Why New Zealand is in the firing line of China's economic woes, continued COVID restrictions

New Zealand exports and imports could be in the "firing line" as parts of China continue to experience COVID restrictions while the country's economy slows.

China's biggest city by population, Shanghai, is in the middle of a city-wide lockdown as the country continues its zero-tolerance strategy to eliminate the virus. 

The lockdown in Shanghai is causing economic woes for the world's second-largest economy.

Xu Tianchen, China economist for the Economist Intelligence Unit, said short-term supply chain disruptions caused by the lockdown will have an impact on China's economy.

"There will also be ripple effects elsewhere because of the interconnectedness between Shanghai and other regions of China, especially the manufacturing hub of the Yangtze River Delta," he said, according to the BBC.

Xu said lost business for retailers, hotels and restaurants could directly cost Shanghai 3.7 percent of its annual Gross Domestic Product (GDP). 

Brad Olsen from Infometrics told AM on Wednesday about 14 percent of China's economic activity has been affected by COVID restrictions, which could cause "huge ramifications". 

"When you then look at how important China is to New Zealand both in terms of what we get from them and what we want to provide, there are real risks and certainly something New Zealand does need to care a lot about and keep a watchful eye on," he said.

Olsen told AM the lockdown in Shanghai could affect the supply and products coming into New Zealand. 

"I think there is a lot because of just how integrated China is in that global supply system. We are expecting the likes of our retail goods and similar to be affected," Olsen said.

Brad Olsen from Infometrics.
Brad Olsen from Infometrics. Photo credit: AM

"Importantly the restrictions there will impact the rest of the world, which means getting imports from other countries is a bit of a domino effect that comes forward. 

Olsen said China's economy has been a "bit sluggish in recent times", which will impact New Zealand. 

"Domestically we are looking at our exports, we send a third of our exports over to China - the dairy sector, the likes of our meats, forestry and similar - all of those are in the firing line if China isn't able to demand quite as much." 

He said this will be a "real challenge" because New Zealand "gets a lot of money" out of China.

"We are not expecting at the moment that Chinese tourists will come back very quickly even though we are reopening the borders, so as much as we focus here domestically, there are real challenges that we need to be aware of in our own backyard."     

Watch the full interview above.