Huawei warns China’s zero-COVID policy will threaten global supply chains-Information Technology

Recently, a Huawei executive warned of ‘major losses’ in the tech industry due to China’s zero-COVID policy.

“If Shanghai cannot resume manufacturing operations in May, all technology and industrial companies with supply chains in the region will shut down completely, especially the auto industry.” Richard Yu, head of Huawei’s automotive and consumer division, said in a WeChat post.

Richard Yu, head of consumer and automotive division of Huawei. Photo: Huawei

Closing cities and borders will put China’s economy and global supply chains at great risk.

To completely eliminate the epidemic, China has applied a zero-COVID policy and locked down many cities across the country, especially the financial center of Shanghai, which has the world’s largest container port.

According to The Gurdian, in a news broadcast on state television on Wednesday, President Xi Jinping urged officials not to relax the work of controlling the pandemic.

“Perseverance will bring victory, it is necessary to overcome negative thoughts, fatigue, laziness and indulgence,” Xi added.

However, economists warn that the shutdown will cost Shanghai (China’s most populous city) and an important financial center 6% of GDP, or 2% of GDP for the whole country. …

According to Iris Pang, senior economist at ING Group, the shutdown will reduce China’s economic growth target by nearly 1% to 4.6%. Premier Li Keqiang last month set China’s annual growth target at “about 5.5%”.

Last month, researchers at China University said China’s shutdowns are likely to cost at least £35 billion a month, or 3.1% of GDP, due to lost economic output. . The authors also estimate that imposing comprehensive lockdown measures on a major city such as Beijing or Shanghai would reduce the nation’s real GDP by 4%.

Alicia García-Herrero, economist at Natixis (in charge of the Asia-Pacific region), said the situation is particularly alarming for manufacturers in Shanghai, Jiangsu and Jilin, who are main hub for automotive, electronics and semiconductors.

“For every month of shutdown, China’s annual GDP will decrease by 0.5 percent,” she warned. Beijing claims it wants economic growth, but ultimately it’s their priority, either killing the virus or allowing the economy to thrive. You can’t have both.”

The closure of cities by China also has a great impact on the global economy, adding to inflationary pressure due to the supply of goods being cut off. Reports say nearly 500 bulk carriers have been moored off Shanghai, as the port struggles to handle.

Yangshan deep-water port in Shanghai, a city that is an important financial and commercial center. Photo: Aly Song/Reuters

Since the cities of Shanghai and Jilin began to close, shares of auto and semiconductor manufacturers have been hit hard. “This will have an impact on consumers elsewhere,” said García-Herrero.

This week, Pegatron, the company that makes iPhones for Apple had to suspend operations of 2 subsidiaries in Shanghai and Kunshan. Similarly, Foxconn (another major supplier) also had to suspend operations at its Shenzhen technology center in Guangdong province in early March.

Stephen Carr, commercial director at Peel Ports, one of the UK’s largest port operators, said: “Global supply chains are so finely tuned that any disruption at one hub is so fine. A big trade like Shanghai will have a big impact on the whole world.”

Port shortages and disruptions leave businesses facing a worrying prospect: out of stock.