China's COVID lockdown and supply chain

China's economy grew 4.8% in the first quarter of 2022, exceeding the growth rate at the end of last year. All this despite the country's zero COVID policy, which has kept millions of people confined to their homes and forced the closure of factories and ports.

These isolation measures are negatively influencing the internal food supply chain, endangering the very health of its inhabitants. The diet of most Chinese depends on fresh produce and meat, mostly purchased in wet markets, highly vulnerable to supply disruptions.

But it is not just an internal problem. China has locked down two of its three biggest cities: Shanghai, a global financial center, and Guangzhou, a huge manufacturing and distribution city. Both house two of the largest ports in the world.

With the closure of these two cities, it is estimated that at least 373 million people have been affected. But the lockdowns aren't just keeping people at home, they're also keeping Chinese goods stuck in warehouses and containers at idle docks.

When the economy restarts there will be a surge of containers from China flooding ports around the world. And many of the supply chain issues we became familiar with early in the pandemic will be seen again. The lockdowns in China have had a major impact on consumer goods like electronics and building supplies.

Once the lockdowns are over, many businesses will scramble to catch up with their import orders. That will translate into higher rates for shipping containers and more ships piling up at ports.

The longer China is out of commission, the greater the impact on global supply chains. In addition to slowing down Chinese production, the blockades can harm production and distribution in the rest of the countries dependent on trade with China.

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