21-10-2022 What can shipping expect from China? Lloyd’s List
The ongoing party congress in Beijing has thus far shown little hope that China’s draconian lockdowns will relax any time soon. China’s economy may be sputtering, thanks in large part to the government’s “zero-Covid policy”, which relies on oppressive restrictions to contain outbreaks, but President Xi Jinping is not for turning. State media reports have been busy reinforcing Mr Xi’s unswerving strategy, explaining why the approach “is sustainable and must be upheld”. Shipping should not anticipate any respite until March next year at the earliest.
The lockdown in Ningbo in recent days has provided yet another stark reminder of how shipping and logistics companies have fallen victim to the heavy-handed policy. With blocked roads, closed warehouses and stranded truck drivers comes disrupted container transport and increased vessel berthing time at terminals. The Chinese port city has already become experienced in handling Covid-led logistics snarl-ups, which have occurred several times in the past two years. Ad hoc efforts have been made to unclog the traffic, but they treat the symptom not the disease. Container lines have been forced to accept the reality that the lockdowns are now the new normal and that expensive adaptations are here to stay. Many are dispersing equipment into different ports from just a few hubs to spread their risks. However, this comes at the cost of efficiency.
In the dry bulk sector, owners might have to take back their optimism about a recovery in cargo volume late this year or even early next year. Persistent Covid restrictions will continue to weigh on economic growth and hence China’s appetite for commodity imports. A worrying sign is that domestic steel prices have started to decline again following a short-lived rebound. The peak season demand is weaker than expected, said Chinese consultancy MySteel. The World Steel Association expects China’s steel demand to fall 4% this year owing to a slump in the property market. It predicts flat growth next year. Some voices are calling for more government stimulus measures and the removal of strict virus-control rules. The zero-Covid position does not just threaten economic prospects, it also increases the risk of China becoming isolated. It strengthens the impression that China needs to be a different system from those societies that have chosen to move on from the pandemic.
As a result, policy makers could be inclined to prioritize security over reforms. That said, in his nearly two-hour congress speech, Mr Xi only gave two brief references to Covid policy, which perhaps he and his supporters do not want to treat as a long-term challenge. Most of the words were spent on portraying an ambitious development roadmap offered by the Chinese Community Party to modernize China in its unique way, a recognition of the Middle Kingdom’s rise as an alternative to western democracies. Now, all eyes are on the final line-up of new members of the elite Politburo Standing Committee, the party’s highest echelon of power, which will be revealed on Sunday. They are expected to help Mr Xi, who is poised to assume a third five-year term as China’s leader, to turn the ambition into reality.
During his first two terms, the initial excitement of the Belt and Road initiatives gave way to the fear of increased Sino-US tensions. The “helmsman”, as Mr Xi is sometimes called, did warn of “high winds, choppy waters and even dangerous storms on our journey ahead”. Without a turnaround in Beijing’s Covid stance, that will not be news to anyone in the shipping industry right now.