China’s COVID-19 policies affect international markets

Beijing’s Zero COVID-19 policy has been strained as the Omicron variant has swept the globe. The implications for trade and the supply chain are tremendous. Ningbo, the world’s third-largest port suspended operations after cases were detected in the province, leading to further increases in the backlog of containers trying to leave China. 

Disruptions like these will only become more common if China decides to keep its zero-case policy. While the Winter Olympics were in full swing, Beijing was eager to maintain these rules. The Wall Street Journal reported that a week’s trade delay at Ningbo would affect approximately $4 billion in value. 

The supply chain seemed to be recovering to meet world demand, but Omicron has changed that. The implications both within China and the larger world are dramatic. 

Inflation is a major concern among Western leaders, so fixing supply chain disruptions has become a major political objective. Domestically, the Lunar New Year demand for goods has only exacerbated the strain on shipping, which has seen air freight rates climb 50 percent since mid-January. 

It will be interesting to see how Beijing changes its COVID-19 policy as the rest of the world moves into living with the COVID-19 virus. China may be forced to ease its rules if port disruptions make the cost of trade too high for some firms.