Blockades due to COVID in China are leading global trade into crisis

The blockades, which are affecting cities with millions of people, have already caused the closure or slowdown in production of international companies with factories in China, delaying shipping, on which much of global trade is based.

So far, the “supply chain” crisis, mainly due to the shortage of goods produced in China, such as microchips in the electronics sector, has caused a general rise in prices, bringing inflation to record levels.

In recent days, for example, the Japanese company Toyota and the German company Volkswagen have been forced to stop production at their plants in Tianjin, a large city about 100 kilometers from Beijing, with a port that exceeds about 1.7 percent of exports. kineze.

The decision of the two car companies was made after on Sunday in the city it was decided to conduct a massive test for about 15 million inhabitants.

Unlike other major cities, Tianjin was not isolated, but the mass test was put in place after two cases of coronavirus broke out in a school. Also, as a result of the discovery of several cases with Omicron, Volkswagen has stopped production at another factory, in Ningbo, Zhejiang province.

South Korea’s Samsung and US-based Micron, two of the world’s most important companies that produce microchips, have problems at their factories in Xi’an. The blockade placed in the city has actually prevented people from going to work and for this reason both companies have had production slowdowns, despite the fact that work has not been completely stopped at the moment.

In Ningbo the products of the Shenzhou International Group, which supplies materials to major apparel companies such as Nike, Adidas and Uniqlo, were shut down for several days. Work could also be cut off at the factories of Foxconn, the largest Chinese company that makes smartphones and other devices on behalf of companies such as Apple, Samsung and Microsoft.

One of the most important factories is in Zhengzhou, the capital of Henan, where 103 positive cases have been detected. Here too, as in Tianjin, no general blockade has been imposed, but only a few restrictions and a massive test for 10 million inhabitants.

Then there is another problem that could worsen the situation in the coming weeks and that has to do with the export system.

Already due to restrictions, some important ports like Ningbo are facing delays in shipping goods and the situation may worsen even more on February 1, Chinese New Year, where most factories close for almost a year. week. In addition to slowing production, the closure of factories could cause another blockage of ports that have to ship containers of Chinese products to the rest of the world.

According to Frederic Neumann, who deals with economic analysis in the Asian market for HSBC, compared to previous months, the Omicron variant could exacerbate the “supply chain” crisis, given that in these two years of pandemic the center of trade is China. The pandemic found that consumption in western countries depends on Chinese production.

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