Omicron has brought fresh challenges to China's strategy to quickly extinguish local outbreaks. Photo / Getty Images
Omicron has brought fresh challenges to China's strategy to quickly extinguish local outbreaks. Photo / Getty Images
As Omicron puts China's 'Covid zero' policy to the test, and Beijing's draconian lockdowns struggle to contain the variant, it is having serious knock-on effects for the global supply chain network as key trading hubs go offline, one by one.
And it has left the world facing the "mother of all supply chain stumbles", warns HSBC Asian economics researcher Frederic Neumann.
Despite the Chinese Communist Party's containment policy, outbreaks of the Omicron variant of Covid are appearing everywhere – from Salian in the north to Shenzen in the south. The result is what can best be described as an enormous game of "whack-a-mole".
Entire cities are being locked down. And the wheels of industry are being slowed by mass testing and isolation.
China is the world's latest producer of electronic equipment. And that means everything from laptops to life support machines. Then there is its cornering of the global medicines market.
Computer chip manufacturers, clothing factories and major distribution networks are closing down.
"If China sticks to a no-Covid policy, Omicron can really disturb the supply chains," warned US Federal Reserve chairman Jerome Powell.
Two years of proudly proclaimed success at containing Covid-19 may soon be over for the Asian superpower. Photo / Getty Images
Covid versus the Chinese Communist Party
Two years of proudly proclaimed success at containing Covid-19 may soon be over for the Asian superpower.
The CCP sees this as an assault on its authority. It perceives the pandemic as an existential threat to its legitimacy.
So it's cracking down. Hard.
"It could quickly overwhelm the country's healthcare system," says California-based China Digital Times editor Xiao Qiang. "It could also – because of the fear and panic associated with the disease – it could have social, political stability implications.
China's important Lunar New Year holiday is at the end of this month. Beijing doesn't want that disrupted. Nor does it want it to become a "superspreader" event.
So it has doubled down on 'Covid zero'.
The pandemic has spread to the major shipping hubs of Tianjin, Shenzen and Dalian.
The port city of 14 million is undergoing mass testing. Trucking, in particular, has been targeted. And that means deliveries to manufacturers aren't being made "just in time".
Then there's the port of Tianjin. It's the world's ninth biggest port and sits just 100km from the capital of Beijing – due to host the Winter Olympics on February 4. No effort is being spared in halting the Omicron outbreak – including shutting down large plants like Volkswagen.
Another Covid foothold in the tech hub of Shenzen is sending shivers through global supply networks. Last year's temporary closure of its massive shipping facility at Yantian caused severe Christmas delivery delays. Local Communist Party officials have been quick to blame "contaminated goods" from overseas for the latest flare-up.
Other ports are simply becoming overloaded as suppliers attempt to reroute stock. Backlogs at Shanghai are reportedly producing delays of up to a week – with queues of ships stretching out to sea.
"This serious port congestion is resulting in delayed voyages, continuous accumulation of delays and multiple suspensions," reports international shipping agency Fibs Logistics. "Forwarders and cargo owners will inevitably face further difficulties in the coming months."
A Chinese epidemic control worker wears a protective suit and mask while performing a nucleic acid test for COVID-19 on a man who has had contact a Covid patient. Photo / Getty Images
Demand and supply
China's lockdowns "are most likely to have the effect isolated in China, because the production facilities in those geographies are principally suppliers to the Chinese market," US National Economics Council director Brian Deese reassured the White House on Thursday.
The city of Zhengzhou – where Apple's iPhones are assembled – is mass-testing its entire population of 13 million residents. All non-essential businesses have been closed.
The nearby city of Anyang has confined its population of five million to their homes.
"As long as you have one grain of rice, stay home," one city official said amid protests over food shortages.
Videos from the city show students – from preschool to high school age – wearing full hazmat gear being loaded onto buses. Some 4000 are being held in isolation at quarantine centres.
Why I'm still betting on China to suppress Omicron...
This video purports to show children, in full PPE, being bussed to a quarantine centre because of a small outbreak in Anyang, Henan. The text, from a parent, says 'mum and dad will wait for you to come home!' https://t.co/0cnN7O8fP5
About 20 million Chinese are now under strict lockdown. The 13 million population of the northwestern city of Xi'an are entering their fourth week of home confinement.
It's a major international computer chip manufacturing hub.
Other provinces are imposing restrictions to avoid the outbreak.
Cities like Beijing have urged residents not to undertake their traditional Lunar New Year pilgrimages to reunite with extended family. Train, bus and air networks are being restricted or halted.
If the past fortnight is any indication, matters are likely to worsen.
"When facing Omicron directly, we found its speed of transmission really is very fast," Tianjin disease control deputy director Zhang Ying told state broadcaster CCTV. "Therefore, whether it is in terms of virus origin tracing, epidemiological investigations or restrictions and controls, the Omicron variant has brought unprecedentedly massive challenges."
Beijing is determined to go ahead with Lunar New Year celebrations. Photo / Getty Images
Lock it down or let it rip?
After almost two years of Covid zero success, Australia is on the edge of crisis.
With border controls lifted and commercial restrictions eased, our Omicron outbreak is among the worst in the world.
It has sent sick leave soaring. Unrestrained contagion is sending tens of thousands into the uncertainty of self-isolation. That has inevitably producing economic snarls – with serving staff, supermarket stackers, truck drivers, meatworks personnel and medicos all having to stay at home.
Prices are rising. Supplies are diminishing.
The only apparent strategy is the hope that the Omicron outbreak will be over soon.
In the United States, more than five million workers stayed home sick last week.
But China's Covid zero policy is having a similar outcome.
People who test positive are being sent to quarantine facilities. Police patrol the streets of suburbs where residents aren't allowed outdoors – even for groceries or emergency medical care.
To the Chinese Communist Party, abandoning 'Covid zero' would be akin to admitting defeat.
And that, international analysts say, make it highly unlikely.
Besides, it's worked before.
Short bursts of intense pain and disruption were touted as justifiable as China's factories were able to quickly reopen in 2020 and 2021. Meanwhile, businesses across Asia, Europe and the United States went into long-term slowdown.
"I think if they didn't do preliminary lockdowns, then you'd have millions of cases in China, and then you'd have a worse supply chain crisis," Plenum economics analyst Chen Long told Fortune.
But the Omicron variant is just too contagious. As it breaks through China's lockdown barriers, it threatens to disrupt the delicate balance the country had previously managed to maintain through the pandemic.
As outbreaks become more frequent, so will lockdowns.
And while that makes things hard for daily life in China, it also makes things increasingly tough for the rest of the world.
