In recent weeks, China has returned to strong restrictions due to the covid-19 pandemic. In the Asian country, about 400 million people, in 45 cities, are under total or partial lockdown as part of its ‘zero covid’ policy.
(Lea: Colombia, the economy that would grow the most in 2022 in Latam).
This implies the 40% of the annual Gross Domestic Product (GDP) of the second largest economy in the world, according to data from Nomura Holdings. That is, 7.2 billion dollars.
Analysts have activated the alarms and assure that investors are not evaluating the seriousness of the global economic consequences that can be generated by prolonged isolations.
“Global markets may continue to underestimate the impact as much attention remains on the Russia-Ukraine conflict and US Federal Reserve rate hikes..” Lu Ting, chief China economist at Nomura, and colleagues wrote in an article, according to CNN.
One of the alarms is due to the indefinite confinement in Shanghai, which has 25 million inhabitants and is, in turn, one of the largest manufacturing and export centers in China.
Along with this, the quarantines have generated food shortage, barriers to health care and the death of hundreds of pets. Also, the port of Shanghai, which handles more than 20% of freight traffic in China, is paralyzed.
At the moment, food supplies are trapped in shipping containers without the possibility of refrigeration, according to the cited medium.
(Besides: GDP in Latin America will rise, but so will inflation, according to the IMF).
In turn, the time export storage decreased. Cargo airlines also canceled all flights in and out of the city. More than 90% of the trucks that support import and export deliveries are out of service.
According to ‘CNN’, Shanghai produces the 6% of China’s exports. This implies that the closure of factories in the city is impacting supply chains.
For example, the supplier plants of Sony and Apple are stopped. Quanta, which is the largest manufacturer of laptops and MacBook, also has its production stopped. Tesla closed its Giga Shanghai factory, which produced about 2,000 electric cars a day.
In recent days, the Chinese Ministry of Industry and Information Technology assured that they are working on a plan to resume production of 666 manufacturers important in the city.
“The impact on China is significant and the knock-on effects on the global economy are quite significant.said Michael Hirson, Eurasia Group’s practice head for China and Northeast Asia. “I think we’re in for more volatility and economic and social disruption for at least the next six months.”
On the other hand, the World Trade Organization assured, through a report, that the decoupling of world economies could reduce the world’s GDP by 5% in the long term.
China’s response to the pandemic may cost at least $46 billion of lost economic output per month, or 3.1% of GDP, according to research from the Chinese University of Hong Kong.
(Lea: IMF lowered world economic growth by almost a percentage point).
For experts consulted by ‘CNN’, it is unlikely that economic growth by 2022 will be 5.5% in China. The World Bank believes that if restrictive policies continue, it could fall to 4%.
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