Pandemic in Shanghai: delivery bottlenecks feared after lockdown

The German economy fears delivery bottlenecks due to the lockdown in Shanghai. 70 percent of the German companies operating in China are based in Shanghai and the surrounding area.

For weeks now, companies in the financial and port metropolis of Shanghai have been affected by short-term lockdowns of office buildings, factories and individual blocks of flats. Logistics are restricted, truck drivers and employees in factories cannot come to work, production is sometimes at a standstill or is only possible to a limited extent.

“The lockdown will now make this situation even worse, so we have to expect a further reduction or shutdown of production in many companies,” says Maximilian Butek from the Chamber of Commerce Abroad in Shanghai. “Of course, this will also lead to delivery bottlenecks in Germany.”

Hotspot after a sharp increase in corona cases

Observers had not expected that Shanghai, the largest metropolis in China, would impose such a city-wide lockdown. The city had wanted to avoid a strict lockdown like in other Chinese cities because of the risks to the economy. But in the past few days, corona infections in the city have increased so much that Shanghai has become one of the country’s hotspots. With the decision to split the lockdown into two phases – first half of the city, then the other half – the city of Shanghai wants to continue to protect the economy as much as possible.

Wang Dan, chief economist at Hang-Seng Bank in Shanghai, believes that the lockdown that has now come into force is not necessarily more harmful to the economy than the small, recurring lockdowns of apartment blocks, factories and office buildings in recent weeks. “Most people in Shanghai have already been in short lockdowns two or three times, which usually lasted two or three days. They were very destructive because it wasn’t announced.” This came as an unexpected shock to many people on low incomes and the self-employed. “But this time at least it’s clear what’s coming.”

Is China’s growth target in jeopardy?

Wang Dan estimates that the effects on the overall Chinese economy will be more regionally limited due to the shortness of the lockdown. However, if a longer lockdown is imposed in Shanghai or the lockdowns keep coming, several economists assume that China’s goal of economic growth of 5.5 percent this year will be difficult to achieve.

“The zero-Covid strategy has worked in China’s favor over the past two years because it has guaranteed supply chain stability,” says the expert. “That’s why China has been so good at export and manufacturing. But this year it’s become a liability.” The Chinese state and party leadership continues to adhere to the zero-Covid strategy. The more propagating Omicron variant has been testing this strategy since the beginning of the year.

The financial markets reacted nervously to the lockdown in the international economic metropolis in Shanghai. Investors are withdrawing from the crude oil market for fear of lower demand from China.