Big companies warn of rising costs and supply chain issues as lockdowns in China persist

As China continues to fight the spread of the coronavirus with its strict zero-Covid policy, major Western multinationals are warning that shutdowns could lead to higher costs for consumers and further disruption to supply chains that are already under the pressure of war in Ukraine and two years of a global pandemic.

Top line

Major Western companies such as Apple, Coca-Cola and General Electric have warned that as China continues to roll out strict lockdowns to deal with the spread of Covid-19 production lines, this could be affected and that shortages are likely.

The strict policies China is enforcing to curb the spread of the coronavirus have resulted in around 350 million people in full or partial lockdowns that have spread to more than 60 cities in the world’s second-largest economy according to Nomura, a Japanese bank.

BEIJING, CHINA – MAY 01: Few cars run on the streets of Chaoyang District as Beijing tightens COVID-19 control measures during the May Day holiday on May 1, 2022 in Beijing, China. The five-day Labor Day holiday, also known as the May Day holiday, began on Saturday. (Photo by Zhang Ruoyi/VCG via Getty Images)

First Shanghai, then Beijing

Since the end of March, closures in Shanghai, a major financial and maritime center in China, have been applied. Closures spread to Beijing, the nation’s capital, in the last week of April. Automakers, chipmakers and technology companies have been affected by the shutdowns, and now European and American multinationals are feeling the fallout.

Media showed Shanghai residents shouting from their balconies over the harsh measure designed to isolate residents of the city.

Analysts believe the economic situation will get worse before it gets better.

“There is a huge backlog (of ships waiting to be unloaded), the supply chain is very congested and congested,” said Shiv Shivaraman, Asia at AlixPartners. The Financial Times. “It will get worse, not better”

Multinationals, from tech companies to agricultural suppliers, said getting goods from China, by air or freight, takes longer and costs more.

“How (the consequences of the lockdowns) play out is not something we have control over. I don’t think anyone really does,” General Electric CEO Larry Culp told analysts according to the FT.

At the end of the line

While a great degree of normality has returned to industry and society in the West, China is introducing strict lockdowns and the effect will be felt globally.

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