China’s Silicon Valley Shenzhen orders production halts Control Covid

People wait in line for nucleic acid samples in Shanghai, China, 12 March 2022.

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BEIJING — Mainland China is facing the worst Covid-19 outbreak since the country clamped down on the pandemic in 2020, with major cities rushing to curb business activity.

Shenzhen, the largest city in the manufacturing hub of Guangdong province, called on all companies not involved in essential public services to halt production or let employees work from home for a week starting Monday. The production halts also reportedly include Apple supplier Foxconn, which did not immediately respond to a CNBC request for comment.

The city, sometimes dubbed China’s “Silicon Valley,” has suspended public transit and begun a third round of city-wide testing. Shenzhen has reported more than 400 confirmed cases since late February.

These numbers and case numbers across China pale in comparison to other countries. But the rapid rise in cases in recent days has prompted local authorities to control the outbreak as China seeks to maintain its zero-Covid strategy.

Shanghai, the coastal metropolis with many foreign companies and financial firms in China, has switched schools back to online teaching. Some neighborhoods are in lockdown and have been conducting mass testing, and residents typically cannot leave until the results are negative.

The city on Saturday urged residents not to leave Shanghai unless absolutely necessary. More than 600 confirmed cases have been found since the end of February.

Jilin province in northern China reported an overnight surge of over 1,000 new locally transmitted coronavirus cases last weekend, bringing the total cases to more than 2,900 this month through Sunday.

Overall, mainland China reported 1,437 new confirmed cases on Sunday – with just 100 attributed to overseas travelers – for a total of 8,531 domestically transmitted active cases. This is the highest level since March 2020. No new deaths were reported.

Hong Kong, a special administrative region just across from Shenzhen, has been battling a resurgence of Covid cases in recent weeks. According to Our World in Data, the region has the highest number of new deaths related to Covid-19 per million people in the world.

The outbreak in Hong Kong dates back to the highly transmissible Omicron variant, which has since spread to the mainland.

Beijing city on alert

The capital Beijing said Sunday it had identified six sources of transmission for the latest handful of communal cases, reported mainly in the city’s inner city and east. Local authorities said anyone returning to Beijing will be barred from attending gatherings for seven days after arrival.

The capital has had one of the strictest Covid control guidelines in the country for months. Travelers must have a negative Covid test taken 48 hours prior to entering Beijing and undergo another test within 72 hours of arrival. If their 14-day travel history shows they have visited a location with a confirmed case, they will not be allowed to enter the city.

After the emergence of Covid-19 in Wuhan in late 2019, mainland China shut down more than half of the country in February 2020 to contain the outbreak. Domestically, the virus was under control within weeks, but Covid had spread abroad in a global pandemic.

South Korea, followed by Germany, has the highest 28-day new case counts at 5.2 million and 4.8 million, respectively, as of Monday, according to Johns Hopkins data. The US has recorded the highest number of deaths, with more than 967,000 as of Monday morning Beijing time.

Zero Covid will not go away

Mainland China has maintained a strict “zero Covid” policy for the past two years. Travel restrictions and the potential for quick lockdowns have weighed on domestic tourism and services businesses and depressed consumer spending.

An annual parliamentary session that ended on Friday gave no sign that the central government plans to relax its Covid control policies, although official statements have added terms such as “dynamic” in recent months.

Vice Premier Sun Chunlan said at a government meeting on disease control on Saturday that the country should continue to pursue the “dynamic” zero-Covid policy and take all measures to prevent a large-scale resurgence of the virus.

Her remarks, as released by state media, ended with a call to prepare the way for a top meeting of China’s ruling Communist Party later this year. Chinese President Xi Jinping is expected to receive an unprecedented third term at the meeting.

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Abandoning zero-Covid “might now be perceived as an admission that the strategy didn’t work at all,” said Ting Lu, China’s chief economist at Nomura, in a note on Friday.

“The next 12 months is a crucial time for the leadership transition that occurs every ten years, pushing top executives to cling to the status quo to avoid policy blunders,” he said. “Images of many Hong Kong Covid patients being treated outside crowded hospitals have further convinced Chinese officials and the masses that ZCS is China’s only viable solution to the coronavirus.”

China’s Center for Disease Control and Prevention released a study in November saying a shift to other countries’ coexistence strategy would likely lead to hundreds of thousands of new daily cases and wreck the national health system.

But, Lu said, the economic costs of the zero-Covid strategy are increasing while the benefits are decreasing.

“Amid lockdowns and travel bans across China,” he said, “more and more people are feeling the hardship, becoming exhausted, unemployed or underemployed and have depleted their savings to a level where they need to cut spending.” China’s Silicon Valley Shenzhen orders production halts Control Covid

Chrissy Callahan

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