Another COVID-19 Lockdown In China Sees Supply Chain Woes Resurgence

China is being impacted by the worst lockdown the country has faced since early 2020, which could impact the economy worse than that initial lockdown.

While it is pretty early on to predict what millions of people under COVID-19 lockdown in China will be, last time the economy contracted around the world, which lessened the impact. This time, the economies of the world will not go back into lockdown soon despite an international resurgence in COVID-19 cases.

While Amazon spokesperson Maria Boschetti told Time Magazine that “we do not anticipate a significant disruption to our business.” However, 17.5 million residents of Shenzhen, an online retail hub, are on lockdown.

The Chinese hub for manufacturing products like shoes, toys, and textiles, Dongguan, is also on lockdown with factories, schools, and restaurants in the region effectively closed. Still, the hardest-hit region in China is Jilin.

Citigroup analysts said in a report obtained by CNBC that “economic loss may be real this time.”

“Considering the spillover effect to other regions, we think the lockdown and tightened quarantine measures this round could potentially deduct ~0.5-0.8 ppt of GDP growth in Q1, assuming no policy responses,” the analysts predicted.

Bank Of America Securities’ China equity strategy team agreed, but added that the Omicron wave, specifically the contagious sub-variant, could present “risks and opportunities for China.”

It also depends on whether China’s COVID-19 lockdown lasts for months or weeks. The length of the lockdown could greatly affect an already disrupted supply chain still recovering from pandemic struggles and dealing with the current Russian invasion of Ukraine.

“If it just lasts for one or two weeks, it might become a blip in the data,” said Francoise Huang, a senior economist at Euler Hermes.

The effects of the lockdown in China will be felt around the world differently depending on the local dependence on China’s manufacturing and supply. China has become a lukewarm ally of Russia as the invasion continues, with Russia asking China for military aid.

The current COVID-19 lockdown in China and its effect are still to be determined, but the current situation may affect China’s ability to assist Russia economically or militarily.