China’s zero-Covid policy is causing “massive losses” in the technology world

China’s zero-Covid policy is causing “massive losses” in the technology world
China’s stringent zero-Covid policy is currently causing huge financial losses for the tech industry, and a bigger supply chain problem than we saw in 2020 and 2021 is on the horizon, according to recently published reports.

China’s technology hub Shenzhen has only just emerged from a month-long lockdown, but China’s biggest city, Shanghai, home to the world’s largest container port, has remained shut since March 28.

An article in the Guardian newspaper has quoted a Huawei executive who warned that China’s stringent zero-Covid policy may trigger “massive losses” for the tech industry, putting the country’s economy as well as the global supply chain at greater risk.

“If Shanghai cannot resume production by May, all of the tech and industrial players who have supply chains in the area will come to a complete halt, especially the automotive industry,” Richard Yu Chengdong, head of Huawei’s consumer and auto division said in a WeChat post. “That will pose severe consequences and massive losses for the whole industry.”

“Many of the things that we use around the world that’re manufactured, have components from China and we’re about to see a logistics snarl that’ll dwarf anything in 2020 or 2021,” business consultant Richard Martin at IMA Asia, told CNBC’s'Street Signs Asia'.

Local officials are “closing down entire cities” due to fear of punishment from Beijing if there’s a Covid outbreak in their jurisdictions, he added.

One in five container ships is now stuck at ports worldwide, with 30% of the backlog coming from China. Researchers at the Chinese University of Hong Kong said China’s lockdowns were costing at least £35bn a month, or 3.1% of GDP in lost economic output. Alicia García-Herrero, Hong Kong-based chief economist for Asia Pacific at Natixis, said that 40% of China’s GDP was already “in some form of lockdown”.

photo: Xinhua/Shutterstock