Covid lockdown in Shanghai reduced world trade by £22bn and has left UK exposed to price shocks
Posted On May 6, 2022
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The swingeing Covid lockdown which halted or delayed production in Shanghai for two months has put a dent of more than £20bn in world trade and will be particularly damaging for the British economy, experts have warned.
Figures looking at the impact of the near total shutdown of the city – China’s financial centre and one of its largest manufacturing hubs – show that sectors from clothing to cars were among those to suffer the largest hits to production as the authorities pursue a “zero Covid” strategy to snuff out outbreaks of the Omicron variant of the virus.
Officials in Shanghai, which also hosts the world’s biggest container port, insisted this week that the city was finally emerging from the lockdown which was first imposed in early March, affecting the entire population of 26 million people. Millions were confined to their homes, while others were asked to stay in factories to try to maintain production.
The effects of the crisis, which saw brands from Tesla to Apple slow or halt production either at directly owned factories or plants supplying components, are now beginning to be felt beyond China amid warnings of increasing prices and potential shortages as a backlog of shipments unwinds.
The Russell Group, a London-based trade and logistics consultancy, said the Shanghai lockdown had reduced world trade by $28bn (£22bn) between March and the beginning of May. Clothing was the hardest-hit sector, with a loss of exports worth £706m, followed by textiles worth £573m.
There was also a dramatic drop in car and vehicle exports of £612m. While Britain receives few direct car exports from China, it is heavily reliant on components made for UK and European producers in the Shanghai region.
Analysis of the economic effects of the lockdown found that Britain and America were particularly exposed, with increased costs such as shipping alongside production stoppages at risk of adding to inflation. A succession of China’s largest economic hubs have gone into full or partial lockdown in recent weeks, at one point last month affecting 375 million people in 45 cities – representing 45 per cent of GDP.
Suki Basi, managing director of Russell Group, said: “The delays in China have caused chaos across the global economy, hitting consumers and corporates alike.
“They will damage Western economies, particularly in the UK and USA, both of which are suffering high inflationary pressures. Any further supply chain shocks such as port delays will continue to push up prices and slow down the recovery of these economies.”
The report found that imports into China had also been affected. Shanghai acts as a major distrubution hub for meat being brought into China but restrictions on lorry drivers and the closure of roads meant that meat products worth some £238m were unable to be delivered.
The Chinese premier Xi Jinping has insisted that the “zero Covid” policy will stay in place, despite the requirement for mass testing and draconian lockdowns, often involving millions of people at a time, which damage the economy. Officials argue the policy is necessary because of factors including low vaccination rates for vulnerable groups – in Shanghai fewer than 40 per cent of the over-60s have been triple jabbed.
The authorities in Beijing this week tightened lockdown measures in the Chinese capital amid fears that the spread of the virus may lead to Shanghai-style restrictions. Some 60 metro stations and more than 150 bus routes were closed as officials sought to restrict cases in Beijing’s north-eastern suburbs.