The Shanghai shutdown threatens to disrupt the global economy

This content was published on Apr 08, 2022 – 14:04
April 08, 2022 – 14:04

(AFP)

Shanghai, the world’s main container port, is under lockdown due to COVID-19, a measure that is disrupting the Chinese economy and threatening supply chains around the world.

To deal with the worst wave of COVID-19 that China has faced since the beginning of the epidemic, the country’s economic capital – whose GDP is equal to that of Poland – has been fully or partially under siege for two weeks.

Although there have been no deaths in Shanghai and the vast majority of cases are asymptomatic infections, the authorities have decided to confine nearly 25 million people, despite the high cost this implies to the economy.

Thousands of trucks are stranded as drivers entering the city have to quarantine for two weeks to leave.

The shortage of truck drivers is affecting port activity, although authorities assert that there are currently less than a dozen ships per day waiting to dock.

“But the problem is that because of the restrictions imposed on truck drivers, the port is not really operational,” Bettina Sean Behanzen, vice president of the European Union Chamber of Commerce in Shanghai, told AFP.

The trade representative said she had learned that volumes had fallen by 40% in a week at the port. “This is a huge thing,” he said.

– No workers, no raw materials –

The effect is starting across China, where delivery delays are multiplied on online trading platforms, especially for imported goods. Some industries are forced to find new suppliers.

But this effect can be felt internationally also because Shanghai port accounts for 17% of China’s sea tonnage. Any disruption will slow trade in the world’s largest exporter of goods.

Entrepreneurs assert that restrictions that occur from one place to another in the country seriously affect their activities.

“Not all professions can work from home,” said Jason Lee, founder of a wheelchair company called Megalicht Tech, whose factory in Shanghai has closed.

The epidemic may affect the growth goals of the Chinese government, which has forecast an expansion of 5.5% this year, the lowest number in 30 years.

– adapting to survive –

Entrepreneurs are trying to adapt to survive. Gao Yongkang, director of Qifeng Technology Company in Quanzhou, in the east of the country, could no longer deliver orders to his regular customers, so he switched to selling protective suits.

Others are able to switch providers.

“It’s a little more expensive and less effective,” said Shen Shengyuan, vice president of New Yifa Group, a diaper manufacturer.

Eric Zeng, president of the American Chamber of Commerce in Shanghai, questions whether the strategy to stem the spread of the virus still works in the current context.

“That’s the big question, especially when one puts it in the balance with the economic cost involved,” he said.