Shanghai Sweats Over Small, But Stubborn COVID Outbreak Already Hampering Economy

Anxiety levels rose along with temperatures in Shanghai on Wednesday, as medical workers sweated beneath their hazmat suits while administering compulsory mass testing for COVID-19 in a city that recently emerged from a painful two-month lockdown.

China's commercial hub is battling an outbreak that has seen dozens of new infections recorded daily for the past week, and though the numbers are relatively low it has unnerved many among the city's 25 million people, after their ordeal in April and May.

Daytime temperatures of around 40 degrees Celsius (104F) added to the febrile atmosphere among a population that dreads the psychological and financial impact of another lockdown.

Ying Jie, a personal trainer, said that even if Shanghai avoids another lockdown, he intends to close his gym for good, just one year after opening it, as he can no longer cope with the uncertainty.

Gyms in some areas of the city, including Ying's, were ordered to suspend operations this week due to the outbreak.

"We were open from July 1 to July 10," Ying said. "I can't not pay rent, but I can't open. If I open in secret and there are positive cases connected to my gym, I'll lose my license. The risk of getting fined is too great."

While most other major countries are choosing to live with the virus, China has adhered to a "dynamic zero-COVID" policy that aims to eradicate outbreaks early, but its economy is paying a price.

The authorities' hopes of success lie in relentless screening and targeted isolation orders, which have so far been issued to hundreds of residential buildings and business venues.

Lockdowns in Shanghai and elsewhere earlier this year have battered the world's second-largest economy, with ripples felt across global supply chains and international trade.

China's exports grew sharply in June, as earlier shipping bottlenecks eased, but subdued import growth pointed to weak domestic demand.

Data on Friday is likely to show China's economy grew only 1% in the second quarter, according to a Reuters poll, which shows full-year growth is expected at 4%, far below China's roughly 5.5% official target.

"The current outbreak in Shanghai and some other cities has again cast uncertainty over the economic recovery in Q3," said Zhiwei Zhang, chief economist at Pinpoint Asset Management.

ESCAPE PLANS

City authorities have repeatedly dismissed talk of broader curbs, even as they warned about risks posed by the highly-transmissible Omicron BA.5.2.1 subvariant.

All the 55 new local cases reported for July 12 were discovered among people already under isolation orders.

But many residents are stocking up on basic supplies, preparing for the worst.

"There are no signs that they will lock down our neighbourhood right now. But there were also no signs the first time," said Omri Hephner, an Israeli business consultant.

"I will escape Shanghai as soon as I can this time," Hephner said, adding that he intends to go to Beijing, then Israel, and only return to China once COVID policies are relaxed.

Overall, mainland China reported 261 new domestically-transmitted infections on July 12, versus 347 the previous day.

Nomura analysts estimate more than 30 cities are facing COVID curbs.

In the northwestern province of Gansu, which reported 69 new local cases, the city of Lanzhou with over 4 million residents said on Wednesday that for the next seven days, only one person per household can leave residential compounds to get groceries. Non-essential workers are banned from going to offices.

In the central province of Henan, key urban areas in the city of Zhumadian entered a three-day lockdown from Tuesday, with residents only allowed out for COVID tests, hospital visits and shopping for basic necessities.

The rules came after the town of Qinyang, which is under Zhumadian's jurisdiction, imposed an indefinite lockdown from Sunday on its nearly 700,000 residents.

Infections have also been detected in the southern province of Guangdong, the eastern provinces of Shandong and Jiangsu and elsewhere.