Shanghai’s two-phase lockdown tests ‘zero-Covid’ limits

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 entered the second day of the lockdown’s first phase, which includes the Pudong financial district and adjacent areas on the east side of the Huangpu River.

The measures confining Pudong residents to their homes, closing non-essential businesses and requiring mass testing are to be lifted on Friday.

At that time, the vast Puxi area on the opposite side of the river will go under lockdown.

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

Shops along the nearby Nanjing Road pedestrian shopping street were mostly closed, with few people out and about.

Restaurants were offering only takeaway service, and a long line formed outside a McDonald’s of people awaiting their orders.

The shutdown adds to anxiety in financial markets over Russia’s war on Ukraine, the US 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 do not 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,” he said.

“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.”

The new Omicron BA.2 sub-variant of coronavirus is widely blamed for bringing a new surge in cases to Shanghai, which had suffered relatively little effect from the pandemic that was first detected in the central Chinese city of Wuhan in late 2019.

Elsewhere in China, new cases have continued to decline in Hong Kong following a recent wave that has led to more than 7,000 deaths.

The semi-autonomous city recorded 7,680 new cases, with no immediate word on whether authorities plan to proceed with mass testing of all of its 7.4 million people.

The north-eastern province of Jilin accounted for 1,055 of the 1,228 new confirmed cases and 812 of the 5,658 asymptomatic cases reported on the mainland on Tuesday.

In Shanghai, panic buying struck markets and some residents have reported shortages of meat and vegetables, including on online platforms.

Authorities are working to ensure food supplies and have converted gymnasiums and exhibition centres to house patients, most of whom show no symptoms.

Government workers in hazmat suits, joined by about 68,000 volunteers, have fanned out and are stationed at checkpoints around residential compounds walled off with traffic dividers and improvised barriers.

Shanghai recorded 4,477 new cases on Monday, all but 95 of them asymptomatic.

Despite a nationwide surge, numbers of new Covid-19 deaths have remained low, with two more added on March 20 for a total of 4,638.

The low number of deaths and total of 145,808 cases since the start of the pandemic are a fraction of the toll in the US and other countries, and are touted by China as evidence of the wisdom of its approach.

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.

Authorities say the two-phase approach was designed to reduce disruptions, and unlike in past situations, definite end dates have been given for the lockdown in Shanghai.