Shanghai’s unparalleled role in world trade means that blocking it could have serious repercussions for the rest of the world, especially if it lasts much longer.
No one ever saw the Japanese consul call the mayor of Shanghai with a request to somehow resolve the situation, which is is extremely tough and unseen before.
If all this had been 50 years ago, when Shanghai was exclusively Chinese port, then all this would have been exclusively a Chinese problem. But today, China has become part of the global logistics system, and behind each ship on the diagram lies one large or a hundred small firms, waiting for components from Shanghai.
In a few weeks the wave could spread widely and globally and it could affect not only jobs and consumer goods, but most likely the food market.
The busiest container city
Shanghai has the largest GDP of any Chinese city – 4.32 trillion yuan ($ 679 billion), the third largest stock exchange in the world based on the value of companies trading there, and the fifth largest number of billionaires in the world. Shanghai and the surrounding areas are one of the largest industrial hubs in China. They are based on imported components that enter the country through the port of the city, which is the way in which the final products are then exported.
Shanghai Port, the busiest container city, handled 47 million 20-foot equivalent units, four times the volume managed by the Port of Los Angeles. The Shanghai port remains operational, but industry data released in late March showed that the number of ships waiting to load or unload had skyrocketed.
State media also reported that many truck drivers found it difficult to move containers in and out of port on time due to travel restrictions.
AP Moller-Maersk A / S, one of the world’s largest cargo shipping companies, has suspended bookings for frozen meat and frozen seafood in Shanghai as a severe lockdown has stuck trucks on the road from port to town. In a warning to its customers, Ocean Network Express warns that containers are piling up in the port of Shanghai and the supply chain is blocked.
The port has been left without the electrical equipment needed to keep the frozen food at the necessary low temperatures. At the same time, the number of trucks is limited and the terminals are overcrowded. As a result, Maersk has suspended shipments of frozen products and various other perishable goods to Shanghai until recently.
Meanwhile, it enables its customers to direct shipments of frozen products elsewhere for the same charge to the greater Shanghai area, which includes Kunshan and many other eastern cities, a major production hub for industries ranging from automobiles to semiconductors. Volkswagen and General Motors have factories in Shanghai in partnership with state-owned automaker SAIC Motor.
Shanghai also hosts Tesla’s first gigafactory in Asia, which normally builds 2,000 electric cars a day, with the company losing 50,000 cars to date. TSMC, the world’s largest contract chip manufacturer, operates a major semiconductor plant in Songjiang Prefecture. Leading Chinese chipmakers SMIC and Hua Hong Semiconductor have factories in Pudong, east of the city.
Anti-pandemic measures have forced many factories to suspend operations in Shanghai and Kunshan, threatening to also disrupt key supply chains for cars and electronics.
Many factories continue to operate using what is known as a closed loop system – where workers stay in their workplace during the lockdown to reduce the risk of infection.
The nightmarish moments Shanghai citizens are experiencing and have infuriated them by exceeding their limits, are making the rounds of the world. Violence without reason and logic, uncontrollable methods of repression and quarantines, a dystopia that has turned people’s homes into “prisons” in the name of zero cases and the effective treatment of the new “wave” of coronavirus, due to an Omicron mutation.
However, the specific practice chosen by the Chinese government to fight the coronavirus outbreak in Shanghai may cause a global supply “domino”. Shanghai’s lockdown and China’s policies could have a huge global impact on the supply chain, soon collapsing the whole world.