Impact of lockdowns in Shanghai on supply chains

Shipping containers are seen at the Yangshan Deep Water Port, part of the Shanghai Free Trade Zone, in Shanghai, China. (Aly Song/Reuters)

Shanghai goes into lockdown as Covid cases surge The measures are expected to be the most comprehensive lockdown in China since the Wuhan lockdowns over two years ago. Chinese authorities have ordered non-essential shops and transportation to close at least until next week.

As one of the world’s largest urban areas in the world’s most populous country, what happens in Shanghai matters to the rest of the world. Shanghai is home to the world’s busiest seaport for containerized cargo and one of the busiest airports for cargo aircraft.

In a service announcement today, DHL said the airport will maintain normal operations during the lockdown. “Staff have been on standby at the airport since March 28 and will be on duty there until the end of the lockdown period,” the announcement said. Restrictions on Pudong, the eastern part of Shanghai where the airport is located, will expire on April 1.

The Shanghai Port Authority also said the seaport will maintain normal operations. With proper documentation and a negative Covid test, some truck drivers are still allowed to enter and exit the airport and seaport.

However, just because the ports remain open does not mean they can function normally. Factories in Shanghai are being shut down and without that production there is nothing to ship. As cases spread, so will the pool of truck drivers who test negative.

Shenzhen, another global trade hub, has experienced similar closures. The consequences of this weren’t as bad as initially feared, but that doesn’t mean there weren’t consequences. Eamon Barrett of wealth explained:

The shutdown in Shanghai mirrors another city-wide lockdown that took place two weeks ago in Shenzhen, China’s southern manufacturing hub and major port city. The local lockdown fueled fears of a major supply chain disruption. Apple supplier Foxconn was one of the major manufacturers that had to close production facilities in Shenzhen for several days.

Limited operations at Shenzhen docks also slowed port procedures, which logistics operators are warning and could lead to higher shipping costs this summer as ports gradually overcome congestion.

He further notes that the stock markets have barely taken notice of the lockdowns. The S&P 500 and the Shanghai stock market are little changed today. Fears of a production slowdown have also pushed crude oil prices somewhat lower today.

The brunt of politics, of course, falls to the people of Shanghai. They started food hoarding last week in anticipation of lockdowns. Financial sector workers have been sleeping in their offices to avoid being refused re-entry when lockdown begins.

There are some signs that China’s zero-Covid policy will not be sustainable with the Chinese public. Lily Kuo wrote on March 16 in the Washington Post:

Complaints from ordinary citizens have surfaced with greater regularity on the country’s heavily monitored social media platforms. A user wrote on microblog Weibo on Monday that due to the sudden new lockdown measures, his family was trapped on a highway for 14 hours as they tried to reach the east China city of Wuxi.

The news that a 4-year-old girl in Changchun, one of the cities under strict lockdown, had died of acute laryngitis while waiting to go to hospital to test negative for coronavirus sparked further anger online.

“3 years. I dare not get sick and don’t even talk about having children. You don’t know what’s in store for them,” wrote one netizen under a hashtag for the issue, which published more than 40 readers in two hours has been viewed millions of times.

Others complained about losses in their businesses. “I really broke down tonight and never wanted to leave Shenzhen as much as I did tonight. I haven’t made a dime since I opened my shop on March 1st,” read one well-publicized comment in response to a Shenzhen Health Commission post on WeChat.

Xi Jinping has promised to minimize the impact of the Covid restrictions on the Chinese economy. The return to citywide lockdowns is not a step in the right direction, and it was one that China signaled wasn’t going to happen just a few days ago. Xi may be able to cover foreigners’ concerns by keeping ports open and keeping the stock market happy. But he could find his own people soon causing trouble if he sticks to the zero-tolerance policy for Covid.

Dominic Pino is the William F. Buckley Fellow in Political Journalism at the National Review Institute.

Leave a Reply

Your email address will not be published.