Another Supply Chain Crisis?

If China’s zero-Covid strategy fails, the world & India should prepare for shortage of key products

- Devi Shetty

US Federal Reserve chair Jerome Powell recently said that Americans should be prepared for the global supply chain to remain in crisis through 2022. Lean manufacturing processes and just-in-time delivery mean a factory closure in one Asian country can unleash a global crisis.

Covid-induced supply chain disruption was a wake-up call for policymakers, highlighting the total dependence on one country for vital products. However, de-risking strategies will take a few years to implement.

What the world needs right now is an interim plan for maintaining the global supply chain if China’s ‘zero-Covid strategy’ fails after the Winter Olympics in February and China goes through the pandemic like all other countries. I am no expert in global commerce but based on my computer chip experience I want to caution policymakers and industry experts to be prepared for this scenario.

I certainly wish China doesn’t go through the misery of a deadly Covid wave. However, if we assume that the Chinese are exactly like us, Covid may not spare them, they may hide from the virus with lockdown, but you can’t lock down forever.

Several countries adopted a zero void strategy at the beginning of the pandemic. Unfortunately, the highly transmissible Delta variant ruined their strategy. Vietnam, which was once hailed as a model, is now struggling with thousands of sick Covid patients flooding hospitals, overwhelming the health system, virtually paralyzing the country.

Even countries like Australia, known for the longest lockdown, New Zealand and Singapore have abandoned the zero-Covid strategy and started advocating that citizens live with the virus.