Chinese ‘zero-Covid’ policy challenges logistics

As the only major country in the world, China still maintains a zero-tolerance policy in dealing with the coronavirus. On the other hand, this ensures a low number of corona infections in the country, but it also leads to disruptions in the transport chain worldwide.

The rigorous corona approach has significantly disrupted shipping in Chinese ports. Many ships are choosing to set sail for Shanghai, the largest container port in the world, in an attempt to escape the corona delays that have already occurred in other Chinese ports. But Shanghai is also experiencing increasing congestion as a result. Overall, sailing schedules are now delayed by about a week. In European ports, which are also already congested, this will eventually work its way through.

In the nearby Shanghai port of Ningbo, several cargo services have been suspended due to corona contamination. Queues are also thriving in Shenzhen. One of the terminals in the port has imposed restrictions on accepting goods. Containers are now only allowed to arrive three days before the scheduled arrival of ships. Tianjin, near Beijing, is currently in complete lockdown. According to the company Westbound Logistics Services, the port is open, but is experiencing significant delays to cargo shipments.

The Chinese government is taking its tough measures because of a, from a European perspective, low number of infections. For example, the measures in the port of Ningbo were taken in response to a paltry 23 outbreaks in the city.

In Beijing, meanwhile, the first infection with the omikron variant has been detected. A press conference last Saturday confirmed that this was a case contracted in the city itself. Health official Pang Xinghuo indicated, according to Reuters news agency, that it cannot be ruled out that the infection occurred through imported goods.

With the Olympic Games in Beijing coming up, which start on February 4th, China is even more alert for corona infections than it already was. Through the major winter sports event, the country wants to make its presence felt on the world stage. To prevent corona from spreading during the Olympic Games, the organization has already decided that visitors are only welcome by invitation.

Last Monday, moreover, the Chinese travel season started: the first people left to celebrate Chinese New Year with their families. State news agency Xinhua expects the number of travelers this year to increase by 28.5% compared to last year. To prevent an increased number of infections during this period, several Chinese cities have already imposed restrictions on travelers. This weekend, for example, the Chinese cities of Luoyang and Jieyang announced that travelers must give three days’ notice of their arrival in order to enter the city.

Are there any benefits?
With these measures, the government is keeping the number of hospitalizations and the number of deaths from the virus under control. The strict policy also had its benefits economically. Where other countries have faced nationwide lockdowns in the past year and a half with major consequences for the economy, life in China was largely able to continue as usual after the historic Wuhan outbreak was contained. But the consequences of the disruption to international supply chains caused by the current measures are now becoming increasingly apparent.

Countries worldwide must secure their supply chains to avoid inflationary shocks, Chinese President Xi Jinping argued during an online version of the World Economic Forum (WEF). According to Xi, current problems and risks must be addressed to also promote the steady recovery of the global economy from the corona crisis, he said via video link.

Xi pointed to the supply chains that have now been disrupted by the crisis. In the process, commodity prices are steadily rising and energy supplies are tight. Xi also warned of global inflation risks and domino effects from higher interest rates. China’s central bank on Monday cut interest rates for the first time in nearly two years. The U.S. counterpart Federal Reserve actually announced interest rate hikes for the coming months. Xi called for coordination of global economic policies.

Sailing schedules were delayed by about a week. The fallback options to still corona-free Chinese port cities are beginning to dwindle as those fallback ports also begin to face congestion.