Shanghai announced that its months-long lockdown will end on June 1.
Wang Gang/VCG via Getty Images. - Business Insider
In compliance with China’s zero-COVID policy, Shanghai implemented a stringent lockdown on March 28 to curb the growth of Omicron cases. However, the lockdown, which spanned seven weeks, quickly spiraled into a dystopian-like nightmare, as travel became extremely limited, thousands of people were sent to quarantine centers following a positive test or exposure, teams of people in white suits entered homes to spray disinfectant, and complaints regarding shortages of food and other resources arose.
The Communist Party restricted discussion regarding its approach, stating it would not accept criticism. As shops and factories were closed, the economy suffered heavily. Shanghai factories will need to pick up production again with the lockdown lift, which may be difficult: for instance, Tesla shut its Shanghai factory for three weeks, but despite reopening, challenges obtaining parts have slowed its production. Shanghai’s port is also struggling with a tremendous backlog. China’s statistics bureau reported that retail sales by more than 11% year-over-year in April. Many analysts foresee a GDP slump: according to CNBC, “Goldman Sachs analysts reduced their forecast for China's GDP from 4.5% to 4%, adding that they do not expect to see an increase before the second quarter of 2023.” Furthermore, there are fears that China’s extreme lockdown patterns could decrease investments in China.
While Shanghai’s lockdown will end soon, the long-term ramifications of the economic shutdown it caused will continue to affect people and businesses. As consumers and businesses learn to adapt to these changes, shifts may result.
Questions:
How have/will global manufacturers adapt their production in consideration of the Shanghai lockdown?
How do you predict consumers’ purchasing habits may change following the Shanghai lockdown?
Summarize the Shanghai lockdown’s impact on the economy using terms we studied in macroeconomics, including the impact on its GDP, employment, investments, etc.
Sources:
https://www.bbc.com/news/59882774
https://www.bbc.com/news/59882774
1 comment:
The supply chain will face much impact from the Shanghai lockdown due to low-level port activity, which will lead global manufacturers to possibly find other places to build parts and look towards other countries for materials. I think consumers’ purchasing habits following the Shanghai lockdown will shift to finding more products that are more domestic due to the backlog of shipments. Shanghai’s lockdown will lead to the shutdown of factories increasing unemployment, and China’s GDP is predicted to fall due to low production throughout the year which is also a result of factories closing down. In addition, the lockdown has not only created a huge backlog in terms of foreign shipments but also affected foreign investments. According to the US Chamber of Commerce in China, a recent survey showed that 52% of foreign businesses who responded stated that they have decreased investments in China due to the COVID-19 lockdown.
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