The hidden tactics behind the Chinese lockdown? This is what the economists say

Updated on 05/21/2022 at 14:06

  • Thousands of ships cruise the world’s largest container port in Shanghai.
  • As the city has been on a massive shutdown for weeks, production is partially paralyzed and international supply chains are halted or significantly delayed.
  • Are there tactics behind it? Experts have a clear answer.

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Is the Corona lockdown in China part of the global supply chain war? This claim is currently being sponsored, at least on Twitter. “Ships are waiting to dock because of China’s crazy COVID strategy. This is intentional,” wrote American businessman Aaron Gein, for example, who published a map showing traffic jams of thousands of ships off the country’s coast.

Indeed, Chinese President Xi Jinping declared in January 2021: “We must increase the dependence of the international supply chain on China and build strong retaliatory and threatening capabilities against foreign powers trying to cut off supplies.”

Huge closure in Shanghai

In Germany, this makes people stand up and take notice, because China is Germany’s number one supplier and one of its strongest trading partners. More than half of all EU exports to China in 2019 came from Germany.

Because of the lockdown in Shanghai, the German economy is also afraid of supply bottlenecks. 70 percent of German companies operating in China are based in Shanghai and the surrounding area. In fact, they wanted to avoid the lockdown in Port City. But now the leadership has found no other way to contain the nationwide hotspot than with drastic measures: production halts, and restricted logistics.

Damage to the Chinese economy

However, economist Bastien Dor cannot imagine that an economic tactic should be behind it. “The Shanghai shutdown is severely damaging China’s economy, as skilled foreign workers leave and investments are suspended or withdrawn,” he states.

China’s growth and technological progress still depends on exchanges with the West in many areas. “So I find it hard to imagine how a lockdown in Shanghai could be strategically or geopolitically beneficial to the CPC,” the expert says.

Expert: China will cut its flesh

Economist Vincent Stammer is also skeptical. Stammer emphasized that “Beijing’s biggest goal has always been to boost economic growth, and a 7% target has been set for this. To achieve this, China relies on exports.”

If China now turns out to be an unreliable partner, Western companies will reassess the risks of manufacturing in China. “So China cuts itself in the foot,” he says.

Transfer production?

The expert sees the role of the matter this way: “The potential effects of the Shanghai lockdown are in conflict with Xi Jinping’s goal,” he asserts. The Shanghai issue is likely to reinforce the trend towards so-called resettlement, rapprochement, or befriending of friends.

In the process, production sites are moved to your country, to neighboring countries or to friendly countries. “In this case, China will lose its relevance in international supply chains, and therefore will have less leverage in the future to apply political pressure,” Dor analyzes.

U turn hardly possible

At the same time, it’s a mistake to interpret every import from China as a dependency, Stammer warns. In any case, he does not believe that China can achieve both goals: “China wants to become more independent, strengthen its domestic market and at the same time make the West more self-reliant. But you can’t do it. Both at the same time,” he says. Stammer.

Rather than economic motives, experts see political motives behind the strict lockdown. “CCP and Xi Jinping personally linked the pervasive supremacy of the Chinese system to the zero COVID strategy that will be initially effective in 2020, recently called the ‘zero COVID’ strategy,” says Dorr.

Fear of overburdening the healthcare sector

Deviating from this strategy would be to admit that this strategy or the authoritarian Chinese regime is not superior, at least when it comes to fighting the epidemic. “So, Shanghai does not have much leeway to deviate from the general line of approach from Beijing,” he adds.

Due to the low vaccination rate and vulnerable populations in China, there are serious concerns that the uncontrolled outbreak of Corona may lead to an increased burden on the health system. Economist Max Zinglin agrees: “Beijing finds it difficult to change course because it has always stressed its superiority.”

reduce dependency

He believes that the debate about dependency in global supply chains is essential. “Corona has shown the vulnerability of supply chains around the world,” he says. However, you will not say goodbye to China.

“It’s not a black and white picture, but you have to diversify yourself and set yourself up more broadly,” he says. It is a long process. “However, Corona and the debate associated with it is only a sideshow, real music plays in geopolitical rivalries,” Zinglin warns.

About the experts:

Bastian Alder Research associate and doctoral student in the Chair “Government Studies: Politics and Economics in China” at the University of Trier. His main areas of research include EU policy toward China with a focus on economic interdependence, comparison of Chinese and European foreign trade policies, and the New Silk Road in Central and Western Europe.

Vincent Stammer He is an expert on trade policy at the Kiel Institute for the World Economy (ifw). He studied economics at Brown University in the United States of America and at Ludwig Maximilian University in Munich.

Max Zinglin Chief Economist at the Mercator Institute of China Studies (MERCIS). His main research interests are China’s macroeconomic development, trade relations and industrial policy. It also deals with the Chinese economic system and the economic situation in Hong Kong, Macau and Taiwan.

Sources used:

  • Twitter Profile Aaron Jen
  • Nikkei Asia: “The Chinese Communist Party celebrates its 100th anniversary in isolation”
  • The Konrad Adenauer Stiftung: The Illusion of Europe and China

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