Shanghai lockdown tests ‘zero-COVID’ limits and shakes up markets

BEIJING >> A two-phase lockdown of Shanghai’s 26 million people is testing the limits of China’s “zero-COVID” strategy, which is shaking markets far beyond the country’s borders.

China’s largest city on Tuesday entered the second day of the first phase of the lockdown, which encompasses the Pudong financial district and adjacent areas on the east side of the Huangpu River that divides the financial, manufacturing and service hub. trade.

With public transport suspended and bridges and tunnels connecting the two sides of the city closed, the city’s usually busy streets – including the legendary riverside Bund in Puxi with its centuries-old historic buildings – were unusually quiet.

Zhang Meisha, a 39-year-old freelancer who takes her morning jog along the Bund, said she was trying to get as much sun as possible before Puxi was locked down.

“I hope the Shanghai spring can wait for us,” Zhang said.

The shutdown adds to financial market anxiety over Russia’s war on Ukraine, the Federal Reserve’s efforts to quell soaring inflation by raising interest rates and other economic challenges. .

Market reactions, including Monday’s 7% drop in oil prices in London, do not reflect the “true reality of the situation”, but investors were already worried about China and the global economy, said Rabobank’s Michael Every.

“We have a whole mountain of issues to deal with, and this is just one of many buttresses,” Every said. “If that’s all it is, a covid lockdown, it’s not hard to look into recent history books and see how it plays out. But it interfaces with a lot of other issues.

The new omicron BA.2 subvariant is widely blamed for causing a further rise in cases in Shanghai, which had suffered relatively little from the pandemic that was first detected in the central Chinese city of Wuhan in late 2019. .

Measures confining Pudong residents to their homes, closing non-essential businesses and requiring mass testing are to be lifted on Friday. At this time, the large area of ​​Puxi across the Huangpu River will be closed.

Panic buying has hit markets and some locals have reported shortages of fresh meat and vegetables, including on online platforms. Authorities are scrambling to secure food supplies and have converted gymnasiums and exhibition centers to house patients, most of whom show no symptoms.

Government workers in hazmat suits, joined by some 68,000 volunteers, fanned out to control checkpoints around residential compounds surrounded by plastic traffic dividers and makeshift barriers.

Shanghai recorded 4,477 new cases on Monday, all but 95 asymptomatic. Despite a nationwide increase, the number of new deaths from COVID-19 remained low, with two more fatalities on March 20 for a total of 4,638.

Shanghai’s lockdown is set to become the biggest of any city in China’s virus campaign, in which millions of people have been confined to their homes for weeks in cities across much of the country.

Despite calls for a more targeted approach and some system tweaks, conditions in Shanghai show the government continues to rely on extreme measures, regardless of the social and economic costs.

Authorities say the two-phase approach was designed to reduce disruption and, unlike past situations, specific end dates have been given for the lockdown in Shanghai. Asymptomatic patients are quarantined in facilities outside of hospitals to free up limited medical resources.

“China should be able to contain the virus in the coming weeks as the lockdown is working,” global financial services firm Macquarie Group said in a report.

“But COVID poses a substantial downside risk to growth for the rest of this year, as the lockdown is also very costly,” the report said, adding that consumer businesses and the real estate sector are set to take the biggest hits.

The Shanghai lockdown indicates that China will stick to the hard-line strategy at least until the ruling Communist Party holds its congress every five years this fall or winter, according to the report.

Xi Jinping is set to be granted an unprecedented third five-year term as the party’s congress leader. The authorities have highlighted the need for stability above all in view of the event.

“Zero-COVID” has been credited with preventing massive outbreaks nationwide as seen in the United States and other countries and China has a vaccination rate of around 87%. However, this percentage is much lower among older people who are most likely to catch the virus.

Wang Hui, who runs a store near the Bund, said high rents and a lack of customers could cost him his business.

“I don’t know how much longer we can hold out,” Wang said.