COVID-19 restrictions in China to impact global supply chains

COVID-induced lockdowns in China have severely impaired operations at Shanghai ­– the world's largest port – and hindered activities in some major cities, impacting the supply chains of business giants like Apple to Tesla.

According to sources, the growth of Chinese export slowed to a sluggish pace since June 2020. However, imports possibly contracted for a second month, which signifies weak consumer spending as millions of people in Shanghai and other areas are locked in their homes.

Being a manufacturer of the world, the disruptions in China are pondering on the global economy and adding to the risk of inflation.

Most of the people in Shanghai have been under lockdown for around five weeks now, and the government is constantly working on getting the production back on track. Still, many foreign businesses are claiming that they cannot resume operations.

The primary indicators for trade are not looking promising. For instance, South Korean exports grew in April by double digits, yet the shipments to China dropped, implying that the slowdown in China is due to its Covid restrictions.

The disruptions to deliveries and production may severely impact shipments. The delivery and output components in April's official PMI data declined to the worst since the lockdowns nationwide in early 2020.

The inflation data of China will be a major cause of focus as shortages of food, and other goods have been triggered due to lockdowns and driving up costs. The consumer price growth is estimated to hasten, while factory gate inflation remained higher in April.

The top leaders of the Communist Party have vowed more impetus for sufficing an economic growth target of around 5.5% this year. The Credit data for this April is due and will be showcasing if the monetary and fiscal support has had the anticipated effect of stoking borrowing.

Source Credit - https://www.business-standard.com/article/international/china-s-covid-curbs-disrupt-global-supply-chains-add-to-inflation-risks-122050800068_1.html