The latest news about COVID in China and its imposition of severe lockdown in Shanghai, is being a major setback not only for the country's economy, but also for large companies that are being forced to stop production due to lack of workers and/or raw materials.
Despite the 4.8% growth at the beginning of the year, the Chinese economy has now fallen by 5% since March. The macroeconomic data for March are stagnating and a sharp downturn is anticipated, with declines in production and consumption in the coming months.
The prolonged lockdown of Shanghai may lead to a fall in China's GDP of up to 3%, according to several universities.
Furthermore, the shutdown is generating delays in seaports due to the collapse of many ships that are unable to offload or depart. Because most transporters are confined, raw materials cannot be transferred. Because of this halt, there will be a significant global impact.
Shanghai is also the world's largest seaport and one of the world's semiconductor, electronics, and automobile manufacturing centers.
Many companies are being or will be affected by this:
VW
GM
FORD
TESLA
APPLE
TSMC (World's largest semiconductor chip manufacturer)
SMIC
These are some of them.
However, Beijing pledged to support the economy to achieve its ambitious growth which may bring relief to stabilize domestic growth and ensure the activity of China's supply chain and thus minimize global supply chain disruption.
However, we will have to see in the coming weeks how China will deal with this issue, as we know that unfortunately COVID cannot be stopped and it is impossible to keep the entire population of China is in a long-term lockdown, so it will have to reconsider some of its harsh limitations if it does not want to be severely impacted, along with the rest of the global chain.
As a result, looking at market behavior, this could be one of the explanations for the current dips and slumps.
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