Economy

A strategy under strain

Shanghai lockdown is angering residents and triggering supply worries

Lockdown-w

A security guard tries to buy food from a vendor in Shanghai

Few people are aware today that even after Shanghai fell to the Japanese army in 1937 about 1,000  US Marines remained stationed in the parts of the city formerly in the  British concession district. And even though the city faced food rationing these American troops were well supplied until their withdrawal four years later (when the US declared war on Japan after Pearl Harbor).

Eighty years on and the supply situation was quite different as US Marines guarding the American consulate in the Covid-hit Shanghai ran low on rations – this time after China’s financial hub went to war with Covid-19 rather than Japan. A consulate employee even issued a plea on WeChat this month for staff to spare some food for the seven American soldiers, Reuters reported. “The Marines only had vacuum-sealed rations left… If you can spare a meal’s worth or two for seven extra mouths, they’d be very appreciative,” the employee wrote.

This was one of the telling examples of the disarray faced in supplying China’s biggest urban economy after authorities imposed a citywide lockdown on Shanghai’s 25 million population in late March.

Since that lockdown began the municipal government has promised to make all possible efforts to ensure supplies of daily necessities, including medicine, as well as well as keeping the supply chain moving in essential items for the city’s businesses. Local authorities declared their goal was to contain the pandemic while also minimising the impact on social and economic activities. To help those efforts succeed many nearby provinces have also supported the Shanghai government with supplies and assistance as it fought to stamp out a fast-spreading Omicron outbreak of new Covid-19 infections.

Resources, as a whole, looked adequate – at least on paper. The problem was less with the quantities of food (and other goods) available than with the difficulty of distributing them. Thanks to a strict social distancing protocol imposed by  China’s so-called ‘dynamic zero Covid-19’ strategy, scarce manpower soon ran into logistical logjams as it tried to make  deliveries to households in Shanghai. Despite boasting one of China’s most elaborate delivery networks, the city soon suffered from a supply crunch as panic spread on WeChat groups about difficult it was to get groceries and other essential items  (stories of residents rising at 5am to shop on overloaded and crashing e-commerce apps – only to find delivery slots already long gone – abounded).

No one has starved to death. Nevertheless, Shanghai is China’s most affluent city and the deprivations of  living under lockdown protocols have got millions grumbling. Some admittedly tried to make fun of their situation. An extensively forwarded social media meme asked which city had suffered from the worst food shortage since war broke out between Russia and Ukraine? The sarcastic answer: Shanghai.

Other content also did the rounds on social media as locals vented their frustration online. Many posted videos of residents quarrelling or even attacking healthcare or security staff. There were also heartbreaking reports of toddlers and infants being separated from their parents after they were put into quarantine camps (for dog lovers there was also a grim video of a corgi that was beaten to death with a shovel by a health worker; the distraught pet had earlier chased a bus taking its owners – who couldn’t find anyone to take care of it – to a facility for those who tested positive for Covid).

The most viral social media moments, however, came earlier this week when an article titled “Shanghai people’s patience has reached the limit” was published by a WeChat blogger. It almost instantly won the coveted ‘10W+’ tag, which meant that it had been clicked more than 100,000 times. WeChat doesn’t provide view counts higher than that, although some reckoned the article was read or forwarded 20 million times within hours. The top comments proclaimed “whoever dares delete this article will suffer a miserable death”. Indeed, after the original article was taken down by censors, reposted versions soon emerged and were still being widely circulated this week.

There is no groundbreaking revelation in the article. But the author eloquently questions the wisdom of the zero-Covid approach and the disruption to normal daily life.

The article points out that while specialists in medical fields unrelated to infectious or respiratory diseases have been mobilised to conduct “endless nucleic acid tests”, those patients with non-Covid concerns such as cancer have been left unattended. “No diagnosis, no operation, no medicine prescribed,” the author derides. “All patients have to make way for Omicron, which results in one critical case [i.e. a Covid-related death] in every 150,000 miles.”

The author is referring to a variant of Covid-19 (Omicron) that while highly transmissible seems to be far less deadly. In Shanghai for instance, local authorities had reported 17 Covid deaths as of Tuesday, most of whom were elderly or patients already fighting critical illnesses. Against these low fatality figures more than 300,000 have been confirmed positive in the past two months.

In a way, that statistic might be said to reveal one of the more positive outcomes of the zero Covid approach: the Chinese government has been able to detect an infection chain at an earlier stage, thus preventing most of the infections from deteriorating into critical conditions. This explains the large number of asymptomatic cases (numbering over 90%) in Shanghai.

That low death rate, however, has not taken into account those non-Covid patients whose entirely different courses of treatment have suffered – or who have seen fatal delays to receiving emergency medical assistance. A now infamous example includes the mother of well-known economist Larry Lang. He confirmed his 98 year-old parent passed away in a Shanghai hospital after being denied access at the infirmary’s entrance until she successfully passed a nucleic acid test for Covid. She died during the four-hour wait for the result.

