China’s zero-Covid restrictions will contribute to the global supply chain recovery as any minor disruption in the country could lead to “impressive results” worldwide, according to HSBC’s head of transportation.
The epidemic has revealed “just how limited the supply chain is. And there is little error, ”said Parash Jain, head of international transport and port research at HSBC.
“China’s great importance when it comes to world trade means that any small disruption in China, will have a negative impact on the entire supply chain,” Jain told CNBC’s “Squawk Box Asia” on Monday.
China, the world’s second-largest economy, has doubled its zero-Covid strategy due to the recent epidemic of disease across the country.
Covid cases have been reported in key port cities of Shenzhen, Tianjin and Ningbo, as well as Xi’an industrial area, which has led to the closure of roads and curbs in large port areas.
China has reported 58 new Covid-19 cases since Monday, according to national health officials. The National Health Commission in its daily analysis said 40 new cases were local infections, with 18 more coming from overseas.
Despite having the lowest number of cases compared to many other places in Asia, Beijing has stuck to its zero-Covid path.
China has a 7-day accumulation rate of 0.04 cases daily per million since Jan. 30 compared to 568.8 in Japan, 290.41 in South Korea and 180.35 in India, according to Our World in Data.
China has infrastructure in place to ease congestion quickly – whether in the port or on the side of the supply chain, Jain said.
“However, the chaos created as a result of this will eventually have an impact on the other side of the ocean,” he added. “That is why, as long as China adheres to this strong zero-Covid stance, we will not exclude any periodic disruption as the year progresses,” he added.
Since the epidemic began in early 2020, Beijing has maintained Covid’s policy of intolerance, sometimes closing all factories or ports for a single offense. It also includes strong segregation and travel restrictions – either within the city or in other countries – to control outbreaks.
The intended targets for Covid-19 content have had an impact on production and shipping worldwide, exacerbating the problem of procurement.
There has been renewed concern that the highly infectious omicron diversity could cause further impact on the transportation industry.
As a result of this epidemic, some of the major shipping lines are “trying to catch a whole network,” Jain said.
“There is a global investment investment. There is an investment on the terminal side. However, I think some of that infrastructure, in particular, in the developed market, has been abandoned for a long time. ”
“From the sender’s point of view or from the customer’s point of view, I think the comfort they have had over the past few decades is keeping things in perspective,” he added.