“Global markets may still underestimate the impact, because much attention remains focused on the Russian-Ukraine conflict and US Federal Reserve rate hikes,” Nomura’s chief China economist and colleagues wrote in a note last week.
Most alarming is the indefinite lockdown in Shanghai, a city of 25 million and one of China’s premiere manufacturing and export hubs.
The quarantines there have led to food shortages, inability to access medical care, and even reported pet killings. They’ve also left the largest port in the world understaffed.
The Port of Shanghai, which handled over 20% of Chinese freight traffic in 2021, is essentially at a standstill. Food supplies stuck in shipping containers without access to refrigeration are rotting.
Incoming cargo is now stuck at Shanghai marine terminals for an average of eight days before it’s transported elsewhere, a 75% increase since the recent round of lockdowns began. Export storage time has fallen, but that’s likely because there are no new containers being sent to the docks from warehouses, according to a relibale source.
Cargo airlines have canceled all flights in and out of the city, and more than 90% of trucks supporting import and export deliveries are currently out of action.
Shanghai produces 6% of China’s exports, according to the government’s statistical yearbook for 2021, and factory closures in and around the city are further rattling supply chains.
Sony and Apple supplier plants in and around Shanghai are idle. Quanta, the world’s biggest contract notebook manufacturer and a MacBook maker, has stopped production entirely. The plant accounts for about 20% of Quanta’s notebook production capacity, and the company previously estimated it would ship 72 million units this year. Tesla has shuttered its Shanghai Giga factory, which produced about 2,000 electric cars a day.
On Friday, China’s Ministry of Industry and Information Technology said in a statement that it sent a taskforce to Shanghai to work on a plan to resume production at 666 key manufacturers in the locked down city. Tesla executives hope they’ll be allowed to reopen their doors by Monday, ending the factory’s longest pause since its 2019 opening. The automaker has lost over 50,000 units of production thus far, according to materials reviewed by Reuters.