Higher social and economic concerns have started to weigh in as well – such as on the impact on school children and their learning and socialisation skills. Analysts have also been monitoring the economic impact after a number of major Chinese cities, including Shenzhen and Guangzhou, have gone into lockdowns of their own.

The headline figures for the economy seem to have held up reasonably well. For instance, the government reported first quarter GDP data this week which showed a 4.8% rise. However, the National Bureau of Statistics warned there were other signs that downward pressures on growth are on the rise with some major economic indicators showing slower increases in the wake of an ever more volatile global situation as well as multiple Covid-19 outbreaks within China.

The bigger question is – and especially after the predicament faced by Shanghai – what economic cost is the Chinese government prepared to stomach to contain the spread of the highly infectious Omicron. Recent research by top universities in mainland China and Hong Kong modelled the costs of the zero-Covid strategy: economists estimated that were there a month-long lockdown in all of China’s four tier-one cities – Beijing, Shanghai, Guangzhou and Shenzhen – it could dent the nation’s GDP by 8.6% in real terms.

Both Shenzhen and Guangzhou have recently performed citywide tests on all of their residents after a Covid scare. Life has largely returned to normal for the two southern megalopolises since then. However, the situation has been dragging on in Shanghai with new infections reported at a rate of nearly 20,000 a day.

A number of carmaking bosses have voiced their concerns if industrial production in Shanghai, China’s answer to ‘Motown’, continues to be hampered by strict lockdowns.

True, there are only four carmakers based in Shanghai ¬– including Tesla – and they accounted for just 10.7% of China’s car production last year. However, there are more than 100 auto part manufacturers in the city. About 30 suppliers of chip processors or semiconductors that are essential for making cars are also based in Shanghai.

That means as Shanghai has stepped on the brakes, the entire nation’s car industry has decelerated too. Automakers may face production halts  next month if the supply chain disruptions are not resolved soon, warned He Xiaopeng, the chief executive of leading electric carmaker XPENG.

Disruptions to Shanghai’s massive port and related trucking infrastructure are also having a knock-on effect. The South China Morning Post reported last weekend on the situation facing Xiao Ke, a trading company owner from Hangzhou, who was trying to send a consignment of cosmetics to a client in Greece. The normal route through Shanghai’s port had failed because of a lack of available trucks; nearby Ningbo port was also facing a partial lockdown and deterred truckers through its own stringent and complicated quarantine requirements. So Xiao sent the goods 1,300km north to Beijing to be flown to Athens.

“The eastern land transport system has become paralysed. I had to go northward. The change cost me an extra 3,000 yuan ($471) and a 10-day delay,” he told the SCMP. “Given that the goods are only priced at $4,000, the cost increase is significant. If the supply chain disruptions continue, I’m afraid small businesses like mine will find it hard to survive.”

Another worrying aspect – as Hong Kong experienced when it dramatically escalated Covid containment measures earlier this year – is that expats, foreign businesses and wealthy individual could try to relocate elsewhere. According to the Financial Times, immigration consultants have been getting more inquiries as wealthy clients in Shanghai looked to move  overseas.

It quoted Shanghai-based consultant James Chen offering this verdict: “The authorities are making people sacrifice their basic needs to fight a disease that’s a bit more severe than seasonal flu. Our clients chose to vote with their feet.”

For the time being, all senior officials and state mouthpieces have been sticking to the official line. A spokesperson for the National Health Commission told a press conference on Tuesday that China will adhere to its “dynamic zero-Covid approach” even as local infections are surging – with the official noting that the World Health Organisation still sees the pandemic as a public health emergency of international concern that China should help tackle.

Relevant studies have shown that the fatality rate for Omicron has been lower than that of the Delta strain, and yet the absolute number of deaths caused by Omicron is still higher if you compare the two variants impacts in a comparable period, the People’s Daily this week warned. The newspaper insisted that this was not the right time to take a “lying flat” approach like other countries i.e. those that have  already switched to the strategy of ‘living with the virus’. 

Chinese medical experts have maintained that the zero-Covid policies won’t last forever and the central government may opt for a phased reopening when the time is right. Indeed there has been much discussion over whether (or when) Beijing would switch to a less zealous Covid approach after Zhong Nanshan, a highly respected local respiratory disease expert, wrote recently that “prolonged dynamic zeroing cannot be pursued in the long run”.

Zhong’s article, published in the April issue of the National Science Review, was titled “Strategies for reopening in the forthcoming Covid-19 era in China”.  He made a number of recommendations on how China could “reopen in an orderly and effective manner”, including the enforcement of nationwide vaccination programmes and the greater use of mRNA vaccine types.

In spite of some reports in international media that Zhong’s article had been deleted, any such move seems to have been temporary, as WiC was still able to find it on the National Science Review’s website at the time of going to press.


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