China Lockdowns Start to Affect Production

Taiwanese electronics company Pegatron announced this week that it had suspended production at its facility in Shanghai until further notice.

On the advice of the local government, Pegatron joined other electronics manufacturers, like Apple, in halting its operations due to tough lockdown restrictions.

Shanghai, China's financial hub and home to the regional headquarters of hundreds of international companies, has become the epicenter of China's latest Coronavirus outbreak, and the resulting “zero-COVID” strategy.

Since the latest wave started in March, the city has recorded more than 220,000 COVID cases, leading to strict stay-at-home orders and greater challenges for businesses.

The country's auto industry has been particularly hard hit. This week, Volkswagen said it had suspended production for weeks, joining Toyota and Tesla.

What does this mean for me? 

China plays a key role in the global economy. The country’s tough new COVID lockdowns have been predicted to cause supply disruptions around the world. This is now coming to bear.

As an investor, you can only monitor how this important developing story unfolds. Not unlike how the war in the Ukraine has affected the oil and gas industry, the China COVID situation is once again revealing how important supply-chain integrity is to the global economy.

Whenever supply chains are throttled, you can expect shortages to ensue and demand to climb. This will inevitably lead to downstream consumer-side effects.