China Ends the Zero COVID-19 Policy - What this Could Mean for Supply Chains

In China, many business owners are excited  for a new year with no restrictions as China has lifted the Zero COVID-19 Policy. On December 7th, 2022, China put an end to this policy. The critical question is what this means for China’s economy for the coming years and the effect on the supply chain. The world is connected through China-centric supply chains, and any ‘delay’ in those chains causes global production and the world economy trouble. The abrupt move away from the Zero COVID policy could mean that China may begin focusing once again on economic growth. However, China is now facing new supply chain issues and a wave of COVID-19 sweeping through the country, impacting the growth of these newly opened supply chains.

Until recently, China implemented the Zero-COVID Policy, which had civilians stay within their homes until otherwise notified when exposed to COVID-19. This policy led to a shutdown of many businesses across the country. With the new shift away from this policy and due to the abrupt change in messages the Chinese government releases, Chinese civilians have shifted their views. Many citizens now see COVID-19 as a disease more consistent with typical illness than a deadly virus. China affirms that the sudden change in the perspective of the pandemic is being received perfectly among civilians. But the impact of the markets will be clear by this shift in policy. In December of 2022, 9,000 people died daily from COVID-19 in China. This month, that number could be up to 25,000 people, which will heavily impact supply chains and China’s workforce.

An industry that is causing concern if affected by this growing disruption of COVID-19 policies from China is the global medical industry. There have already been some early signs of slowdowns at China’s ports in delivering manufacturing orders. The increase in COVID-19 patients and the lower flow of goods out of Chinese ports could cause the worst supply chain challenges of the world’s pandemic. Due to these slowdowns, there is serious concern over potential shortages in medical treatments across the globe, in particular, antibiotics to blood thinner.

When discussing the medical industry, we see some countries at high risk if China starts to slow in its supply chains. For example, India imports 75% of their medical supplies from China, making China its number one source for medical imports. The United States is another market that relies heavily on Chinese medical care. China is the number one country of medical implications for the United States, leaving the industry vulnerable throughout another wave of COVID-19.

Over the past year, the United States healthcare system has tried to adjust to a range of scarcity due to China’s Zero-COVID-19 Policy disrupting the flow of goods. Now, they must adapt to a new issue. However, the depth of the problem is still not known. Industry analysts have said the lack of data coming out of China (such as the number and location of infections, mortality rate, and different variants) has made it incredibly difficult to predict the future of the disruption. Without knowing the severity of the disruption, with the increasing number of ill citizens, analysts warn that the impact of China’s latest COVID-19 wave could take months to work its way through the supply chain and will directly depend on the trajectory of the pandemic in the coming months. 

While the Zero COVID-19 Policies are ending in China, we will have to continue keeping a close eye on other industries to see the negative or positive effects.