The news: Major manufacturing hubs in China, including Shenzhen and Dongguan, have been put under lockdown after detecting new COVID-19 cases, per Bloomberg.
- Toyota and Volkswagen halted production at several plants, and key Apple manufacturer Foxconn said it would suspend its Shenzhen operations until further notice from the government.
- Trucking delays and long lines at China’s ports are compounding the issue and raising fears of a global shipping slowdown.
How we got here: While most of the world has loosened coronavirus-related restrictions, Beijing maintains a hard stance on COVID-19 outbreaks.
- A December 2021 outbreak in Zhejiang province, another key manufacturing hub, closed factories, and strict quarantine rules made it difficult for truckers to pick up goods and access ports.
- China averages more than 5,100 daily cases—less than one-tenth the number of new cases the US reported on Monday, per The New York Times—but more than 45 million people are under lockdown.
What this means for retailers: Many companies rely on goods manufactured in China. Even if their factories are operational, it’s getting harder—and more expensive—to get goods out.
- Wang Xin, the head of the Shenzhen Cross-Border E-Commerce Association, says the lockdowns “are creating significant disruption to the production and delivery of goods sold on major online marketplaces” like Amazon and Walmart.
- Delays on order fulfillments could create major backups at ports across China, which could bring global shipping to a halt.
- Freight prices, already high, are rising further: It costs at least $16,353 to ship a container of items from Asia to the West Coast as of this writing, up nearly $200 from a week ago, per data from Freightos.