Market News

Fresh China Covid-19 curbs spark trade disruption fears

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This aerial photo taken on October 18, 2021 shows containers stacked at Qingdao port, in China’s eastern Shandong province. FILE PHOTO | NMG

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Summary

  • A fresh Covid-19 outbreak in China is curbing activity at some of the country’s biggest airports, stoking fears among Kenyan traders that further disruption to international flights risks upending trade between the two countries and pushing up the price of Chinese exports.
  • Authorities in China have this week canceled hundreds of flights, closed schools, and ramped up mass testing to try and stamp out a new Covid-19 outbreak linked to a group of tourists.
  • Beijing has maintained a relentless zero-Covid approach with strict border closures and targeted lockdowns, even as other countries including Kenya tentatively try to ease restrictions.

A fresh Covid-19 outbreak in China is curbing activity at some of the country’s biggest airports, stoking fears among Kenyan traders that further disruption to international flights risks upending trade between the two countries and pushing up the price of Chinese exports.

Authorities in China have this week canceled hundreds of flights, closed schools, and ramped up mass testing to try and stamp out a new Covid-19 outbreak linked to a group of tourists.

Beijing has maintained a relentless zero-Covid approach with strict border closures and targeted lockdowns, even as other countries including Kenya tentatively try to ease restrictions.

Disruptions in Chinese ports have negatively impacted traders in Kenya this year, with consumers bearing the brunt of costlier goods.

The situation has forced many traders in the global supply chain to source goods from alternative costlier markets.

Just two months ago congestion at Chinese ports due to a two-week partial closure of the world’s third-largest container port triggered anxiety among Kenyan traders over fresh increases in the cost of goods imported into Kenya.

Meishan terminal at Ningbo port resumed operations in August after shutting down due to a Covid-19 infection case.

The impact of the closure of the gateway worsened logjams in the global supply chains amid a resurgence of consumer spending and a shortage of container vessels.

Meishan terminal accounts for about a fifth of traffic at the Ningbo port, one of China’s top two container ports.

The Kenya Association of Manufacturers (KAM) said then it was monitoring the situation and may urge its members to turn to other markets for raw material if the situation persisted.

“The association is constantly monitoring global trends on logistics matters, including possible delays and disruptions that may occur due to the sudden surge of Covid-19 cases and consequent measures to mitigate its spread,” the lobby at the time.

Kenya imports a wide range of raw materials and finished consumer goods from China, with electronics such as mobile phones topping shipment orders.

Others are clothing, kitchenware, furniture, machinery, optical and medical equipment. Several Chinese ports are facing congestion as vessels due to call at Ningbo are being diverted and cargo processing is slowed down partly as a result of stricter disinfection measures under China’s “zero-tolerance” coronavirus policy.

Orders for Kenya’s produce by China fell 6.71 percent to $139 million (Sh15.07 billion) last year from $149 million (Sh16.15 billion) a year earlier which was a record in recent years for a country that largely buys cut flowers, specialty tea, coffee, beans, and avocadoes amid similar lockdowns.

The situation has already forced many traders in the global supply chain to source goods from alternative costlier markets.

China has cemented its position as the largest source market for Kenya’s imports, followed by India and the United Arab Emirates. Official data shows that Kenya’s imports from China stood at Sh208.9 billion in the six months to June, representing a 32 percent rise from Sh157.87 billion recorded in a similar period of 2020.

Domestic outbreaks have largely been eliminated, but as China logged a fifth straight day of new cases – mostly in the northern and north-western areas – the authorities this week beefed up coronavirus controls.