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Shanghai lockdown threatens economy, business leaders warn

April 15, 2022

The Chinese government has doubled down on its zero-COVID strategy, but long-lasting lockdowns could harm its supply chains. Health authorities warned that Shanghai has not yet controlled its outbreak.

Staff disinfects an area in the convention center-turned makeshift hospital in Shanghai
Many Shanghai residents have voiced their discontent on social media and on the streetsImage: Jin Liwang/Xinhua/picture alliance

The ongoing lockdown in Shanghai could disrupt the country's economy, business leaders warned on Friday, as the central government doubled down on China's "zero-COVID" strategy.

One of Huawei's top executives warned about clogged supply chains. "If Shanghai continues being unable to resume work and production, from May, all tech and industrial players involving the Shanghai supply chain will completely shut down, especially the auto industry!" Richard Yu, head of Huawei's consumer and auto segment, said on the social media platform WeChat.

COVID controls have shut down some of China's largest cities, fueling public irritation, threatening an already weakened economy and prompting warnings of possible global shockwaves.

Shanghai has been at the epicenter of China's struggle to contain its outbreak, as authorities recently sought to loosen some restrictions to quell residents' dissatisfaction. But health officials warned this week that despite a slight lowering in infections, Shanghai didn't have the virus under control.

Shanghai coronavirus lockdown extended

China's growth expected to slow

Beijing shot back at criticism of its strategy, at a time when the US and other governments are dropping restrictions and trying to live with the virus.

"Prevention and control work cannot be relaxed,'' Xi said, according to the official Xinhua News Agency. "Persistence is victory,'' he concluded.

But COVID restrictions in regions producing the world's smartphones, consumer electronics and other goods have prompted forecasters to cut China's economic growth projection to as low as 5%, down sharply from last year's 8.1% expansion.

The figure is lower than the ruling party's target of 5%. China's growth sat at 4% in the final quarter of 2021 after tighter official controls on debt triggered a collapse in home sales and construction, industries that support millions of jobs.

Shanghai residents distressed by lack of food

Auto industry affected

Chinese auto makers have warned there could be a halt in production if Shanghai's COVID curbs continue.

"If supply chain companies in Shanghai and its surrounding areas cannot find a way to dynamically resume work and production, all original equipment manufacturers may have to stop production in May," Xpeng chief He Xiaopeng said Thursday on social media.

Xpeng has been touted as a Chinese challenger to US electric car giant Tesla.

Covid curbs have also affected foreign manufacturers. Volkswagen said it had been "severely hit by Covid-19 outbreaks in Changchun and Shanghai," with the firm being "temporarily unable to meet high customer demand," CEO of Chinese operations Stephan Wollenstein said on Thursday.

Residents clash with authorities

Most of Shanghai's shops remained closed on Friday, with the exception of some shops with half-opened shutters selling goods through delivery drivers.

Locked down residents have vented frustration on social media over a lack of food and medicine. Authorities on Thursday announced they would be converting residential apartments into quarantine space, prompting anger.

Residents scuffled with hazmat-suited police ordering them to surrender their homes, videos on social media showed. Authorities have tried to clamp down on social media posts through censorship.

In one unverified viral video, a drone purportedly deployed by authorities is seen flying through a residential area urging residents to "control your soul's desire for freedom."

jcg/kb (Reuters, AFP, AP)