With China’s financial centre still under lockdown, the Covid-19 outbreak in Shanghai is threatening to cripple the country’s economy and tug at the already overstretched global supply chains.
On Wednesday, Shanghai announced a daily record high of 16,766 cases.
Despite being low compared to international standards, this is China’s deadliest epidemic since the virus spread to Wuhan in January 2020, triggering the global pandemic.
Shanghai’s entire 26-million-strong population has been evacuated, causing significant frustration among residents who have been subjected to movement restrictions for weeks as officials stick to its zero-Covid policy of eradicating the disease.
Shanghai has received at least 38,000 medical personnel from different parts of China, as well as 2,000 military troops, and the city is mass-testing individuals.
A separate wave is spreading in the north-eastern region of Jilin, with nine new cases reported in the capital, Beijing. Workers in the city shut down an entire shopping centre when a case was discovered.
There is growing evidence that China’s economy is slowing dramatically as a result of the restrictions.
Growth and contraction are distinguished by a dip below the 50-point threshold in purchasing managers’ index (PMI). In March, China’s services sector shrank at its fastest rate in two years, as an increase in cases limited mobility and hurt demand. The Caixin PMI dropped from 50.2 in February to 42.0 in March.
Last week, the country’s vast manufacturing sector contracted, according to the same survey, and economists cautioned on Wednesday that things might become worse as the Shanghai lockdown begins to affect the results for the coming months.
On Wednesday, Asian stock markets dropped, with the Nikkei down 1.5% and the Hang Seng down more than 1.8%.
The pandemic has disrupted the global economy’s intricate supply chains for two years, producing a dramatic surge in commodity, food, and consumer goods prices.
The war in Ukraine has raised inflation, particularly in oil and grain prices, and further Chinese shutdowns could exacerbate the problem.