China: Epicenter of the Supply Chain Crisis How concentrating dependence on China upended our economy and added risk
BY ROBERT KUTTNER Early on in the COVID pandemic, indelible images began to appear of medical personnel wearing trash bags for protection instead of hospital scrubs. It was indicative of unprecedented nationwide shortages of basic medical supplies, particularly PPE (personal protective equipment), such as surgical gloves, masks, face shields, gowns, and hand sanitizer. Why the abrupt scarcity? Initially, it wasn’t due to increased global demand. Wuhan, China, where the COVID outbreak began, happens to be a major center of production and export. The Chinese government, a dictatorship that can make draconian decisions instantly, decided not to fool around. On January 23, 2020, when there were still few U.S. cases, the Chinese state shut Wuhan down, including all transport in or out. Some 11 million people in and around the city were under quarantine. Just west of Wuhan, in Hubei province, is Xiantao, the site of China’s largest manufacturer of nonwoven fabrics used in the production of PPE. An alarming percentage of PPE was made in China, even if the nominal vendor was a U.S.-based multinational corporation, such as 3M. The quarantine blocked not just products made in the Wuhan area, but also exports originating elsewhere that had to pass through Wuhan 8 PROSPECT.ORG FEB 2022
to get to the ports. Twelve other cities in Hubei province, with a total population of 60 million, were subjected to similar restrictions. Other Chinese responses to the pandemic emergency disrupted production more broadly, extending the supply chain crisis from medical supplies to the larger economy. Travel restrictions prevented workers who had gone home for the Lunar New Year from returning to work. China’s “floating population” of rural migrant workers is estimated at 288 million, or about one-third of its labor force. Ports were also suddenly short of workers, causing exports to pile up on docks. In addition, the Chinese government, realizing that it would soon face a mask shortage at home, sent out a call via the Communist Party’s United Front Work Department to have Chinese people living outside the country buy all available PPE and send it to China. By mid-February, as other nations were just beginning to appreciate the impending shortage, overseas Chinese had already sent some 2.5 billion PPE items to China, including two billion masks. Shortages only worsened as the pandemic took hold. By March 3, 2020, the World Health Organization issued a warning of “severe and mounting disruption to the global supply of personal protective
equipment (PPE).” This revealed itself in both monthslong delivery delays and inf lation: Prices for surgical masks increased sixfold, N95 respirators tripled, and gowns doubled. Bidding wars and market manipulation proliferated. China’s extreme quarantine measures have continued into the omicron era. In the Yangtze River Delta, a vital manufacturing center south of Shanghai, outbreaks of COVID in December led to government restrictions on movements in the cities of Hangzhou, Shaoxing, and Ningbo until March 2022, causing factories to cut production. Ningbo is also one of China’s largest container ports. China’s zero-COVID policy is so strict that the Ningbo port, the third-busiest in the world, shut down for two weeks last summer because of one worker’s infection. So, from the very beginning of the pandemic, China has played a bottleneck role unique in the world, both as a producer and as a consumer. The reason why involves decades of decisions made at the highest levels of public and corporate policy, with devastating
