Companies are bracing for another round of potentially debilitating supply chain disruptions as China, home to about a third of global manufacturing, imposes sweeping lockdowns in an attempt to keep the omicron variant at bay.

The measures have already confined tens of millions of people to their homes in several Chinese cities and contributed to a suspension of connecting flights through Hong Kong from much of the world for the next month. At least 20 million people, or about 1.5 per cent of China’s population, are in lockdown, mostly in the city of Xi’an in western China and in Henan Province in north-central China.

The country’s zero-tolerance policy has manufacturers — already on edge from spending the past two years dealing with crippling supply chain woes — worried about another round of shutdowns at Chinese factories and ports. Additional disruptions to the global supply chain would come at a particularly fraught moment for companies, which are struggling with rising prices for raw materials and shipping along with extended delivery times and worker shortages.

China used lockdowns, contact tracing and quarantines to halt the spread of the coronavirus nearly two years ago after its initial emergence in Wuhan. These tactics have been highly effective, but the extreme transmissibility of the omicron variant poses the biggest test yet of China’s system.

So far, the effects of the lockdowns on Chinese factory production and deliveries have been limited. Four of China’s largest port cities — Shanghai, Dalian, Tianjin and Shenzhen — have imposed narrowly targeted lockdowns to try to control small outbreaks of the omicron variant. As of this weekend, these cities had not locked down their docks. Still, Volkswagen and Toyota announced last week that they would temporarily suspend operations in Tianjin because of lockdowns.

Analysts warn that many industries could face disruptions in the flow of goods as China tries to stamp out any coronavirus infections ahead of the Winter Olympics, which will be held in Beijing next month.

(New York Times News Service)