Chinese Lockdowns Expand, Raising More Questions About Beijing’s Motives For Shutting Down
Growing lockdowns in China have me believing more and more that the country isn’t exactly crestfallen about the supply chain crisis it is creating for the rest of the world.
Days ago, I wrote about suspicions I had about China’s latest round of Covid lockdowns. In that piece, I drew the conclusion that the country’s “Covid Zero” plan is irrational and egregious, and that China’s lockdowns may have to do with something more than Covid.
The three scenarios I floated for the potential reason China was “overshooting the mark” with its draconian lockdowns were:
The CCP may be trying to usurp more power
There may be something about Covid that China knows that the rest of the world still doesn’t know
China is looking for an excuse to slow its production to put pressure on the Western world at a time when it is trying to separate further, economically, from the West
Today, I’m leaning toward reason number three. That’s because as of this past weekend, China is now expanding its lockdowns further across the country. Oh, and did I mentioned that China’s top oil and gas producer has also all of a sudden decided it is going to cease doing business with Britain, Canada and the United States?
First, let’s identify some of the interesting ways that lockdowns are spreading across the country. One lockdown happens to hit California-based Apple, Inc. in the gut. The “Zhengzhou Airport Economic Zone, a central Chinese manufacturing area that includes Apple Inc supplier Foxconn, announced a 14-day lockdown on Friday to be adjusted according to the epidemic situation,” according to Reuters.
Additionally, the country has tightened controls in northwestern China, where in the city of Xian, residents were told “to avoid unnecessary trips outside their residential compounds and encouraged companies to have employees work from home or live at their workplace”.
Suzhou also told its residents that “all employees capable of working from home must do so, and residential compounds and company campuses should avoid unnecessary entry of people and vehicles,” the report noted.
All told, we are witnessing a significant increase in the intensity of lockdowns across China – the very same actions that led us to supply chain hell in 2020 to begin with.
It’s important to remember that the rest of the world hasn’t even recovered from the first round of lockdowns nearly 2 years ago. Automakers globally are still mired in a semiconductor shortage, store shelves in the U.S. remain sparsely stocked, commodities and goods that would be normally available have multiple-month backlogs and prices have gone through the roof.
Every indication out of China seems to point to the fact that we are about to relive 2020’s disruption all over again, despite objections from China’s own residents.
Domestic support for a zero-COVID policy has worn thin in recent weeks as virus-related restrictions have triggered food shortages, family separations, lost wages and economic pain.
Analysts say broad supply chain disruptions are likely to lead to delays in shipments from companies including Apple, and to weigh on the country’s economic growth rate this year.
Japan is already feeling restless about the lockdowns, Reuters reported:
…ongoing restrictions prompted Japan’s consul general in Shanghai to call for the local government to address concerns of Japanese businesses, in a letter posted on the consulate’s website on Saturday.
Additionally, according to another Reuters article out this weekend, China’s main offshore oil and gas producer has all of a sudden decided to end business operations in Britain, Canada and the U.S. because of “concerns in Beijing the assets could become subject to Western sanctions”.
This only exacerbates tensions between the U.S. and China, which are already the highest they have been in decades. Further, the U.S. has warned China about trying to help Russia skirt Western sanctions, the report says:
The United States said last week China could face consequences if it helped Russia to evade Western sanctions that have included financial measures that restrict Russia’s access to foreign currency and make it complicated to process international payments
2020 was one thing – we (likely wrongfully) gave China the benefit of the doubt on its lockdowns because of the air of confusion Covid created globally – but thanks to the war in Ukraine and what we now know about Covid, 2022 should be handled with far more skepticism.
But this time around, we’d be better served to question China’s motive in a way most of us didn’t in 2020. While in 2020, it was easy to attribute China’s shut down to the virus, this time around we shouldn’t be so quick to be satisfied with that answer.
For one, we know far more about the virus than we did 2 years ago – notably that it isn’t a guaranteed death sentence.
On top of that, we have the unique economic situation developing globally, wherein Russia – in the midst of war and being alienated from the West – is seeking an economic partner and has likely found one in Beijing.
Given the global backdrop and what we now know about the virus, it’s tough to draw a road of logic that doesn’t, at some point, lead to asking questions about whether or not China could be engaging in these lockdowns on purpose.
Beijing’s forthcoming actions will continue to tell the tale.