Supply Chain Blockage Amid Spread of the Delta Variant Slowing China’s Economy

Amid a logistics problem caused as a result of the coronavirus outbreak, China’s economy slowed down this month. From 50.4 in July, an official survey of industrial activity dropped to 50.1 in August. Even though it was slightly beyond the 50-point expansion threshold, it was nevertheless the lowest pace of development since the pandemic’s outbreak in 2009. For the first time since April 2020, the Caixin manufacturing Purchasing Managers’ Index (PMI) dropped to 49.2 in August. More worrisome is that service sectors, which already represent a large share of the world’s second-biggest economy, the Purchasing Managers’ Index for non-manufacturing fell to 47.5 from 53.3 in July.

Despite the pandemic, China’s GDP grew last year while others fell. Officials took drastic steps to slow the infection rates, this included shutting down cities, banning flights, and stopping commerce. The Delta variant has been contained as a result of the tough and inflexible policy but at the price of economic operations. As a result of “travel restrictions reinstituted and customers being more apprehensive amidst the ongoing viral flare-up,” he said the non-manufacturing PMI fell. Things have gotten worse as a result of ongoing supply system issues throughout the world Supply chains are further disrupted by container constraints, industrial closures in Vietnam, and the consequences of harbor shutdowns in China.  A dock worker who worked at the Ningbo-Zhoushan Port, south of Shanghai tested positive for Covid-19, causing the port to be closed for weeks, contributing to the delay induced by a prior shutdown.

Evans-Pritchard stated, “The survey breakdown continues to show indicators of supply constraints, with delivery delays increasing as businesses continue to draw out their raw material stockpiles.” The country is also grappling with a slew of other issues, such as cholera epidemics, and Beijing has also launched a major crackdown against companies, which has affected various businesses such as the tech industry, private schools, etc., have gotten restricted by the crackdown. Oanda’s Jeffrey Halley, a senior market analyst for the Asia Pacific, said that the crackdowns, particularly in IT and education, “are hurting both unemployment worries among those impacted and general market optimism as fears of further interventions increase.” As long as Covid cases in China remain in control, Evans-Pritchard anticipated most of the deterioration recorded on Tuesday to recover. “Even with the instability created by China’s recent viral outbreak, the economy appears to be returning to normal,” he said. Information regarding more of such aspects affecting marketplaces around the world can be found at various research platforms.