Covid Surge in China Sparks Supply Fears

Fears are growing that lockdowns to tackle a sharp rise coronavirus cases in China will disrupt shipping from one of the world’s biggest ports and cause shortages to ripple through global supply chains.

Chinese markets tumbled today as authorities imposed a one-week lockdown imposed a one-week lockdown on Shenzhen, a city of 17.5 million people in the southeast of the country, to tackle rising infection rates.

Shenzhen, dubbed the Silicon Valley of China because of its booming technology industry, has the world’s fourth-largest port, Yantian International Container Terminals. Yantian is thought to handle about 90 per cent of China’s vast electronics exports, making it a key cog in global trade.

While Yantian said that the port was operating normally, the Shenzhen lockdown is widely expected to hit trade from the facility. Signs are already emerging that the lockdown is starting to cause disruption in the city, including to two big suppliers to Apple.

Foxconn, the Taiwanese company, said that it had suspended its operations in the city, including an iPhone factory, until further notice “in co-operation with the local government’s anti-coronavirus work”.

The company said that it would reallocate work among backup plants to minimise disruption to production. Shenzhen is not understood to be one of Foxconn’s main iPhone manufacturing sites.

Unimicron Tech, a printed circuit board maker, also said that it would “co-operate with” the local government and halt operations in Shenzhen until further notice.

Coronavirus cases are rising across China and authorities are responding with measures in line with Beijing’s strict zero-Covid policy.

Investors fear that the rapid introduction of restrictions will inflict damage on the world’s second-largest economy if swathes of its vast industrial and manufacturing sector are frozen.

The Hang Seng index in Hong Kong dropped 5 per cent today and the Shenzhen Composite index in mainland China lost 2.6 per cent. The Hang Seng China Enterprises index of Chinese mainland companies fell by 7.1 per cent, its biggest one-day decline since the global financial crisis in 2008.

A travel ban was imposed today on Jilin province, which is in the northeast of China and has more than 24 million residents.

The carmaker Toyota, which has a joint venture with Chinese state-owned FAW Group, said that production in the city of Changchun, the province’s capital, had been halted.

Jilin is the first entire Chinese province to be locked down since Hubei was put into quarantine in early 2020 at the start of the pandemic.

Schools have been shut in the financial centre of Shanghai and bus and subway services suspended in Dongguan, a manufacturing hub nicknamed “the world’s factory”.

Meanwhile, the territory of Hong Kong — the pre-eminent Asian financial hub — has been grappling with a fifth wave of the virus that began in late December, with just over 26,900 new cases reported in the former British colony on Monday and 249 deaths.

The National Health Commission in Beijing said today that 1,337 new domestically transmitted infections with confirmed symptoms were reported in the Chinese mainland yesterday.

“The lockdown announced in Shenzhen will send shockwaves through global supply chains,” Simon Geale, an executive vice president at Proxima, the procurement consultancy, said. He estimated that a one-week delay to shipping would mean “roughly half a million containers are not starting their journey”.

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Covid surge in China sparks supply fears