lockdowns.
Electronics disruption
The Times reports fears that lockdowns will disrupt shipping from Yantian International Container Terminals, which is thought to handle about 90% of China’s vast electronics exports.
“The lockdown announced in Shenzhen will send shockwaves through global supply chains,” said Simon Geale, of procurement consultancy Proxima.
He estimated that a one-week delay to shipping would mean “roughly half a million containers are not starting their journey”.
E-commerce impacted
Orders placed with global e-commerce platforms like Amazon and Walmart may be delayed by lockdown restrictions, according to an industry body that represents 3,000 exporters in Shenzhen.
Wang Xin, head of the Shenzhen Cross-Border E-Commerce Association, told Bloomberg: “Shenzhen now has pressed the pause key, with operations halted for almost all sectors, and we are no exception.”
Deliveries are snarled because logistics firms and warehouses aren’t operating or are doing so at a reduced capacity, he said.
Downgraded growth
China’s growth prospects were recently downgraded to 5.5% – the lowest in decades – as productivity has suffered because of the pandemic.
Some analysts now believe even this level of growth is unrealistic.
The Daily Mail reports a briefing note by Tommy Wu of Oxford Economics, who said it will be “challenging” for China to meet its official GDP growth target for the year.
“Renewed restrictions, notably the lockdown in Shenzhen, will weigh on consumption and cause supply disruptions in the near term,” he added.
Zero Covid strategy
Despite the zero-Covid strategy adopted since the start of the year, China has now reported more domestically transmitted cases in 2022 than in the entire 2021.
This may cause Beijing to reassess how it handles Covid, according to Chinese infectious disease expert Zhang Wenhong.
He told the BBC that while it was necessary for China to maintain its Covid strategy for now, “this does not necessarily mean we will continue implementing the strategy of lockdowns and mass testing forever”.