China’s Covid outbreak deteriorates global supply chain crisis
Head of Investment Research
Global financial markets have been especially volatile in recent sessions following the Russian invasion of Ukraine, and the Covid resurgence in China, which raised fears for another global supply chain crisis.
China is struggling with its most severe Covid outbreak since the height of the pandemic in 2020, with Chinese equities falling to the lowest level since 2016 on Tuesday based on fears over the country’s economic outlook.
China's zero-tolerance policy of eliminating transmission as rapidly as possible has placed more than 50 million people into some form of lockdown, especially in the country's economically prosperous southern provinces of Shenzhen and Dongguan.
Analysts fear that a prolonged lockdown in key economic, and manufacturing areas in China, and export hubs including Hong Kong and Shanghai, could unleash supply chain disruptions worldwide which will have implications for already rising global inflation.
Shenzhen, often known as China's Silicon Valley, is one of the country’s largest manufacturing hubs, and it has the 4th world's largest container port, with investors expecting more supplies and shipping delays soon.
China’s latest moves to curb the spread of the virus are also having an impact on commodities prices, since the country is the world’s largest importer of raw materials, including crude oil, natural gas, industrial metals, and grains.
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