Berlin, Beijing An opaque fence several meters high, barbed wire, security forces, a police car – when you see the Kunlun Hotel in the heart of Beijing, you might think that the luxury hotel is preparing for an invasion. The hotel is just one of several dozen facilities in the Chinese capital that are to house athletes and fellow travelers for the Winter Olympics, which begin on February 4 – albeit shielded from the rest of Beijing.
Because from the point of view of the Chinese government, the visitors from abroad actually represent something of an invasion. Each of the thousands of people entering the country could potentially bring in the corona virus. And the state leadership is reacting rigidly to this.
After several cities in various provinces of China reported infected people, the local governments have already taken measures, some violent, in recent weeks to prevent the virus from spreading further. And when the first omicron case was registered in Beijing over the weekend, the deputy head of the Beijing health authority called on the population to minimize the purchase of goods from overseas. A letter from Canada transmitted the virus.
Experts have been warning for months that a large-scale outbreak of the corona virus would push the rigid zero-Covid strategy that China’s government has been pursuing since the beginning of the pandemic to its limits, and would even result in a catastrophe in the People’s Republic. The highly contagious Omicron variant now greatly increases the pressure.
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This also increases concerns in the economy. Companies in China, including German ones, are already impacting the production stops caused by the corona. But from there, the consequences could spread out into the world. With every company shut down in China, the potentially negative consequences for the global economy increase – China’s decisive role in the international movement of goods has a full impact.
“Absolutely a cause for concern”
The current situation in China is “absolutely a cause for concern” for the global economy, says Klaus-Jürgen Gern, head of the world economy at the Kiel Institute for the World Economy (IfW): completely throws trade off track again.”
Gern fears that this would have a severe impact on foreign trade in Germany. Because from no other country does the German economy obtain as many goods as from China. According to a survey by the Ifo Institute, at the beginning of the pandemic in April 2020, almost a third of German industrial companies stated that they were dependent on Chinese primary products.
A look at the recent Corona past shows how serious the situation is. China’s strict zero-Covid strategy had repeatedly caused severe setbacks for the global economy. In August 2021, a single port worker infected with the corona virus was enough for the local government to close an entire terminal in Ningbo – after all, the second largest port in the world. More than 50 container ships were backed up, and transport by sea was halted worldwide.
Currently, it is again important port cities that are threatened by the outbreak of the corona virus. Shanghai, Shenzhen and Tianjin have reported cases of the omicron variant, and there have already been delays in some of the important logistics centers due to pandemic prevention measures.
The operation of the port in Tianjin is stable, a representative of the local Tianjin Port Group told the state newspaper “Global Times”. The smooth running of the supply and industrial chains in the regions will continue to be guaranteed “to the full extent”. Still, recent cases in the economy bring back bad memories.
In addition, with the port in Dalian in the north-eastern province of Liaoning, another large port of Omicron is now affected. Observers warn that the important port of call on the Liaodong peninsula is likely to exacerbate not only the general delivery bottlenecks but also the energy price crisis. According to analysis platform Fleetmon, tankers carrying oil, gas or fuel account for a quarter of traffic at Dalian Port.
German economy particularly affected
Many German companies have started to change their supply chains. “But you don’t just replace a colossus like China,” says Gern. All the more since the People’s Republic is not only an important supplier, but also the second most important buyer of German products. The German automotive industry in particular is dependent on the Chinese market. “If large parts of the Chinese population are isolated, this will seriously damage the sales of many German industries,” explains Gern.
The general corona measures in China had already depressed consumption in December. Retail sales growth slowed to 1.7 percent. In November, the increase was still 3.9 percent.
How quickly restrictions in China will affect other countries and ultimately the global economy is still unclear due to the sparse data, explains Feodora Teti, deputy head of the Ifo Center for Foreign Trade. Either way, the German economy in particular would be particularly affected, “because it is still suffering significantly from the existing supply bottlenecks,” says Teti.
Vaccine apparently only provides insufficient protection against omicron
Despite all the risks, a quick departure from the zero-Covid strategy seems unlikely. This is also due to the fact that, according to experts, the Chinese vaccine only provides insufficient protection against infection with the virus.
The Charité virologist Christian Drosten had already warned in December: “The vaccine used in China has poor effectiveness against omicron. This is a real threat to the global economy.” Foreign vaccines such as Biontech or Moderna are not approved in the People’s Republic.
Experts expect that China will further strengthen its rigid containment policy. “It would have significant economic implications for China and the world,” says Olivier Blanchard of the Peterson Institute for International Economics. Given China’s zero-Covid policy, that means frequent and widespread lockdowns that would have a major impact on global economic activity.
There was an omicron case there.
(Photo: Imago Images)
“Consequent new lockdowns in China are likely to lead to new serious problems in the global supply chains,” warns Jürgen Matthes, head of the “Competence Field International Economic System and Economy” at the German Economic Institute in Cologne. Because China is so important as a supplier, this will be felt all over the world. “Such an infectious virus and a no-Covid strategy do not go together,” says Matthes.
China is at an impasse due to the low effectiveness of its own corona vaccine.
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