What’s happening: The world’s second-largest economy is pushing its “zero-Covid” strategy as many other governments decide it’s time to learn to live with the virus.
Shenzhen, an important technology hub, has imposed a week-long quarantine after 66 positive cases were reported in the city on Saturday. All businesses, except for those deemed essential, have suspended operations or switched to work from home. Shanghai, China’s largest business center, has also imposed strict measures due to the spike in cases, closing schools and cinemas and restricting travel to the city.
Who’s been affected: Foxconn, one of Apple’s biggest suppliers, has suspended operations in Shenzhen, where it has two main campuses. On Monday, it was said that a date for the reopening of the plant would be “announced by the local government.”
The Taiwanese company said it moved production to other sites to “minimize the potential impact” of the disruption, but did not specify which sites would take on the additional work.
Uncertainty about Foxconn production is one sign that China’s response to the surge in coronavirus cases will reverberate around the world. On Sunday, the country reported 2,125 local cases in 58 cities.
Lockdowns in China could further increase container shipping costs, which remain extremely high, and disrupt global supply chains still struggling to cope with pandemic-related delays.
“If a case is found in the port of Yantian [in Shenzhen]then the port could be suspended for at least two weeks,” ING economists told clients on Monday. “This will affect the export and import of electronic parts and goods.”
This could further exacerbate inflation. Spending within China, an important engine of the country’s growth, could also be affected by a new wave of Covid restrictions.
“This is by far the worst virus situation in China since the Wuhan lockdown and threatens growth prospects as domestic consumption takes another hit,” Hao Zhou and Bernd Weidensteiner, Commerzbank economists, said Monday.
Remember: China’s growth target of about 5.5% this year was already the lowest in three decades. The country’s economy grew by 8.1% in 2021, but the growth rate has fallen sharply in the last months of the year.
The war brought the world to the brink of a food crisis
Svein Tore Holseter says the world is approaching a food crisis that could affect millions of people.
Record high natural gas prices have forced fertilizer company Yara International, which he manages, to reduce ammonia and urea production in Europe to 45% of capacity. He expects fewer of these two staple agricultural ingredients to impact global food supplies.
“The point is not whether we will have a food crisis. The point is how big this crisis is going to be,” Holceter told me.
Step back: More than two weeks after Russia invaded Ukraine, the prices of key agricultural products produced in the region have skyrocketed. The biggest problem is wheat, the staple food. Supplies from Russia and Ukraine, which together account for almost 30% of the world’s wheat trade, are now under threat. Last week, world wheat prices reached a historic high.
And that’s not all: another serious problem is access to fertilizers. It is imperative that farmers fulfill their production plans for growing crops, since exports from Russia have practically ceased. Production in Europe also fell due to higher prices for natural gas, which is an important component of nitrogen fertilizers such as urea.
The situation worries the world’s food experts. G7 agriculture ministers met on Friday to discuss the looming implications.
“Any further rise in food prices and volatility in international markets could jeopardize food security and nutrition globally, especially among the most vulnerable and food insecure populations,” the statement said after the meeting.
Russia and Ukraine serve as breadbaskets for import-dependent countries in the Middle East and North Africa. The United States and Europe will also feel the pain as the price spike in important agricultural commodities will affect food-producing businesses in all markets.
Uber’s fuel surcharge may just be the start
Everyone feels pain at the gas station – even Uber (UBER). The sharing service has announced that it is introducing a fuel surcharge to help its drivers offset the burden of higher gas prices for at least the next two months, my CNN Business colleague Ramishah Marouf tells.
Starting Wednesday, users will pay an additional $0.45 or $0.55 per ride and an additional $0.35 or $0.45 for Uber Eats, depending on location. Uber said that all the money from the surcharge will go to drivers.
“We know prices are rising in the economy, so we’ve done everything we can to help drivers and couriers without putting too much extra burden on consumers,” said Lisa Winship, head of drivers for the US and Canada.
Uber said switching to electric vehicles would be the best way to avoid a surge in gas prices in the long term. It gives up to $4,000 annually to drivers who use electric vehicles and is partnering with Hertz to provide up to 50,000 Tesla electric vehicles to drivers by 2023.
In the meantime, however, rising fuel prices are likely to bite. And Uber won’t be the only one who decides it needs to pass on some of the cost to its customers.
On the radar: Passengers may also start to see surcharges on flights as fuel makes up 20% to 30% of an airline’s operating costs.
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The Producer Price Index, a key indicator of US inflation, is due on Tuesday.