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What was supposed to be a staggered nine-day lockdown in Shanghai is morphing into something bigger, with a record of 20K daily new coronavirus cases reported in China's largest city on Thursday. The restrictions have since grown in severity and have been extended to the entire city. There are even reports of food and healthcare shortages, price gouging and parents being forced to separate from their children.
Quote: "Basically everything else is not moving but is being diverted away from Shanghai to other parts of China," said Mads Ravn, global head of air freight procurement at transport and logistics giant DSV. "It's affecting every commodity you can think of and will have a global effect on almost every trade."
Mainland bottlenecks can eventually result in ocean shipping delays due to the buildup in orders and goods. As the virus spreads to more cities and provinces, alternate shipping channels may also be disrupted by lockdown measures, further weighing on the global supply chain. While China has conducted zero-COVID lockdowns before, they have never been on this scale, hitting important manufacturing, financial and logistical regions all at once. Note that 88% of the country's 1.4B population have been fully vaccinated with jabs from providers like Sinovac (NASDAQ:SVA) and Sinopharm (OTCPK:SHTDY), according to the National Health Commission of the PRC.
Analyst commentary: "The COVID situation in China has deteriorated at an alarming pace, but abandoning zero-COVID now could be perceived as conceding that the strategy did not work in the first place," Ting Lu, chief China economist at Nomura, said before the Shanghai lockdown began last month. "With the much worsening pandemic and Beijing's resolution in maintaining its [zero-COVID strategy], we believe China's 'around 5.5%' GDP growth target this year is becoming increasingly unrealistic." Nomura now estimates that 23 cities and nearly 200M people are under full or partial lockdown across China.
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