Since China is a major part of global GDP, any economic crisis in China will be felt all over the world. As Shanghai officials begin to discuss lifting the lockdown restrictions that were so strict that people were left without food and work, the real economic impact of Covid may be realized.
China’s manufacturing industry is the largest pillar of international trade and with more than a billion consumers, it is a major driver of global economic growth.
Last year, China accounted for 18 percent of global GDP, which was 17.8 percent more than the entire EU, while the US accounted for 23.9 percent.
Draconian lockdowns in Shanghai and other regions of China have impacted industrial production, according to new April data released by Bloomberg and China’s National Bureau of Statistics.
The data shows that factory production plummeted 2.9 percent, while consumer spending also fell 11.1 percent.
These numbers were worse than experts initially thought and do not bode well for a period of global economic crisis.
China is responsible for nearly a third of global manufacturing output and about 12 percent of world trade, according to UN data.
According to Fareed Zakaria of CNN Business, “Any downturn in its economy hurts the world.”
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Shanghai is the epicenter of automotive and engineering manufacturing with the world’s busiest port, and according to The Economist, 506 ships were waiting to unload in mid-April, compared to 260 in February.
While companies struggle to find drivers to transport cargo, the logistical nightmares of lockdowns have caused serious disruptions to supply chains, demonstrating the key role China plays in global industry.
For example, about half of Apple’s 200 largest suppliers are based in and around Shanghai, and the company announced it would see a loss of revenue of between $4 billion (£3.3 billion) and $8 billion (£8 billion) due to the impact of the lockdown. 6.7 billion).
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Similarly, Shanghai’s typically booming auto industry has been crippled by lockdowns and delivery issues, with BMW reporting a 19 percent drop in production in the first quarter of this year compared to the previous calendar year.
Even Tesla, which kept factory workers to get around the lockdown, still struggled to make cars due to a shortage of parts.
Mr Zakaria concluded: “The global economy is intertwined in unimaginably complex ways. Even if you are annoyed by that reality, as many in Washington and Beijing do, you can’t ignore it.”