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Shanghai lockdown tests ‘zero-COVID’ limits, shakes markets

Residents line up for COVID tests on a street in Shanghai, China, Tuesday, March 29, 2022. 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. (AP Photo/Chen Si)

BEIJING (AP) — 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 includes the Pudong financial district and adjacent areas on the east side of the Huangpu River that divides the center of finance, manufacturing and trade.

The measures confining Pudong residents to their homes, closing nonessential businesses and requiring mass testing are to be lifted 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 fabled riverside Bund in Puxi with its century-old historic buildings — were unusually quiet.

Zhang Meisha, a 39-year-old freelancer taking a morning jog along the Bund, said she was trying to get as much sunshine as possible before Puxi goes under lockdown.

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

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 McDonalds of people awaiting their orders.

The shutdown adds to anxiety in financial markets over Russia’s war on Ukraine, the U.S. 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,” 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 subvariant 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.

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 centers 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 U.S. 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. Asymptomatic patients are being quarantined in facilities outside hospitals to free up limited medical resources.

“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 that consumer businesses and the property sector were set to take the biggest hits.

The Shanghai lockdown indicates China will stick with its hard-line COVID-19 strategy at least until the ruling Communist Party holds its once-every-five-year congress this fall or winter, the report said.

Xi Jinping is expected to be granted an unprecedented third five-year term as party leader at the congress. Authorities have promoted the need for stability above all in the runup to the event.

“Zero-COVID” has been credited with preventing mass nationwide outbreaks and China boasts a vaccination rate of around 87%. However, that percentage is much lower among seniors who are the most likely to be sickened by the virus.

Wang Hui, who runs a shop near the Bund, said high rents and a lack of customers could cost him his business.

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

Associated Press researcher Chen Si in Shanghai and business writer Joe McDonald in Beijing contributed to this report.