Shanghai Closure

The impact of Shanghai’s closure spreads to the world

Since the first confirmed case of the Omicron variant strain was discovered in Shanghai on March 1, the epidemic has spread rapidly, with more than 20,000 new cases per day. The Chinese authorities have adopted thunderous measures to seal the city, and President Xi Jinping reiterated during his recent inspection in Hainan that he adheres to the policy of dynamic clearing. As the world’s largest port, and China’s important external window and economic engine during the epidemic, the closure of Shanghai will undoubtedly have a significant impact. It will not only affect the daily life of Shanghai residents and China’s economic development but also affect the global supply chain and economic recovery prospects.

Although there have been no fatalities among the more than 200,000 cases in Shanghai so far, residents have been caught in the dilemma of insufficient food distribution and deaths due to emergency medical treatment due to severe lockdown measures. Shanghai is the most advanced standard for large-scale city management in China. The secondary disasters caused by the closure of the city show that a large city with a population of 26 million can only meet all the needs of residents through market circulation. No matter what country it is in, no government can replace it. this role. The Shanghai government apologized for this, reflecting China’s current helplessness in the face of epidemic control.

On the one hand, the authorities are not unaware of the livelihood and economic costs of the lockdown. The British “Economist” think tank said that if Shanghai’s closure of the city is delayed until the end of April, the economic loss will be equivalent to a reduction of 0.4 percentage points in China’s GDP growth. On the other hand, China still lacks the basic conditions for coexisting with COVID-19 – the population over the age of 60 belongs to a high-risk group, and tens of millions of people have not been vaccinated; in addition, according to some studies and Hong Kong’s data and experience, China’s domestic vaccine less effective than mRNA vaccines. Therefore, if severe lockdown measures are not taken, once the virus spreads, it will be difficult for even a big city like Shanghai with relatively rich medical resources to deal with it, and other areas will be even more unimaginable.

The impact of the closure of Shanghai shows that the dilemma that plagues the Chinese government also has a huge opportunity cost. Cities are key nodes of a country’s economy, characterized by concentration and mobility. Cities are the places where people, capital, information, technology, goods, and services are concentrated, and they are also places where these economic growth factors flow and exchange freely. When these value-creating activities are suddenly stopped, it will inevitably trigger a huge chain reaction, especially in such an international metropolis like Shanghai, and the impact is not limited to China.

The Yangtze River Delta, where Shanghai is located, is one of the regions with the largest population, the strongest innovation capability, the largest comprehensive strength, and the most concentrated foreign investment in China. It is the main base of China’s “world factory”. Shanghai is the leader of the Yangtze River Delta, and the lockdown effect will inevitably spread to the entire region, including many factories in surrounding cities that have to stop production due to shortages of workers and raw materials, and obstruction of transportation and logistics. Many small and medium-sized enterprises in the export processing industry chain, I am afraid that many will go bankrupt and aggravate the unemployment problem. The lag effect of the economic impact may soon be manifested.

Previously, due to various geopolitical reasons such as the China-US game, economic decoupling, and other reasons, the global industrial chain has already faced tremendous pressure. In response to this change, China proposed the concept of “dual circulation”, using the domestic market to make up for the possible weakening of international market demand. Chinese Premier Li Keqiang has repeatedly warned recently that the downward pressure on China’s economy is increasing, and it is necessary to expand public investment, boost domestic demand and promote employment. But economists in China and internationally worry that the closure of Shanghai will slow down China’s economic growth and add more uncertainty.

Due to the huge inconvenience caused by the closure of the city, China may lose international talent as a result. On March 31, the French consulate in Shanghai, on behalf of EU countries, asked the Shanghai government to allow European expatriates to manage their health at home, and parents and children could not be separated from each other under any circumstances. On April 12, the U.S. State Department ordered the consulate’s non-emergency staff and their families to evacuate from Shanghai. International capital, which is very sensitive to uncertainty, is bound to adjust its investment layout in China out of the consideration of risk diversification; the disruption of China’s commodity exports due to the closure of the city will make the world’s inflationary pressure even worse.

Shanghai is the jewel in the crown of China’s decades of reform and opening up. The Chinese people and even China’s regional economic and trade partners hope to see Shanghai continue to lead the steady development of China’s economy and promote the rapid recovery of the region and the global economy from the epidemic. The challenges Shanghai is currently facing touch the hearts of China and its partners in the world who care about China. Globalization has made possible the community with a shared future for mankind proposed by China. China cannot be isolated from the world, and the world cannot be without China’s participation. The symbolism of Shanghai here is therefore particularly significant. The world hopes that Shanghai can get rid of the predicament as soon as possible, restore its usual vitality, and continue to shine for globalization.

Leave a Reply

Your email address will not be published. Required fields are marked *