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Macroscope | Why Shanghai reopening is good for Biden and global economy
- News of Shanghai easing its strict lockdown measures could signal an end to supply chain disruptions that have plagued the global economy
- Clearing the snarl-ups would reduce inflationary pressures and boost Biden’s midterm election hopes
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With higher prices dominating the economic and monetary debate in Washington, the reopening of Shanghai might have come just in time for US President Joe Biden. The emergence of China’s commercial hub from strict pandemic-related lockdown measures could also be an inflection point for the commodity and currency markets.
Pandemic-related supply-chain disruptions have been a driver of global inflation, with the economic side effects of Russia’s invasion of Ukraine exacerbating the situation. But the bottom line is that China lies at the heart of global economic supply chains.
Consequently, if production lines in China are disrupted, the rest of the world is left scrambling to find alternatives. As is always the case when demand exceeds supply, scarcity translates into higher prices.
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Economic dependence on Chinese supply chains may not be a palatable concept for Western policymakers, but it is a simple reality.
The West doesn’t always see eye to eye with Beijing, and it has reservations about the implications for the global balance of power given China’s increasing global footprint.
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Be that as it may, and while the West might wish to bind China to a “rules-based” global order in which the West presumably writes the rules, the centrality of China to the smooth functioning of the global economy is indisputable.
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