China Locks Down Megacity Chengdu as Covid Zero Intensified

  • City of 21 million is biggest to be locked down since Shanghai
  • Electronics, automaker supply chains at risk of disruption

The Chinese metropolis of Chengdu will lock down its 21 million residents to contain a Covid-19 outbreak, a seismic move in the country’s vast Western region that has largely been untouched by the virus.

The capital of Sichuan province, Chengdu will be the biggest city to shut down since Shanghai’s bruising two-month lockdown earlier this year. The move — which will upend the lives of millions of people and businesses, with repercussions for China’s economy and beyond — shows the country’s commitment to the Covid Zero approach espoused by President Xi Jinping, despite the disruption it’s causing.

The lockdown of Chengdu starts Thursday night and comes after officials reported 157 new Covid cases for Wednesday. The city, which accounts for about 1.7% of China’s gross domestic product, is home to technology companies and automakers, including Toyota Motor Corp. and VW China. Foxconn Technology Group, the world’s largest assembler of Apple Inc.’s iPhones and other devices, makes iPads in the area. Intel Corp. and other foreign firms also have facilities in the city.

Chengdu is also a popular tourist destination, famed for its giant panda sanctuary.

Chengdu Lockdown

Megacity finds more than 900 cases in 10 days

The extent of the economic dislocation depends on the duration of the lockdown. While the immediate consequence is a chill on consumer activities like shopping and dining out, the fallout could be severe for the giant southwestern manufacturing sector if supply chains are severed for a protracted period, sapping factory inventories and hitting production.

Global stocks hit a six-week low on news of the lockdown and hawkish commentary from central banks. A gauge of Chinese stocks listed in Hong Kong extended losses, falling as much as 1.7% to a session low on Thursday. China’s benchmark CSI 300 Index was down 0.3% as of 1:13 p.m. in Shanghai. Currencies in emerging markets also fell, with the South Korean won dropping more than 1% against the dollar as the news spurred more risk aversion.

Isolated at Home

Mass testing will begin Thursday evening. Residents must stay home indefinitely other than in exceptional situations, such as a medical emergency, the city government said. Families can send a single person out, once per day, for groceries. They can leave the city only after getting a negative test result within the past 24 hours.

Covid has spread widely within China thanks to its increasing contagiousness, even as the number of cases overall dwindles in response to aggressive measures to eliminate it. The success in stopping outbreaks is directly tied to fast action to interrupt transmission.

The lockdown approach, which is inflicting a heavy economic and social toll on the world’s second-largest economy, is being embraced nationwide. There’s additional pressure to tame flareups in the run up to the party congress later this year, when Xi is expected to secure a precedent-breaking third term as leader.

Total infections in Chengdu in the current outbreak have exceeded 900, according to a tally of daily numbers released by the local health commission. Residents who have special reasons or virus prevention jobs can take public transportation with a negative Covid test result from the previous 24 hours.

Weather Impact

Due to the extremely hot weather in the city, frequent contact among people in indoor entertainment venues including water parks led to increased transmission of the virus, Yang Xiaoguang, head of Chengdu’s health commission told reporters during a press conference on Tuesday.

Chengdu postponed school restart times on Wednesday, as did multiple cities across the country, citing its virus prevention efforts.

Source: Bloomberg

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