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MARCH 14, 2022
Kuttner on TAP
COVID and the China Bottleneck
Beijing’s extreme lockdowns are one more reason to unwind U.S. reliance on Chinese supplies.
China COVID strategy is based on something close to zero tolerance. When cases increase, Beijing locks down entire provinces.

The latest is a lockdown of Shenzhen. This order affects at least 17.5 million people in the city and a total of 24 million in the surrounding Guangdong province, who are forbidden from traveling. The order, which took effect Sunday, effectively shuts down the regional economy.

Guangdong province accounted for 11 percent of China’s GDP and 23 percent of China’s exports in 2021, according to Bloomberg, whose economists estimate that Beijing’s measures directly affect about half of China’s economy.

The problem is that the omicron variant and its subvariants are not cooperating with China’s lockdown strategy. Nationally, cases in China doubled nationwide to nearly 3,400 in one day. Some version of COVID will likely be endemic for a long time. Other nations have dealt with similar upsurges without total lockdowns.

As a totalitarian government, China resorts to abrupt and extreme measures like these. As public-health measures, they may work for China (though they will cost China’s 2022 growth targets dearly). But they clearly do not work for a China that plays the role of key supplier in the global supply chain.

The U.S., faced with a supply chain crisis, was already moving away from reliance on Chinese sources of supply. Now, with China’s role in helping Russia evade the impact of Western economic sanctions and its extreme COVID measures further reducing production and supply, the Biden administration can and should accelerate its delinking from the Chinese economy.

Unfortunately, this will take time, and in the short run Beijing’s lockdown strategy will only add to global shortages and supply-driven inflation. It’s one more painful lesson of the disastrous fallout from extreme globalization.

~ ROBERT KUTTNER
If Only There Were an Infrastructure Bill to Deal With This Oil Crisis
By pouring money into fossil fuel infrastructure, the bipartisan law is already showing its tragic inadequacies. BY ALEXANDER SAMMON
Envision Healthcare Hits the Skids
Backed into a corner financially, the private equity–owned physician staffing company could put doctors and patients at risk. BY EILEEN APPELBAUM & ROSEMARY BATT
 
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