Is Shanghai’s two months of Covid lockdown finally coming to an end? Not quite yet, it seems, with most of the city’s 25 million residents still waiting for the green light to leave their homes for the first time in weeks.
Shanghai’s deputy mayor has already announced that the city will be reopened in phases, aiming for a return to normal life by the middle of June, and there has been a partial easing of restrictions in some districts over the last few days.
But former freedoms are returning slowly for most residents, with limitations on how far and how often they can venture out. Temporary passes have been issued allowing just one person per household to go shopping within narrowly set time periods, for instance, and neighbourhood committees are watching closely to make sure that no one breaks the rules.
The cautious approach signals how Shanghai’s exit from isolation could take a little longer than many expect. That’s not just going to be frustrating for its residents. Companies around the world are desperate for the lockdown to be lifted as well, as a first step towards getting their businesses back to pre-pandemic levels.
The long reach of Shanghai’s supply chain sclerosis
Lockdowns or pandemic-related restrictions have been reported in at least 40 cities in China since the beginning of the year, although Shanghai has taken centre-stage in the country’s battle to contain the virus.
Partly that’s because the lockdown there has been so extensive in scale and duration. But it’s also because Shanghai is symbolic as China’s commercial capital. Policymakers are proud of its claims to be the leading hub or gateway to the rest of the country, making its closure all the more confounding.
The city serves as a key conduit for trade and investment between the Chinese economy and the wider world, handling about a fifth of national goods through its port.
The seizing up of traffic at the city’s container terminal in recent weeks has created massive congestion in the global supply chain, with hundreds of vessels not only waiting at anchor off Shanghai but also at other ports on the eastern and southern seaboard.
According to maritime consultancy Drewry around 260,000 TEU cargo boxes have not been shipped during the Shanghai lockdown (equivalent to 10 fully loaded container ships) and HSBC says the time it now takes for a cargo vessel to voyage from China to the US is now 104 versus pre-pandemic levels of under 50 days.
Other delays in shipments – with manufacturers closed down by Covid-related restrictions – have added to the logistical logjam, wreaking havoc much further afield than China.
In one major news story from the US this month, hospitals warned that they were running low on supplies of a contrast dye used in the scans of millions of patients. General Electric, the dye’s manufacturer, explained that it had been forced to close its Shanghai manufacturing facility for several weeks, although it has been scrambling to boost production at other plants to make up on the shortfall.
More than 180 listed companies around the world have mentioned terms including “China” and “lockdowns” in their first-quarter earnings calls or financial statements, Bloomberg reported.
With an extensive list of outsourcing partners in a number of Chinese cities, Apple is one of the worst affected, warning that sclerosis in the supply chain could cost it between $4 billion and $8 billion in sales this quarter.
Similar pressures led to an alarming slump last Friday in the share price of John Deere, an American manufacturer of agricultural machinery, after it blamed disappointing sales on difficulties getting components from China and warned that supply chain challenges were expected to persist until the end of the year.
Read More at https://www.weekinchina.com/2022/05/the-great-reconfiguration/
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