‘Locked’ Logistics: The Pandemic and the Global Supply

Written by: Michael Zhou

Note: This article was written at the height of the COVID-19 pandemic in China in 2021. The author, Michael Zhou, is a G11 student from the United World College Changshu China (UWCCSC).

“Shanghai can keep telling the world what it wants to accomplish, but others will have to play

ball,” says Rico Luman, senior economist on transport, logistics, and automotive at ING

Research. Starting on March 14, the COVID-19 pandemic exploded in Shanghai, the most

developed city in China and the world’s financial hub, followed by an immediate and strict

lockdown. As Xi Jinping is implementing a zero-Covid policy to confine the spread of the

epidemic, all citizens are banned from going out of their homes, and companies, factories, and

shops are forced to close. The domestic and global economies are in an emergent situation

because of the severe disruption caused by a reduced number of trucks, vessels, and planes

allowed to go on roads.

The Chinese government has continuously been condemned by western media and global

organizations, including the World Health Organization which denies the sustainability of this

policy, for its authoritarian approach to containing the positive cases regardless of its influences on the global economies and citizens' health and mental condition.

Shanghai under the Zero-COVID lockdown

Plugged Bottleneck

The prolonged lockdown brings about a bottleneck in the supply chain of many multinationals. Only 30% of workers are permitted to work during this period, creating tons of backlogs, which is detrimental to companies. For instance, truck drivers at Suto Logistics could carry 1,000 tonnes of goods each day for export and import in early March, whereas in April, only one or two trucks were able to ferry commodities. Also, the NAT requirement in each area is different, as reported by the Financial Times, so they may need to pass the cargo to another driver from another province at borders. The process is highly inconvenient and inefficient and lots of drivers are unwilling to deliver goods because they might not be able to come out again if they ferry the cargo to a restricted area. 30% of workers are permitted to work during the lockdown, generating tons of backlogs. Apart from that, the cargo at Chinese ports sits longer than usual because of the absence of most of the drivers to collect containers. On May 12, the average waiting time for importing containers was 12.9 days, the number was 4.7 days on March 28. Therefore, the loading and unloading of vessels are much slower, and by mid-April, the number of ships waiting at Chinese ports doubled compared to that two weeks ago. The delayed vessels caused disruptions in global supply, as 80% of international trade is by sea.

With the prolonged period of transportation and delay in supply, the city’s income is estimated to decrease by 60% and the national income by 8.6% due to the closure, according to the report of economist Song Ching from the Chinese University of Hong Kong. China also experienced the first contraction of retail sales since August 2020, a decrease of 3.5% in March, as shown by the first-quarter data released by the National Bureau of Statistics. As there are insufficient drivers to collect goods, the transportation costs are rocketing, with 20-30% of total transport capacity and fivefold increased fees. More than two-thirds of European firms in China said profits are expected to decrease because of this intense and rigid regulation, according to a survey by the British Chamber of Commerce in China on April 20. Furthermore, foreign investors reduced their investment in Shanghai. According to fDi Markets, a Financial Times database, the first quarter of 2022 saw the lowest quarterly amount of greenfield foreign investment projects since records began in 2003. The lockdown harms both domestic and global economies significantly because more than 20% of China’s total export shipments and roughly 8% of manufactured exports to world markets pass through Shanghai’s port.

A China Railway Express container at port

Transportation Suspended

Shanghai’s lockdown put the living conditions at stake. 25 million residents were forced to stay at home. Neither Chinese citizens nor foreigners in Shanghai can leave for their hometown, as at all airports in China, passengers need to have a negative NAT within 48 hours of boarding, but arranging a NAT is difficult. Also, public transportation in Shanghai is stopped, so merely arriving at the airport is challenging for many people. It is a tough period for everyone in Shanghai, seemingly the only thing most people can do is stick together.

Hunger and Anger

Wu Peiying, 27, who works in business development, only received one package of food which contains a carrot, a cabbage, a yam, and a few chicken wings, after the local party propaganda article was released on WeChat saying they send 25,000 packages of food a day to the 100,00residents in western Shanghai. Videos full of residents’ resentment were posted on social media.

Apparently, Shanghai’s residents have been furious about the current policy and are living without the guarantee of a basic food supply, but under the administration of this authoritarian

government, no one can make a difference in the situation. The majority of foreigners in Shanghai were no exception. There are 15,000 officially registered foreigners in Shanghai, and all of them are facing the same difficulty as many others, or even worse, as they cannot read Chinese characters. The vast majority of foreigners cannot join the group purchases on WeChat for bulk ordering of food and daily supplies, thus, they are stripped of most of their basic necessities.

Shanghai during its most stringent lockdown

Medical Supply Shortage

Medical supply is also in an emergent situation. To begin with, artificial blood vessels, used in

coronary artery bypass grafts, peripheral bypass grafts, and kidney dialysis shunts in surgery, in major Chinese hospitals are in short supply because of the logistic issues. As only Japan’s Term and Germany’s Maquet can produce artificial blood vessels, all artificial blood vessels in China are imported, and the foreign manufacturers only put the supply of the European and American markets on top priority when there is a shortage of supply. Therefore, the materials are not available when patients need surgery in hospitals in Shanghai, and the lockdown is putting the body health of residents at stake with no exceptions being made.

Moreover, hospitals in foreign countries are also impacted by the lockdown in terms of the

medical supply. The production of contrast dyes, which are used to increase the contrast between internal organs in medical imaging, by General Electric Co., the major manufactures of the dyes for the U.S., is cut off because of the lockdown on March 27, which caused CT scans and rationing in hospitals in the U.S. to delay and bodies of non-urgent patients not to be checked.

A COVID-19 testing booth in China

Divergent Voices

With regards to aspects such as logistics, citizens’ living conditions, and medical supply, the

economic impact of Xi’s policy keeps exacerbating. On May 18, Xi talked about the global

economic challenges due to the COVID-19 but barely did he speak about the ramifications of his own policy. In contrast, Premier Li Keqiang explicitly mentioned China’s own issues and that they are going to balance between saving the economy and preventing the pandemic from further spreading in an in-person meeting one day after. Under the authoritarian administration of the Chinese government, only the leaders of this country can bring about a real revival.