Shanghai Lockdown Tests China’s Zero-COVID Policy

BEIJING — A two-phase lockdown of Shanghai’s 26 million people is testing the limits of China’s hard-line “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 lockdown’s first phase, which encompasses the Pudong financial district and adjacent areas on the east side of the Huangpu river that divides the center of finance, manufacturing and trade.

With public transport suspended and bridges and tunnels connecting the two sides of the city closed, usually bustling city streets — including the fabled riverside Bund in Puxi with its century-old historic buildings — were unusually quiet.

Zhang Meisha is a freelancer of 39 years who took to the Bund for a morning jog. She said that she wanted as much sun as possible before Puxi takes over.

Learn More China Faces Its Worst COVID-19 Outbreak Since Wuhan

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

The shutdown adds to anxiety in financial markets over Russia’s war on Ukraine, the Federal Reserve’s effort to cool surging inflation by raising interest rates and other economic challenges.

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

“We have a whole mountain of problems to worry about, and this is just one foothill among many,” said Every. “If that’s all it is, a COVID lockdown, it’s not difficult to look in recent history books and see how it plays out. But this interfaces with a lot of other issues.”

A new subvariant in the micron BA.2 is being blamed for driving a surge of cases to Shanghai. Shanghai was previously relatively unaffected by the pandemic in central China, first discovered in Wuhan at the end 2019.

Friday will see the end of Pudong’s restrictions that kept residents in their houses, closed nonessential shops and required mass testing. The large Puxi, on the other bank of the Huangpu River will also be put under lockdown.

Some residents reported shortages in fresh produce and have complained about panic buying on markets. To ensure that food is available, authorities have turned gyms into exhibition centres to accommodate patients. The majority of them are not showing any symptoms.

With 68,000 volunteers and government workers dressed in hazmat suits they have set up checkpoints at residential areas that were sealed off by plastic traffic dividers or improvised barriers.

On Monday in Shanghai, 4,477 cases were reported. All but 95 of these new cases were symptomatic. The number of COVID-19-related deaths has been declining despite a national surge. Two more cases were added to the list on March 20, bringing it up to 4,638.

The Shanghai lockdown stands to become the largest of any city in China’s campaign against the virus, in which millions have been confined to their homes for weeks at a time in cities across much of the country.

Despite calls for a more targeted approach and some tweaking of the system, conditions in Shanghai show the government’s continuing reliance on extreme measures, regardless of the social and economic costs.

Officials claim that the two-phase strategy was intended to minimize disruptions. And unlike past circumstances, Shanghai has been set with definite deadlines for its lockdown. In order to make available limited medical resources, symptomatic patients will be kept at bay in other facilities.

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

“But COVID does pose substantial growth downside risk in the rest of this year, as lockdown is also very costly,” the report said, adding consumer businesses and the property sector were set to take the biggest hits.

Reports indicate that China is likely to continue its hard-line policy until the Communist Party’s once-every-5-year Congress in this fall/winter.

Learn More How Hong Kong Became China’s Biggest COVID Problem

Xi Jinping, the party leader of the congress’ unprecedented third term for a fifth time in five years, is likely to receive a record-breaking three-year extension. In the lead-up to the event, authorities have stressed the importance of stability.

“Zero-COVID” has been credited with preventing mass nationwide outbreaks as seen in the U.S. and other countries and China boasts a vaccination rate of around 87%. This percentage drops to a much lower level among senior citizens, who are more likely to contract the virus.

Wang Hui who owns a store near the Bund said that high rents could lead to a loss of business.

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

This report was contributed by Chen Si, an Associated Press reporter in Shanghai, and Joe McDonald, a Beijing business writer.

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