About 373 million people in 45 cities were living under some form of lockdown in China last month, according to an estimate from the Japanese financial services conglomerate Nomura Holdings. That’s more than three-quarters of the entire EU population (448 million) and the entire US population (330 million). A quarter of the Chinese population now lives in locked-down cities in response to China’s worst covid outbreak since the start of the pandemic.
In pursuit of its zero-covid policy, Beijing has issued extensive travel restrictions in dozens of cities, including Shanghai, the country’s largest city, port, and economic engine, which is home to 25 million people. Although covid cases have started to ease from their April peak, authorities once again tightened lockdown measures today (May 10), barring Shanghai residents from leaving their homes or receiving non-essential deliveries.
These restrictive measures have created widespread economic disruptions within China and left millions of urban residents scrambling to find food. Over the next few months, factory shutdowns and dwindling port activity could spill over to the rest of the world. The disruption risks triggering a new round of supply chain delays, shortages, and soaring shipping costs which have been dragging on the global economy since the start of the pandemic.
Covid lockdowns dampen China’s economy
Placing hundreds of millions of workers under lockdown has hammered China’s factories. Authorities have tried to limit disruptions by imposing measures such as “closed-loop management“, forcing workers to sleep at their factories. But even such drastic steps have failed to prevent Chinese factory output from falling last month to its lowest level since June 2020.
The International Monetary Fund has cut its forecast for Chinese economic growth in 2022 from 4.8% to 4.4% because of the lockdowns—well below the government target of 5.5% and down nearly half from last year’s 8.1%. Some (pessimistic) analysts are even predicting that China’s lockdowns could push the country into a recession this year.
Supply chain disruptions may return
Chinese ports, like factories, have switched to a “closed loop” system to insulate themselves from covid lockdowns. But data from the supply chain data platform FourKites shows the volume of goods shipped out of the Port of Shanghai fell 23% in the month after the city’s lockdown began on March 12.
As a result, shipping lines are planning to scrap more than a third of their scheduled routes out of Asia over the next six weeks because they’re expecting there won’t be enough export cargo to pick up at Chinese ports. This lull in exports could be the calm before the storm: Once lockdowns are lifted and factories and ports return to full production, China could once again unleash a sudden flood of cargo that overwhelms US ports, just as it did earlier in the pandemic.