New Covid outbreak in China threatens crucial economic region, raising supply chain concerns

Bloomberg News

04 July 2022, 18:20

Last modification: 04 July 2022, 18:32

China is racing to quell a new virus outbreak that threatens to spread to one of its most economically important regions, raising the specter of disruptions that could upend global supply chains for solar panels , drugs and semiconductor chips.

Infections have risen in Si county in eastern Anhui province, with authorities reporting 287 cases on Sunday and nearly 1,000 since the end of last week. Authorities locked down Si and a nearby county late last week in an attempt to prevent the virus from spreading to neighboring Jiangsu, China’s second-largest contributor to economic output and a globally important manufacturing hub for the solar sector.

But cases there are already on the rise. Wuxi City, a biotech hub, reported 35 infections and suspended food services at shuttered restaurants and entertainment venues. Zhejiang province and Shanghai have also reported Covid-positive patients, fueling concerns about the wider impact in the Yangtze River Delta region which accounts for a quarter of China’s economy.

Residents are tested for Covid-19 in Suqian city, Jiangsu province on July 2. Photographer: CFOTO/Future Publishing/Getty Images/Bloomberg


Residents are tested for Covid-19 in Suqian city, Jiangsu province on July 2. Photographer: CFOTO/Future Publishing/Getty Images/Bloomberg

The new outbreaks will be a major test for President Xi Jinping’s virus strategy. He reaffirmed last week that China would stick to Covid Zero – which relies on lockdowns and frequent mass testing to eradicate infections – and said the country would rather suffer a temporary impact on economic development than to let the virus harm people’s safety and health.

China is only beginning to show signs of a nascent recovery after its latest string of outbreaks, including Shanghai’s deadly two-month lockdown that caused massive manufacturing disruptions and hampered global supply chains.

While the epicenter of the latest outbreak is just a small county so far and authorities haven’t imposed lockdowns in any of the major regional hubs, any escalation in restrictions has the potential to spill over into the whole world.

According to BloombergNEF data, more than a third of global solar panel manufacturing capacity is located in Jiangsu Province, and it is also the top producer of solar cells and wafers. The Yangtze River Delta is also a key manufacturer of components for iPhone and Mac laptops, semiconductor chips, as well as drug makers and e-commerce operations. Some manufacturers still haven’t returned to normal after previous outbreaks.

China reported 380 cases on Sunday, bringing nationwide infections to a level last seen in late May, as Shanghai was about to lift its lockdown.

The financial hub, neighboring Jiangsu, reported three local cases on Sunday. One was found outside the government quarantine after six days of the city reporting no community infections. Zhao Dandan, deputy director of Shanghai’s municipal health commission, warned at a briefing on Sunday that the city still faced risks of a rebound in Covid cases. Beijing has not reported any new cases.

Elsewhere, the city of Ningde in Fujian province discovered 10 new Covid cases and put in place control measures. The city is the headquarters of Contemporary Amperex Technology Co., the world’s largest manufacturer of batteries for electric cars.

Macau, which reported its first two Covid deaths of the pandemic on Sunday, would not rule out locking down the entire city if its virus control measures failed to curb transmission, the Social Affairs and Protection Secretary said. Culture Ao Ieong U during a briefing on Sunday. The city said it would carry out three more rounds of mass testing this week, with 650 workers from mainland China arriving to lend support.

In Hong Kong, new chief executive John Lee said there was no immediate need for a universal mandatory Covid testing campaign in the city, but stressed the need to reduce daily infections, which have hit their highest level since April.

— With help from John Liu, Dong Lyu, Dan Murtaugh and Claire Che

Disclaimer: This article first appeared on Bloomberg and is published by special syndication arrangement.

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