How China’s Covid Policies Are Leading to Hampered Supply Chains and Higher Inflation

At the start of the Covid-19 pandemic, China’s strict zero-Covid policies succeeded in keeping Covid-19 at bay. More than two years later, ongoing controls in the country are still weighing its economy and the blocking of global supply chains.

“Zero-Covid has become one of the main drivers of the global recession,” Steve Morrison, senior vice president of the Center for Strategic and International Studies, told CNBC in an interview.

Major shopping centers such as Shanghai and Beijing, after responding to waves of omicron-induced infections, requiring workers to test negative Covid tests to enter public spaces. Demanding quarantine and testing rules have also thwarted truckers on the roads, increasing the time it takes for goods to arrive at Chinese ports for export.

When it comes to manufacturing, China has forced some companies to operate in a closed-loop system – similar to the “bubble” strategy – where factory workers live on-site. Companies such as You’re here and iPhone maker Foxconn had to implement closed-loop systems.

Not to mention poor weather, labor issues and abnormal demand patterns that also contributed to supply chain disruptions.

“What supply chains thrive on is predictability,” said Simon Geale, executive vice president of procurement at Proxima, in an interview with CNBC. “And the only thing we can say about China right now is that for many companies they see China as predictable and unpredictable.”

Watch the video above to find out how China’s evolving zero-Covid strategies are slowing down global supply chains and if there is relief in sight.

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