The Lockdown Heard ‘Round the World

The city of Shanghai began a two-tiered Covid shutdown impacting its 26 million residents yesterday, China’s most extensive city-wide lockdown in two years.

🤔 Why it’s a big deal: Since the pandemic began, the world’s second-biggest economy has followed a “zero-Covid” policy, repeatedly locking down entire cities (or sections of them) and ordering factories to suspend operations.

The closed factories cause production and shipping snags in various industries, which then impacts consumers (aka us).

• When authorities halted operations at a port in Shenzhen last June because of Covid, it caused a shipping backlog that took months to ease. One exec at shipping giant Maersk told Fortune that the closure was “a much bigger disruption than the Ever Given getting stuck in the Suez Canal.”😳
• Shanghai’s port remains open for now, but exporters are bracing for delays as the lockdowns hit warehouses, transport and staffing, a pattern experienced during similar targeted lockdowns such as the one in the southern city of Shenzhen.
• The city of Shanghai plays host to hundreds of multinational companies and manufacturers like GM and Tesla (the latter of which has shut down its factory in the city for four days).

🏙 Zoom in: East Shanghai residents were ordered to stay inside from Monday–Thursday, according to a government notice, then the lockdown will switch to West Shanghai residents for four days starting April 1.

👀 Looking ahead… China is seeking to wean itself off these disruptive and costly all-out lockdowns, but faces an immense challenge as omicron puts stress on the country’s healthcare and governance systems, the WSJ reports.