China | Shanghai Lockdown: most likely scenarios and its impact on global supply chain

The Covid-19 flare-up in Shanghai has deteriorated very fast recently. China’s authorities are still embracing their “Zero Covid” strategy. Although it remains an open question whether Shanghai can win this uphill battle, we are certain that China’s authorities won’t capitulate to the Omicron variant any time soon.

Key points

• Key points:
• A full-scale lockdown is imposed in Shanghai. Nevertheless, we don’t believe that China’s authorities will switch to the “co-existence” mode in dealing with the Shanghai flare-up before June.
• One of three scenarios is likely to take place after Shanghai’s lockdown in April and May. In our base scenario, the lockdown will be effective and the city is expected to end the lockdown as early as in June.
• Although at this moment it’s hard to predict the growth outlook under these three scenarios, we try to estimate the economic costs under different scenarios.
• Shanghai’s lockdown has affected the global supply chain through three channels: production, logistic and intermediate goods channels.
• Lastly, we use a batch of high-frequency indicators to monitor Shanghai’s situation in a timely way.

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