Shanghai lockdown How much does this test undermine China?

The city of Shanghai is of great economic importance. Both for China's own domestic economy and trade with the world. The city of Shanghai has important trade links with the East Asian region. This may result in an impact on the regional supply chain. Especially South Korea, Taiwan and Vietnam.

China is fighting the COVID-19 epidemic. The worst outbreak since the disease began spreading in the city of "Wuhan" in Hubei province more than two years ago, since March this past. The epidemic has resurfaced in many provinces in China. Because the new strain “Omicron” is 2 times more difficult to stop than the Delta strain, this means that China must make more efforts than ever to preserve the health and lives of its people.

When China had to deal with the spread of the "Omicron" strain in many areas such as Guangdong Province, Shandong Province, Hebei Province and Jilin Province. China has implemented strict control and prevention measures such as quarantine, management, lockdown and screening. This leads to a better and satisfactory situation. By various practices This has repeatedly shown that the “core” of winning against the Omicron strain is the “Zero Covid” policy.

But the lockdown that the world is watching is probably inevitable: "Shanghai Lockdown" because Shanghai is a commercial center. It has China's densest population, approximately 25 million people, with a middle class with a bright future. and is the center of education for an elite group of people A large number of Chinese people who received education from abroad live in Shanghai. The population also has the highest personal income in the country, so implementing the lockdown measures in Shanghai, which is an economic engine that contributes about 4% of China's GDP, is extremely challenging.

The “Zero Covid Policy” has worked well in other areas. But it appears that Shanghai has developed "drug resistance" to this drug. Recently, more than 20,000 new cases of infection have been reported in Shanghai. This brings the total number of infected people to more than 220,000 as of March 1. Meanwhile, Shanghai city officials who had planned to ease the lockdown in low-risk areas had to back off and put the plan on hold for now. Amidst social and economic pressures that are increasing every day.

Lockdown in various areas in Shanghai and other cities of China has raised serious concerns about the impact of strict restrictions. inevitably Both business and people's livelihoods are affected. In terms of the business sector, the lockdown causing disruption to various supply chains in China has intensified After creating severe pressure on the transport and logistics sector across the country Ready to make the economy worse from the policy “Covid zero” because the number of infected people shows no signs of decreasing.

The lockdown has especially affected the trucking business, which plays an important role in transporting goods between cities. and the world's major ports, but now face restrictions on drivers and transportation to various locations. with reports of infected people Make now various activities Departure from Shanghai Go to another city in China instead. This may affect almost every aspect of global trade.

Shanghai, which is the production base for SAIC Motor and Tesla, has also been affected. by the main auto parts production lines Must temporarily suspend production which interruption in production It will affect China's car supply in the short term. This is because Shanghai produced about 2.83 million cars in 2564, accounting for 10.9 percent of China's total car production last year.

However, the temporary shutdown in Shanghai is not expected to cause serious disruption at the national level. But the lockdown in other cities It will affect the demand for cars within the country. According to the China Passenger Car Association, daily retail sales of passenger cars were 39,146 units from March 21 to 27, down 29 percent from the same period a year earlier. and expects to lose approximately 300,000 units in sales in April.

The port of Shanghai, which is the world's busiest container port, is operating normally. But faced with delays Due to a shortage of drivers and workers handling various goods The Shanghai port handles about 17 percent of China's total port operations and handles about 47 million TEU of cargo.

The city of Shanghai is of great economic importance. Both for China's own domestic economy and trade with the world. The city of Shanghai has important trade links with the East Asian region. This may result in an impact on the regional supply chain. Especially South Korea, Taiwan and Vietnam.

In terms of impact on people's well-being, various measures in Shanghai This has led to many complaints of difficulties in obtaining food and insufficient quantities. Due to being confined to stay inside the house The Shanghai city government is also trying to hasten to solve the problem of food and medicine shortages. Because the lockdown is still protracted. E-commerce platforms and logistics service providers in Shanghai have expanded their delivery channels and express channels. to ensure there is food and other daily necessities Sufficient for people who are undergoing lockdown.

Crisis in Shanghai It is seen as more than a public health challenge. But it is also a test of policy. "Covid zero" of the government as well. The number of infected people continues to increase. That may be because omicron strains spread easily and quickly. This makes the central government fear that it will not be able to control the situation in a short period of time. which is considered a threat to social and economic stability It may also affect the status of China's leadership that will change in the next few months.

For the reason that China must use the strategy “Covid zero” is caused by Western countries like the United States and England. Trying to declare that the Omicron strain is just the flu. and has finally succeeded in living with the virus. But China views these arguments as morally and scientifically incorrect. This is because international data shows that the Omicron strain actually causes a higher death rate than the Delta strain.

And even WHO Director-General Tedros Adhanom Ghebreyesus said many countries are facing the highest death rates since the start of the coronavirus outbreak. When looking at China's population figures, it will be found that 267 million people are elderly people aged 60 years and over, and more than 250 million are children, which when the numbers are added together, it is already more than 500 million people. Therefore, China does not Can easily let go and adhere to the policy We will continue to strive to be "Covid Zero", but we will also maintain our world leadership in economic development.

Maintaining China's leadership in economic development may be called a "difficult task" by Chinese Premier Li Keqiang. Has issued a warning 3 times about various risks. to economic growth Due to widespread lockdown Affecting production and spending China will study and adopt stronger economic policies when necessary to support the economy. Measures to support growth that should be used include tax and fee reductions. Selling and using special bonds and incentives to maintain jobs.

Economists at Nomura Holdings Inc. said the risk of recession is increasing in China. It is estimated that around 373 million people in 45 cities are under full lockdown. or semi-lockdown This represents approximately 40% of China's GDP.

Meanwhile, the Asian Development Bank or ADB predicts that the growth rate of China's Gross Domestic Product (GDP) in 2565 will be 5%, decreasing from China's target of this year. Grows at 5.5% and in 2566 will grow at around 4.8% as it continues to face new risks. continuously, such as the Russian invasion of Ukraine and the spread of the “omicron” strain.

World Bank section China's economic growth is estimated at 5% this year, down from the previous estimate of 5.4%, but the downgrade is due to greater weight on the war in Ukraine. The internal impact on China's economy is something that should be closely watched. This is because China's economy is of great importance to the world economy and international trade.

By Siriapa Khamchan, ASEAN Specialist AEC Connect, Bangkok Bank