the outbreak of omicron in china is already sending jitters
through global supply chains because the concern is that production
in china at its factories and shipments from its ports
will be disrupted by the government's aggressive containment of the
virus. The so called Zero Covid strategy. Now
to be clear, China Zero Covid strategy has allowed
its factories to operate at full speed since the pandemic
began. That has been crucial for the rest of
the world, of course, who by all of
the manufacturing goods like laptops and healthcare equipment from china
. But the fear is because this variant is so
much more transmissible. And the risk is then that
there's more disruption at factories and ports that causes delays
to goods being shipped. And of course sends up
prices for goods around the rest of the world.
So the world economy through much of last year was
beset by a global supply crunch, goods were either
in short supply or prices were going through the roof
throughout all of that. The ability for china to
keep its factories humming was critical to at least keeping
some degree of normalcy in global supply chains. For
example, in Southeast Asia last year, when there
was a severe outbreak of the virus factories, there
had to stop production and that led to delays for
everything from semiconductors to handbags. So if china's factories
do go down this year because of disruption linked to
the virus, well then the concern is that the
supply crunch that we saw last year could become,
in the words of one Hsbc economist, the mother
of all supply chain stumbles