China steps up COVID-19 measures as cases more than double

BEIJING (AP) — Chinese authorities tightened virus checks at ports on Tuesday, raising the risk of trade disruptions after some auto and electronics factories shut down as the government battles coronavirus outbreaks.

Stock prices in China and Hong Kong fell for the second day after the shutdown on Monday of Shenzhen, a technology and financial hub adjacent to Hong Kong in the south, and Changchun, an automotive hub in the northeast. Bus service to Shanghai, China’s economic capital and largest city, has been suspended.

The number of cases in China is low compared to other major countries or Hong Kong. But authorities are applying a “zero tolerance” strategy that aims to keep the virus out of the country. He temporarily shut down major cities to find every infected person.

The restrictions come at a time when the global economy is under pressure from Russia’s war on Ukraine, soaring oil prices and weak consumer demand.

“We can think of no risk to the global economy, except nuclear war, that is greater than the risk of a COVID outbreak in China shutting down industrial production,” said Carl B. Weinberg of High-Frequency Economics in a report. “Countless manufacturing supply chains pass through China.

Economists say for now, smartphone makers and other industries can use factories and suppliers in other parts of China. But a bigger threat looms if business is disrupted at nearby ports in Shenzhen, Shanghai or Ningbo.

They connect Chinese factories that assemble most of the world’s smartphones and computers, as well as medical devices, home appliances and other goods, with component suppliers and overseas customers. A month-long slowdown at Shenzhen’s Yantian Port last year caused a backlog of thousands of shipping containers and sent shockwaves through global supply chains.

“The risk here is whether COVID will be found at Yantian port,” said Iris Pang, chief China economist at ING. “If the port is to be suspended, it will affect many electronic imports and exports.”

There were no signs of major disruption, but port operators announced restrictions on face-to-face contact with shippers and seafarers.

The agency that manages the Port of Shanghai closed the windows where customers submit documents and said the function would go live. It gave no indication that cargo handling or other operations were affected.

The port of Lianyungang, north of Shanghai, announced that foreign sailors were prohibited from leaving ships or using the city to change crews.

Shenzhen has suspended cross-border freight service at Liantang crossing point to Hong Kong. He said Man Kam To’s crossing would be limited to handling fresh and live foods to ensure Hong Kong receives adequate supplies.

“The Shenzhen lockdown creates significant risks of supply chain disruptions,” Rajiv Biswas, chief Asia economist at IHS Markit, said in an email. The risk of global disruption would “aggravate if the authorities in Shanghai also decide to implement a containment”.

The number of new cases reported on the Chinese mainland on Tuesday more than doubled to 3,507. Nearly three-quarters were in Jilin province, where Changchun is located, with 2,601 cases.

Hong Kong, which reports separately, had 26,908 cases as of Monday.

Yantian Port tried to reassure customers that operations were normal. A statement on its social media account promised to “do everything possible to ensure the smooth and stable operation of this ‘port supply lifeline'”.

China, where the pandemic began in late 2019 in the central city of Wuhan, became the first major economy to rebound after Beijing shuttered factories, shops and offices to contain the disease.

This year, the ruling Communist Party’s growth target is 5.5%. If reached, it would be well below last year’s 8.1% expansion. But forecasters see it as aggressive at a time when construction, which supports millions of jobs, is in crisis due to a debt crackdown in the housing sector.

Leaders promise tax cuts for contractors and increased spending on building public works. This could help boost consumer spending and shield the economy from a manufacturing slowdown.

The latest outbreak of infection, blamed on a fast-spreading variant called “stealth omicron”, challenges Beijing’s pandemic strategy.

All businesses in Shenzhen and Changchun, except those providing food, fuel and other necessities, have been ordered to close. Bus and metro services have been suspended. Millions of residents have been urged to be tested for the virus.

Anyone who wants to enter Shanghai, a city of 24 million people with car factories, China’s largest stock exchange and offices of global companies, needs to be tested.

Elsewhere, the populous eastern province of Shandong had 106 new cases on Tuesday. Guangdong in the south, where Shenzhen is located, reported 48. Shanghai had nine and Beijing had six.

Jilin Province, where Changchun is located, has banned residents from leaving the province and traveling between cities within it.

Automakers Volkswagen and Toyota, iPhone maker Foxconn and smaller companies announced they were suspending production at some factories.

Others, including telecommunications equipment maker Huawei Technologies Ltd., Apple Inc., General Motors Co. and electric vehicle brand BYD Auto, did not respond to questions on Tuesday about how they might be affected. .

“The risk of broader lockdowns is increasing,” Bank of America economists said in a report.

Volkswagen AG said the Changchun factories for the VW and Audi brands were closed from Monday to Wednesday.

Toyota Motor Co. said its Changchun plant that makes the RAV4 and Harrier SUVs suspended operations on Monday.

Shenzhen, a city of 17.5 million people, is home to some of China’s biggest companies, including Huawei, BYD Auto, Ping An Insurance Co. of China and Tencent Holding, operator of popular messaging system WeChat. Taiwanese company Foxconn, which assembles Apple iPhones, has its Chinese base in Shenzhen.

Foxconn assembles smartphones and tablets in Shenzhen, but has moved most production out of the city. Other manufacturers have also moved to cheaper regions in China or overseas. They keep research and development, finance and marketing in Shenzhen – functions that can be done by employees working from home.

“The manufacturing is elsewhere, so unless all of China is affected by COVID, there won’t really be a shortage of particular products. For example, phones,” ING’s Pang said.

In addition, authorities appear to be trying an “aggressive ‘zero COVID’ policy” that still aims to keep the virus out but uses “targeted lockdowns” to try to reduce the economic and social cost, said David Chao of Invesco. .

“Many see this as a huge COVID risk that could potentially cause further weakness in the Chinese economy,” Chao said. “But I think it gives policymakers the opportunity to evolve their policies in the event of a pandemic.”

AP researchers Chen Si in Shanghai and Yu Bing in Beijing contributed to this.


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