The Shanghai lockdown is designed to show the West that China is „the indispensable nation.“ Don’t mess with it.
China is in a mild panic, and I have a hunch it has little to do with Covid-19. Their ridiculous, and failed, “zero-tolerance” Covid policy is magic thinking. But this magic thinking has led to yet another port shut down, this time in Shanghai. The target is not the Chinese longshoremen and lorry drivers, trying to keep them from catching a virus that might kill 0.5% of them. The target is the multinational American and European companies that are being pressured at home to decouple from China. The Shanghai lockdowns stifle supply chains heading to the U.S. and Europe, proving that China is “the indispensable nation.” China is nervous that people here are thinking otherwise. Larry Fink of Blackrock just said the war in Ukraine is a signal that globalization is finished. Volkswagen said it will rely less on China, arguably its most important market. As part of its effort to reduce China’s weight in its business, Volkswagen said it would invest more than $7 billion in the U.S. over the next five years, mainly on EVs, the WSJ reported on Monday. Can you think of an emerging market that has benefited from globalization more than China? Can you name a country that has benefited more uniformly from globalization than China? The U.S. benefited, but that’s more true if you count Wall Street and Walmart WMT, Amazon AMZN and Apple AAPL, according to the International Trade Commission’s own admission last year. VW knows what the Shanghai shutdown means. It means supply constraints because everything is made in China, including some basic semiconductors used in automotive manufacturing. That leads to higher prices because things are harder to buy, harder to make. That hurts the U.S. economy. And for the Chinese Communist Party, that makes for free lobbying by the likes of American multinationals who will argue against trade war tariffs, which, by the way, are already coming down, just as — surprise — the well connected Hillary Clinton predicted back in November. Shanghai’s Covid Policies: Supply Chain Dumpster Fire For starters, keep in mind that this is the city of some 20 million people that told you only 7 people died of Covid. Johns Hopkins University’s Covid tracker still has that lucky number on its website without adding a disclaimer, such as: this data is 101% unreliable and probably false. If you believe only 7 people in all of Shanghai died of Covid, then you believe lockdowns saved lives in China — but nowhere else — and it must lockdown again. In the real world, logistics managers are now warning clients the latest two-stage lockdown in Shanghai could be worse than the initial Covid lockdowns in Wuhan.
