Canadian Manufacturing

Shanghai lockdown tests ‘zero COVID-19’ limits, affect markets

by Associated Press   

Exporting & Importing Manufacturing Operations Supply Chain Infrastructure Public Sector Economy Manufacturing regulation supply chain trade

China boasts a vaccination rate of around 87% but the percentage is much lower among seniors, who are more vulnerable to the virus.

Chinese authorities sought to reassure companies and jittery investors on Mar. 29 as a two-phase lockdown of Shanghai’s 26 million people entered its second day, casting an unusual quiet over the normally bustling center of finance, manufacturing and trade.

The omicron outbreak in Shanghai is one of a series across the country that is testing the government’s ability to enforce a strict “zero-COVID” strategy without overly disrupting the economy and people’s daily lives.

Many shops were shuttered and pedestrians were sparse even in the half of the city that remained open. The lockdown is being conducted in two phases to limit the disruption, starting with the Pudong financial district and adjacent areas on the east side of the Huangpu River that divides Shanghai.

Market reactions including Mar. 28’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,” 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.”

Any interruption of activity at the port of Shanghai poses a greater threat to industry and trade. State media reported that the world’s biggest port was handling normal cargo volumes and that managers were ensuring that vessels “can call normally” at the port. General Motors Co. and Volkswagen AG said their Shanghai factories were operating normally.

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.

China boasts a vaccination rate of around 87% but the percentage is much lower among seniors, who are more vulnerable to the virus.

Macquarie Group said in a report that China should be able to contain the virus in the next few weeks, given the effectiveness of lockdowns.

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


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