Two-stage lockdown ends in Shanghai, but strict restrictions remain to achieve zero-Covid

On April 1, Shanghai's Puxi started a four-day lockdown as the one in Pudong was extended in some communities were Covid-cases were detected. While residents in Puxi are under strict lockdown until April 5, some of the 9 million people living east of the Huangpu River, who completed two rounds of nucleic acid tests between March 28 and April 1, remain confined to their homes or neighborhood for up to 10 more days in accordance with epidemic control protocols based on the test results. The transmission of Covid-19 in Shanghai is “rapidly rising,” and the city is expected to see more infections in the near future.

The Chinese mainland reported 13,146 local Covid-19 cases on April 3, including 1,455 confirmed and 11,691 asymptomatic ones, the highest daily increase since the latest outbreak, which has already infected over 100,000 people. Shanghai reported 438 local confirmed and 7,788 asymptomatic cases on April 3. The total number of symptomatic and asymptomatic Covid-19 infections in Shanghai since the start of the current outbreak on March 1 reached 52,000. All citizens were told to carry out rapid antigen tests on April 3 before citywide nucleic acid testing the following day.

Chinese Vice Premier Sun Chunlan made an official visit to the city to help battle the virus. Sun stressed that the dynamic zero-Covid strategy must be upheld with resolute and swift action. With Shanghai's hospital system on the verge of being overwhelmed, medical teams and supplies from across the country are flooding in to help fight the outbreak, with thousands of medical workers coming from the neighboring provinces of Jiangsu and Zhejiang to assist in nucleic acid testing and the building of makeshift hospitals. In Suzhou, which borders Shanghai, a new virus mutation – VOC/Omicron variant BA.1.1 – was identified, posing new challenges in the region.

Shanghai is not the only region that’s experiencing a Covid-19 outbreak. Lei Zhenglong, Deputy Director of the National Health Commission’s Disease Control Bureau, said that from March 1 to 31, a total of 103,965 local cases were reported nationwide, affecting 29 provincial-level regions. “90% of the newly reported infections nationwide come from Jilin province and Shanghai. The epidemic in Jilin is still in the developing stage while in Shanghai it is expanding rapidly,” he said. But Wu Zunyou, Chief Epidemiologist at the Chinese Center for Disease Control and Prevention, said that China can still achieve the goal of zero Covid, although it would take a long time because the Omicron strain is spreading fast and it is difficult to detect. To prevent the current outbreak from spreading to other cities from Shanghai, the municipal government issued a travel restriction on March 31 that requires people leaving Shanghai to show a negative nucleic acid test taken within 48 hours before departure as well as a negative antigen test within 24 hours prior to starting their journey.

Starting on April 5, Shanghai will implement a “venue code” and an all-in-one machine for health checks, or “digital sentry,” citywide as a new beefed-up measure to monitor and curb the spread of Covid-19. Residents will be required to scan the “venue code” to enter some key locations in the city, including pubs, restaurants and hotels. Administrators or operators of key locations should post the QR code or install the “digital sentry” machines at the entrance. The venue code can be accessed on the app “Government Online-Offline Shanghai” or “Suishenban”. Senior residents or juniors who don't have smartphones are allowed to use registration on paper.

The two-stage lockdown in Shanghai raised fears among foreign investors that China will stick to its zero-Covid strategy longer than first thought, while putting pressure on businesses. The sudden decision to impose consecutive lockdowns in Pudong and Puxi caught many foreign firms by surprise. “While the majority of G20 countries are exiting pandemic-related lockdowns, China appears to be stuck with its old toolbox of zero tolerance and draconian measures to fight Covid,” said Joerg Wuttke, President of the European Union Chamber of Commerce in China (EUCCC). “We fear that we may be about to witness the beginning of an Omicron crisis across China.”

Shanghai’s lockdown shows that Chinese authorities are continuing their “dynamic zero-Covid” policy, which involves stamping out local outbreaks with strict preventive measures, while much of the rest of the world is shifting to live with the virus. The lockdown will have significant ramifications on the service sector, but the European Chamber of Commerce pointed out that supply chains will also be disrupted as essential workers are quarantined or key materials are unable to be delivered. Wuttke said unemployment might spike in the service sector, though the manufacturing sector should be able to handle the lockdowns better “as some have already established production rosters, whereby operational staff remain on factory grounds for up to seven days, before a new team takes over”.

Bettina Schoen, Chair of the EUCCC’s Shanghai Chapter, said it was a terrible situation with all kinds of uncertainty, as production capacity at many European firms was limited and it was only possible to plan on a daily basis. “Looking at what companies report, the situation is very difficult,” she said. “Depending on how long the lockdown will last it will have quite a big impact on revenues in coming months.” Many foreign investment banks have lowered their China growth estimates for the year as the Omicron wave spreads and other factors like the Ukraine war, commodity price inflation, and U.S. rate hikes weigh on the economy. “Spreading Omicron infections are testing the sustainability of this policy. The possibility of rapid transmission of Omicron in China is a key risk to its economy,” Louis Kuijs, Chief Asia-Pacific Economist at S&P, wrote in a note.

Hong Kong has meanwhile been grappling with its worst outbreak, with more than 7,700 deaths so far – most of them unvaccinated elderly people – and the health system overwhelmed.

This overview is based on reports by the China Daily, Shanghai Daily, Global Times and South China Morning Post.