China’s ruthless pursuit of zero-Covid must finally teach us resilience in supply chains
China’s ruthless pursuit of zero-Covid must finally teach us resilience in supply chains

China’s ruthless pursuit of zero-Covid must finally teach us resilience in supply chains

Friday, April 29, 2022 at 06.15

By:

Tom Tugendhat

Tom Tugenhadt MP is chairman of the House of Commons Foreign Affairs Select Committee and founder of the China Research Group

Shutdown in Shanghai has caused supply chain branches worldwide (Photo by Getty Images)

There is a distant storm on the way for all of us here in the UK. Shanghai, the world’s busiest port, has 500 container ships at anchor off in the East China Sea because the city is one month inside the world’s strictest lockdown.

This is not a story about China. It’s about global trade and the importance of the few key points that keep it afloat. Shanghai is the busiest. At least that was until it was shut down in a delusional attempt to wipe out Covid-19 completely.

Those blockages are already costing us. Delays cause prices to rise and make life harder for everyone. Prices that accelerate like a skier out of control will let us all go downhill. Manufacturers have seen their costs rise at the fastest rate since 1975, according to the CBI. The producer price index has been pushed up to a colossal 19.2 percent, according to the Office of National Statistics.

But what happens next can be even more serious.

There is a tsunami of goods on the way to our ports, which we are already struggling to get to shops and homes. More ships, more containers, means more trucks and more demand here. In some major European ports, such as Hamburg or Rotterdam, there are already delays of up to almost two weeks. It will cause the prices of other services to rise as the increase in supplies competes with goods that are already on our roads.

No one has planned two months of ships arriving at once. Maybe we need to start, because this is not the end.

In the first three months of this year, the UK built 100,000 fewer cars than the year before, as manufacturers struggled to find small items missing from stopped production lines. We had hoped that the end of Covid-19 would put an end to the delays, but Beijing’s elimination strategy continues to cause the snarl. Shanghai is only the latest example of the Communist Party’s failed policy of torturing its own citizens and putting costs on everyone.

Along with rising energy bills, we are now clearly seeing the highest inflation in a decade. And it’s getting worse. That’s why we need to look elsewhere.

Resistance costs. But so does vulnerability – we learn it the hard way. Resilience means spending on stocks and tying up capital in commodities instead of our habit of watching it flow fast to create quick profits. If we are to avoid the large backlogs that come from small disruptions, we will have to go from just-in-time to just-in-case.

China produces 40 percent of the world’s active pharmaceutical ingredients. We do not see that these delays leave millions of Britons with high blood pressure at risk.

Last year, the UK realized that their delivery of the essential treatment is dependent on a single Chinese company. That is unacceptable.

We need to think twice before the storm lands.

In Shanghai, 25 million people are banned from leaving their apartments. In some areas, officials have built two-meter fences across building entrances that lock residents inside.

But it is not just China that is suffering.

Global supply chains mean we have an incredible range and diversity of stores on UK coasts. But they also make us unprotected if we do not look at where these goods come from and what would happen if the supply dried out.

We need to look at the cargo ships for anchor, or the people detained in their homes. This is about freeing us all from dependence on unreliable partners once we have already learned our lesson.

Over the past five years, we have received three warnings about building resilience at home. Brexit, Covid and the war in Ukraine have all been siren clear. Now is the time to act.

The next alarm – it could be anything from a climate catastrophe to a political failure – may not be so forgiving. And we will not be able to say that we did not know. This storm has been brewing for years.

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