China’s Covid fight may sicken global supply chains

Is it now China’s turn to spook the globe with inflation? It’s hard not to wonder as Omicron prompts Asia’s biggest economy to institute new lockdowns that are sure to upend supply chains and intensify global price pressures. If that happens, it could shift China from an economic hero of the Covid era to its villain. Until now, the mainland’s massive factory economy acted as a giant shock absorber to keep prices “quite manageable,” note leading China economists like Grace Ng at JPMorgan. Chinese producers effectively ate double-digit surges in raw material pricing, judging that the fallout from consumer price spikes would be worse than reduced corporate profits. This dynamic seems sure to change as President Xi Jinping’s “zero-Covid” absolutism collides with new shutdowns. Much has been said about how China’s response to Covid-19 in 2020 and the 2021 Delta variant could backfire in the Omicron era, given that the latest variant’s high transmissibility makes it virtually impossible to contain.

China’s Covid fight may sicken global supply chains

Is it now China’s turn to spook the globe with inflation? It’s hard not to wonder as Omicron prompts Asia’s biggest economy to institute new lockdowns that are sure to upend supply chains and intensify global price pressures.

If that happens, it could shift China from an economic hero of the Covid era to its villain. Until now, the mainland’s massive factory economy acted as a giant shock absorber to keep prices “quite manageable,” note leading China economists like Grace Ng at JPMorgan.

Chinese producers effectively ate double-digit surges in raw material pricing, judging that the fallout from consumer price spikes would be worse than reduced corporate profits.

This dynamic seems sure to change as President Xi Jinping’s “zero-Covid” absolutism collides with new shutdowns. Much has been said about how China’s response to Covid-19 in 2020 and the 2021 Delta variant could backfire in the Omicron era, given that the latest variant’s high transmissibility makes it virtually impossible to contain.