World manufacturers and shippers are anxious about supply chain disruptions as China battles its Omicron outbreak.
Notably, factories stayed open throughout the pandemic in 2020 and 2021 under the country’s ‘COVID-zero’ strategy, but continuous detections of local infections since mid-October may have ‘knock-on consequences’ for ports and factories as cities lock down, Bloomberg reported.
Thomas O’Connor, a supply chain expert at Gartner Inc. in Sydney told the publication that China “remains the centre of global manufacturing” and significant COVID-19 related shutdowns would have “massive impact on the global economic environment”.
“A surge in omicron across China and the rest of Asia could trigger the mother of all supply chain stumbles this year,” Frederic Neumann, co-head of Asian economic research at HSBC Holdings Plc, told the publication.
For example, disruptions have already been felt due to the shutdown of clothing factories and gas deliveries near Ningbo seaport; the city-wide lockdowns in Xi’an and another province which have affected computer chip manufacturers; restrictions in the technology and manufacturing hub of Shenzhen city which has caused concerns about delays at nearby Yantian port – among the biggest container ports in Asia, which was partly shut for a month last year after an outbreak.
Cost is another concern as the global economy struggles due to a shortage of frontline workers, pilots, supermarket staff and truck drivers, amid Omicron and the supply crunch has sent prices soaring. Shipper container and raw materials costs remain much higher than pre-crisis levels and Oxford Economics analysts expect this to continue through the year.
To be sure, the impact in China is not as strong as seen in Australia, Japan or the United States, but the upcoming Winter Olympics and political events lined up later this year may make policymakers more cautious.