Not Over Yet: China’s COVID-19 Surge Will Create Worldwide Supply Chain “Shockwaves”

Surging COVID-19 case numbers in parts of China have led the government to implement business shutdowns and other curbs on public activity to slow the disease’s spread. 

As many of the lockdowns are in production centers, there are concerns that they will have a ripple effect on the global supply chain, affecting numerous businesses including some in the promotional products industry.

China has announced lockdowns in 19 provinces, including Shenzhen, Zhejiang, Shanghai, Jilin, Suzhou, Guangzhou and Beijing. The country has implemented a stringent system of lockdowns, quarantines and contact tracing in pursuit of its zero-COVID strategy. Shenzhen has reported more than 400 cases since late February. Similarly, Shanghai has registered 600 new cases and has Jilin province in northern China reports 2,900 new cases this month.

Overall, China reports 8,531 domestically transmitted active cases. Shenzhen is seen as particularly vulnerable due to its proximity to Hong Kong, which is logging more than 30,000 new COVID cases per day.

Shenzhen, about 50 miles from Hong Kong and a major manufacturing hub, instructed all businesses that are not essential public services to shutdown Monday and remain closed at least through this week. The city is home to approximately 24 million people, including Chinese tech giants like Tencent and Huawai. Foxconn, manufacturer of Apple’s iPhone, has closed its production facilities in the region. The company’s doors will be shut until it is notified otherwise by the local government.

The closures in Shenzhen have raised fears over how they might impact the international supply chain. The city is home to several ports, including the Yantian International Container Terminals. Yantian is the world’s fourth largest port and approximately 90% of Chinese electronics exports move through it. Authorities closed Yantian in June 2021 due to a COVID-19 outbreak there and the resulting supply chain logjam took months to clear.

The lockdowns are expected to heavily restrict container movements in the affected ports. Dr. Johannes Schlingmeier, co-founder and CEO of German logistics firm Container xChange, says, “Lockdowns in China will further reduce capacity and cause a surge in already inflated shipping prices. The shockwaves will be felt across the U.S. and America, and almost everywhere in the world.”