Suez Canal blockage: China to see minor raw material disruptions, but accident further exposes ‘risks’ of global supply chains

The Suez Canal blockage will have limited impact on China’s economy, but may prompt firms to once again consider diversifying global supply chains

The ultra-large container ship Ever Given has broken free from the banks of the Suez Canal after a five-day salvage effort, but the rescue mission is still under way

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The ultra-large container ship Ever Given has been partially freed from the banks of the Suez Canal after a five-day salvage effort. Photo: Reuters

Published: 8:15pm, 29 Mar 2021Updated: 10:12am, 31 Mar 2021

Any upheaval in the Chinese economy due to the blockage of the Suez Canal by a massive container ship is likely to be minimal given most of its intermediate supply chains are located in the Asia-Pacific region, economists and analysts say.

Although there will be some impact on China, it will be mostly limited to sectors such as battery and rubber manufacturing, which depend on intermediary raw materials from Europe, they added.

However, the bottleneck in one of the world’s busiest trading waterways following the grounding of the ultra-large Ever Given has raised the alarm again in economies dependent on trade with China and Asia, underlining the need to diversify supply chains, especially after the mayhem caused by lockdowns during the pandemic.

“Many of [Asia’s] intermediate supply chains are located within the Asia-Pacific region, which should initially mute the impacts of supply and price. Much depends upon the length of the shutdown of the canal,” said Steve Cochrane, Moody’s chief economist for the Asia-Pacific region.

The shutdown does, however, bring to light additional risk factors as firms reconsider global supply chains

Steve Cochrane

“The shutdown does, however, bring to light additional risk factors as firms reconsider global supply chains. Geopolitical concerns rose to the forefront during the height of the US-China trade war. Covid-19 added another dimension as it illustrated differential approaches, and effectiveness, of policy and disaster preparedness across countries and regions.