Trucks are being held up by driver testing. Container rates are rising as ships wait for long periods of time at ports. Warehouses are overflowing with goods.
As Chinese officials work to contain the country’s worst Covid-19 outbreak since early 2020, they are imposing lockdowns and restrictions that are causing havoc in global supply chains. The measures in China, which accounts for roughly one-third of global manufacturing, are causing delays in the production of finished goods such as Toyota and Volkswagen automobiles, as well as Apple’s iPhones, as well as components such as circuit boards and computer cables.
On Tuesday, the number of cases increased to over 5,000 new infections across the country. In comparison to many other large countries, this figure is insignificant. However, China has adopted a zero-tolerance approach to outbreaks, requiring strict lockdowns as well as mass testing and quarantine in government facilities. Because several of China’s largest industrial cities are currently fighting outbreaks, such measures are putting a strain on the factory and transportation networks that are the backbone of China’s manufacturing — and the global economy.
After surging last week, oil prices fell about 5% at the start of trading on Monday, owing in part to concerns about a Chinese economic slowdown. And the global economic damage already caused by China’s rise in cases — as well as the government’s tough response — could worsen. Officials in Beijing and a growing number of cities and provinces say the virus is still spreading and that the government must take even more drastic measures to stop it.
“Recently, local clustered epidemics have occurred in many places throughout our country, primarily of the Omicron variant, which has spread quickly and is very hidden,” said Mi Feng, a spokesman for the National Health and Health Commission, on Tuesday. “Epidemic prevention and control are more difficult, and the situation is dire and complex.”
Zhang Li, a deputy director of the provincial health agency in Jilin Province in China’s northeast, which has the highest concentration of recent cases as well as many factories making cars and car parts, said that residents and officials would need to “urgently mobilize and act to overcome difficulties with clenched teeth — we are racing against time.”
The outbreak itself may be less concerning to some foreign investors than the unpredictability of government responses. “The business risk in China is higher now than it has been since late spring 2020,” said Julian MacCormac, chairman of the British Chamber of Commerce in China.
Work has also been halted at electronics factories in the south and a wide range of industrial companies in central China due to lockdowns. Cities near Shanghai have closed highway exits or required each driver to pass a P.C.R. test, resulting in miles-long lines of trucks attempting to transport critical components between factories.
High international freight costs, which were a major issue last year and contributed to inflation in the United States, have begun to rise again following a brief dip during the Chinese New Year holiday last month.
Shipping a container of goods from Asia to the West Coast of the United States cost $16,353 as of last Friday, before the latest coronavirus restrictions went into effect, up from $16,155 a week earlier. According to Freightos data, rates have nearly tripled from a year ago and have increased 12-fold from two years ago.
To prevent infections, Chinese ports now require workers to live and work at the docks for up to two months at a time, away from their families. In contrast to last spring and summer, when infections forced extended closures of major container terminals in Shenzhen and near Shanghai, this has allowed the ports to remain open even during prolonged outbreaks.
However, with truck traffic to the docks disrupted, ships are facing delays of at least 12 hours and may soon have to wait for as long as two weeks, according to Julie Gerdeman, CEO of Everstream Analytics, a supply chain analysis firm.