PBOC Pledges Loans to Protect Supply Chain

The People’s Bank of China (PBOC) has pledged financial backing for trucks and logistics companies amid the country’s worst COVID outbreak in two years.

As Bloomberg News reported Friday, the move is designed to support China’s supply chain, with the central bank asking lenders to “reasonably” extend and renew loans for the industry.

The PBOC says financial institutions will be encouraged to increase support for the transportation industry with policies such as re-lending and rediscounting tools. The bank added that it plans to increase credit to air cargo companies as well.

China has seen an uptick in supply chain disruptions in places such as Shanghai – home to the largest container port in the world – following COVID lockdowns. Congestion in ports and road checks have made delivery times longer, hampered production and reduced consumption, making China’s yearly growth target of 5.5% tough to reach.

The Bloomberg report says business figures in China are warning of slowing production due to supply chain issues. Among them is He Xiaopeng, CEO of electric-vehicle firm Xpeng Inc. In a social media posting Thursday, he warned that Chinese carmakers could be forced to shut down production in May if shutdowns persist in Shanghai.

And Richard Yu, chief executive of Huawei Technologies Co.’s smart car solutions unit, brought similar concerns, saying production for entire technology and industrial sectors which have supply chains that rely on Shanghai could halt next month if the city doesn’t resume operations.

Read more: Container Shipping Rates Tank Amid US inflation, Shanghai’s Pandemic Lockdown

As PYMNTS reported Friday, China’s supply chain troubles may have had a ripple effect on rates for shipping containers, which are falling while prices for other things are rising, as the pandemic is disturbing the flow of goods from China, reducing the need for container shipping.

According to the World Container Index, a resource for independent container market data, shipping along major routes from Shanghai to Los Angeles and Shanghai to New York have fallen a respective 17% and 16%.

But the most dramatic statistic: the WCI has fallen 13% since March 10, which suggests spring retail sales will suffer as COVID in China is having a larger impact on global supply chains than many expected.