Posted on 03/16/2022 1:10:03 AM PDT by blam
The global economy is in disarray as the war in Ukraine unleashed a commodity shock with increasing risks of stagflation. Adding to the turmoil is an outbreak of COVID-19 in China that may unleash another supply chain crisis.
News from China over the last day shows a new outbreak of the highly contagious omicron variant has infected more than 5,000 people, the most since the early days of the pandemic in early 2020. China’s zero-tolerance approach has shuttered factories and placed some 51 million people into some form of lockdown.
As of Tuesday, omicron variant infections have been reported in 21 provinces and municipalities nationwide, including the capital of Beijing. According to CNN, five cities are in lockdown, including Changchun, Jilin, Shenzhen, Dongguan, and Langfang.
Lockdowns have forced factories to idle production and risk snarling production from Apple iPhones to Amazon Echo & Alexa devices to Toyota SUVs to smart television to all sorts of other electronic devices. Disruptions to exports may induce shortages and drive up inflation, just as the Federal Reserve embarks on hiking interest rates to control inflation at four-decade highs.
A Bank of America Corp. survey of fund managers published on Tuesday showed confidence in global growth this year is the lowest since July 2008, and stagflation expectations have jumped to a whopping 62% of respondents.
“You take all these little paper cuts and you start to add them up and you could be looking at a potential significant slowing of the global economy,” said Jay Bryson, chief economist at Wells Fargo & Co.
China’s zero-tolerance policy has reminded us that supply chains are still subjected to massive disruptions. The lockdowns couldn’t come at a worse time, as spring tends to be one of the busiest shipping seasons of the year.
Shenzhen’s 17.5 million residents were placed under lockdown on Sunday. The city resides in Guangdong, a coastal province of southeast China known for its manufacturing hub and ports, which account for about 11% of China’s economy. The province accounted for 23% of China’s shipments in 2021.
Bloomberg Economics warns that a prolonged lockdown in Shenzhen could unleash supply chain disruptions worldwide.
“The forceful action to contain the worst COVID-19 outbreak since early March will deal a direct hit to the production and consumption sides of a province that accounts for 11% of GDP. Previous steps to contain virus flareups left manufacturing unscathed for the most part. This lockdown will hit output in key industries such as tech and machinery that feed into global supply chains,” Chang Shu, chief economist for Asia, said.
“Given that China is a major global manufacturing hub and one of the most important links in global supply chains, the country’s Covid policy can have notable spillovers to its trading partners’ activity and the global economy,” said Tuuli McCully, head of Asia-Pacific economics at Scotiabank.
According to Stephanie Loomis, vice president of International Procurement, the global impact of lockdowns could roil supply chains once more.
“If they don’t let any of these guys go to factories and produce goods, then nothing will move,” Loomis said. “It’ll just stop.”
We expect factory shutdowns will spread if the virus isn’t contained and could have massive implications on the global supply chain if lockdowns persist for the next several weeks. It’s still debatable whether the factory shutdowns will impact the US. If so, it usually has a 6-8 week lag.
We question if container ships will limit delivering Chinese goods to the US because of factory shutdowns as the demand to ship sinks. This may lead to depressed shipping rates on an intermediate basis because of the lack of demand. However, long term, shipping rates should rebound due to a backlog of products that would need to be shipped once factories reopen.
“The outbreaks impose downside risk to China’s economy at least in the next few months,” Zhiwei Zhang, chief economist at Pinpoint Asset Management, said.
“A China slowdown would exacerbate the risk of stagflation and global supply chain problems,” said Zhang.
And when you thought things couldn’t get any crazier for the global economy, they certainly did and risked further economic turmoil that may roil global supply chains, just like what happened in the early days of the pandemic.
Jeez… China still cares about “cases”? The virus is going to have its way, one way or another. Just protect your elderly and vulnerable people and “let ‘er rip” among the young and healthy.
We might have a long wait to replace batteries?
Sorry, ain't buyin' what they're sellin'.
Wouldn’t happen if Trump was still in the Oval Office.
Perhaps a warning shot to America that China too can impose crippling sanctions on America if we choose to play the sanctions game to deter or punish a Chinese invasion of Taiwan. Perhaps an attempt to strengthen the hand of those businesses, institutions and politicians who will lobby to advance China's ambitions and who can be counted on to oppose defensive economic and strategic measures.
The obvious course for America is to take the clear lesson of these supply chain breakdowns to disengage ourselves from China and move toward a mercantilist economy for economic and national security reasons. However, there is simply no chance that this will be done because virtually every important American institution, not excluding the American Congress, has been co-opted by the Chinese. Only some come-to-Jesus moment, some epiphany like a Pearl Harbor, 9/11 or a Great Depression might bestir the people to the level of action necessary.
I took off out of Shenzhen about 14 hours ago, our max takeoff weight is 987,500. We left with a gross weight of 985,500. I guess we must of left without one pallet of rubber dog sh1t. We’re not seeing any slowdown.
“Only some come-to-Jesus moment, some epiphany like a Pearl Harbor, 9/11 or a Great Depression might bestir the people to the level of action necessary.”
—
It will probably have to come to something like that.
For the generation brought up to think the most difficult thing in life is deciding which of the 5 dozen genders to be the awakening gonna be a rude one.
Couple this with Saudi Arabia planning on accepting Yuan for oil (death of the petrodollar) and “you ain’t seen nothing yet!”
The death of the dollar has accelerated 10 fold. And nary a word is being spoken about it anywhere. Oh boy, we are really in for it!
I, too, think there’s something other than Chinas explanation.
Sure, 5000 CASES sounds like a big number all on itself. Now when you compare 5000 to 1.5 BILLION, not so much.
Perspective people. Stop looking at a number all by itself. Put it into perspective.
Yes, I know this is common sense and I need to go back to re-education camp. Guess I’m too old to learn “new math” tricks.
yep, they are playing war games
I am sorry, but you can not convince me that China has a zero covid policy. They are not that stupid— no country is.
If by "more than 5,000" they mean 500,000+, then yeah...otherwise the numbers they continue to publish are not plausible. They lie about EVERYTHING.
BTTT!
Imho these reports have nothing to do with covid. My though is the world has entered an economic war. WWII began because of an economic war IIRC and imho
Remember this?
https://www.washingtonexaminer.com/obama-under-my-plan-electricity-rates-would-necessarily-skyrocket
And, as each item formerly in a store becomes scarce, remark on how it was stupid to have moved that manufacturing to the CCP in the first place.
Vital items need mandated manufacturing in your own country. Japan has that as policy.
The only people who object are the ones getting rich skimming $$$ going overseas.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.