It’s Groundhog Day in China. A rise in Covid cases has seen authorities close schools and businesses in Shanghai, lock down the 17 million people living in the southern power plant in Shenzhen as well as several towns in northeast Jilin.
Everyone in Shenzhen – one of the world’s most important export hubs – must undergo three Covid tests a week in what authorities describe as the worst outbreak since the start of 2020.
All manufacturing and commercial activities in the province have been ordered to close for the next seven days.
Lockdown restrictions: Health workers test residents of Shenzhen city in southern China in what authorities describe as the worst Covid outbreak since the start of 2020
The Yantian Free Trade Zone is also closed, although all ships already loaded at the port are allowed to leave – but no cargo will be allowed to pass through the port from next week.
It was the closure of Yantian Port – the world’s third largest – during the first outbreak that caused such disruption to global supply chains, with some analysts believing that trade to and through the port has slowed down. collapsed by three quarters.
As the past two years have shown, it only takes a few bottlenecks in shipping routes to create a devastating boost to trade around the world, one of the reasons for the skyrocketing inflation.
Apple supplier Foxconn and dozens of Taiwanese manufacturers of circuit boards and other high-tech products are among those who have halted production.
South of Shenzhen, Hong Kong is also in dire straits with one of the highest levels of Covid cases and deaths in the world.
As the new shutdowns were announced over the weekend, fears that China’s GDP could be hit hard by a loss in production sent the Hang Seng Tech Index down more than 7% and the Hang Seng Index wider by almost 5%.
Since July 2020, the valuations of companies on the index have lost more than $2 trillion.
China’s efforts to contain these surges, with its zero Covid policy of lockdowns and mass testing, are under strain.
But if its leaders continue on this path, the country’s growth target of 5.5% this year seems increasingly unlikely.
China’s slowdown will in turn have a knock-on effect on global growth, which has already been hit by the devastating impact of Russia’s war in Ukraine on energy and other commodity prices. , not to mention the horrific humanitarian crisis.
Russian roulette
The ruble is worth about a penny. The Moscow Stock Exchange has been closed for two weeks.
Russia’s credit rating is close to junk status, while every foreign company worth its salt has either pulled out of the country or stopped production.
Without a doubt, the economic noose thrown by the West around President Putin’s neck has the most crippling effect on the Russian economy, the equivalent of being sent to Siberia.
Western sanctions are severe, especially for the middle classes. The impact is so severe that the Institute of International Finance warns that Russian output will fall by around a third this year, a bigger collapse than in the financial crash of 2008.
Yet the sanctions noose had little or no impact on Putin’s desire to end the war. Indeed, the unprecedented actions of the West make it even more bellicose, determined to fight it out alone with the help – or so it had hoped – from China and India.
This is why sanctions so often appear as a crude tool to punish the behavior of an aggressor. But where sanctions really come into their own is when the warring parties end up sitting together at the negotiating table.
As seen in the jockey between the United States and Iran, this is when the promise of easing or even tightening sanctions can be used as bargaining chips. The West’s poker game with Putin has only just begun.
In the basket
When historians look back at the time of Covid, they will point to March 14 as the marker between Pre-C and Post-C.
Out of the cost-of-living basket come men’s suits and women’s padded bras, and come blazers and sports bras.
Suits and bras are just two of 700 everyday items the Office for National Statistics has thrown out of its basket used to measure the cost of living.
Instead of the suit – which has been a staple of the inflation cart since 1947 – comes the blazer jacket. How sad. Traditional costume will be much mourned and hopefully its absence will only be temporary.
Also new to the basket – along with chickpeas and lentils – are the ubiquitous antibacterial wipes that have clearly made a fortune in recent years. Hopefully they will soon be out of fashion too.
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