THAT 26 million of Shanghai residents are closed at home, as are Italians in March 2020. Over the past ten days, cases of coronavirus have grown exponentially in the megalopolis, reaching an alltime high of over 25,000 in the country on Sunday, April 10 . Figures of this type do not seem particularly meaningful compared to those of European countries, but take on a very different value considering that China continues to follow a policy defined as “Covid Zero: all cases must be followed up, all positive ones must be isolated in special facilities to nip the spread of the disease in the bud. This system has worked reasonably well so far, the Guardian reports, but things have deteriorated significantly since the People’s Republic began looking into Omicron. Due to the variant’s higher transmissibility, the virus also filters through the tight mesh of Chinese persecution, with the result that Shanghai, home of the world’s largest port, is completely paralyzed. And the virus shows no signs of stopping.
Problems with manufacturing and services in China
The lockdown has sparked protests, food shortages and controversy over the methods health authorities use to force people home (we’ve talked about that here and here). In addition, more people at home mean fewer people working, and this is a problem for the Chinese economy. The services and manufacturing indices developed by national information giant Caixin are among the most reliable indicators of the health of the country’s economy and have collapsed since February, pointing to difficulties in both the services and manufacturing sectors. In another sign of the turmoil in the Chinese economy, most Asian markets have closed with a net loss over the past few days. In short, factories produce less. The port is currently functioning thanks to a bubble created among the workers who work there, who are unable to communicate with the outside world, but road transport is suffering and fewer and fewer goods have to be shipped, with consequences for the Asian economies chain, which repercussions on global markets could have industry experts told the Guardian already severely tested by the war between Russia and Ukraine.
The impact on inflation
Inflation has risen sharply in many European countries recently, moving from negative values in December 2020 to 7.5% in the Eurozone in March 2022, also due to the price increase resulting from supply chain problems Global sourcing. But what seems the most obvious solution diversifying sources of manufactured goods supplies beyond China may not be practical, warned Agustín Carstens, head of the Bank for International Settlements (the financial institution that works with 61 global central banks, including major European central banks and the US central bank), as there is a risk that the costs of the transition will be reflected in the finished products and trigger a cycle of further price increases that is difficult to break.
