Shanghai Goes Into Lockdown

SHANGHAI IS NOT only the largest city to date to be locked down, but China’s financial and commercial hub.

Authorities, who have been battling an outbreak of Covid-19 for a month, had put off doing so for as long as possible because of the potential economic cost. However, a spike in cases has forced their hand.

The necessity of action will be a disappointment as the national surge in new cases is now falling following lockdowns to counter the outbreaks in Jilin province, Xi’an and Shenzhen, the last a spillover from the massive outbreak in Hong Kong.

However, the 3,500 new cases recorded in Shanghai on March 27 accounted for more than half the national total. 

From today, the city is being locked down in two phases for mass testing over the next nine days, starting with everyone east of the Huangpu River, which includes the city’s financial centre in Pudong. The city’s western side is due to go into lockdown from Friday.

Public transport has stopped. Firms have been instructed to suspend operations or work remotely. However, where workers can be confined on-site and follow ‘closed-loop’ testing protocols, factories can continue to operate to mitigate the economic damage. Similar steps are being taken to minimise supply-chain disruption.

Authorities are trying to avoid a larger-scale disruption to production in Shanghai than in Jilin, where the Toyota factory, among others, has been idle for more than two weeks.

Keeping half a city of 25 million people functioning during a lockdown is the furthest China has gone to ease its strict zero-Covid policy involving mass lockdowns and testing to contain surges of infection. However, the contagious Omicron variant is testing the approach severely.

Beijing will not readily abandon zero-Covid, as its willingness to lock down its most populous and wealthy city attests. Yet, it will aim to minimise the economic impact with continuous fine-tuning of the strategy.

Nonetheless, the knock-on effect on the national economy is likely to see the government introduce additional stimulus, including interest-rate cuts, in the near term.