(Bloomberg) — China placed the 17.5 million residents of the southern city of Shenzhen into lockdown for at least a week, spurring a key Apple Inc. supplier to halt production as authorities sought to gain control of a spreading Covid-19 outbreak in the vital technology hub.
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The lockdown, which came after virus cases doubled nationwide to nearly 3,400, will be accompanied by three rounds of city-wide, mass testing. Called with little notice on Sunday, the order followed earlier restrictions placed on Shenzhen’s central business district, and will last until March 20.
All bus and subway systems were shut, and businesses, except those providing essential services, have been closed. Employees were told to work from home if they can. Residents will be barred from leaving Shenzhen — home to the headquarters of tech giants Huawei Technologies Co. and Tencent Holdings Ltd., as well as one of China’s busiest ports — except in limited situations. Shenzhen Yantian Port remains operational, though with tighter Covid controls.
Apple supplier Hon Hai Precision Industry Co., known as Foxconn, said it was halting operations at its Shenzhen sites, one of which makes iPhones. The company, which has its China HQ in Shenzhen, didn’t specify the length of the shutdown, though said it would reallocate production to other plants in the country. Chipmaker Umicron Technology Corp. also suspended output.
Read more: Foxconn Halts IPhone Shenzhen Site Due to Covid Lockdown
The surge in infections in Shenzhen is thought to be linked to an unbridled outbreak in neighboring Hong Kong, which went from a handful of cases to more than 30,000 in about a month. A Covid flareup in Shanghai has also seen most schools returned to online learning and travel into the city restricted. Bus services from other provinces were halted at the weekend, and China’s aviation regulator is in discussions with airlines about diverting all international flights into the financial center, Bloomberg News reported Friday.
Read more: China Looking to Divert Flights From Shanghai as Covid Surges
Growing clusters spawned by the highly infectious omicron variant in China’s most developed large cities and economic powerhouses have turned into an unprecedented challenge for the country’s Covid Zero strategy.
The policy, which gave China long periods virus free and one of the lowest death rates among major economies, is leaving the country increasingly isolated as other parts of the world open up and live with the virus. Until now, officials had largely resisted more hardcore measures such as lockdowns in China’s biggest cities and relied more on targeted responses, only to see omicron continue to spread.
Shenzhen’s lockdown is the largest since China effectively shut in around 40 million people in Wuhan and its surrounding province at the start of the pandemic. The significant number of infections in the community is thought to be behind the tough move, with just 38 of the 86 infections reported Monday close contacts of existing cases who are already in isolation. China quarantines all Covid cases, regardless of severity, as a way of halting spread.
Why China Is Sticking With Its Covid Zero Strategy: QuickTake
Investors reacted to the news, selling shares related to tourism and China’s reopening, while buying rapid-antigen test kit makers after China started allowing them for general use on Friday. An index of Macau casinos slumped as much as 10% to a record low, with the lockdown and outbreaks likely to limit gamblers from the mainland, especially neighboring Guangdong.
Cases are popping up through out China, with omicron also in Beijing and in Tianjin, a coastal city nearby. A number of cities in Jiangsu province, next to Shanghai, and in the country’s manufacturing powerhouse, Guangdong province, have also reported infections.
The worst outbreak is in Jilin province, in China’s northeast, which reported more than 1,000 cases in the community for Sunday. Jilin’s capital Changchun, a city of some 9 million people, was locked down on Friday, with residents there also to be mass tested.
Reminiscent of the early days of the pandemic in Wuhan, authorities are moving quickly to build makeshift hospitals there and in the eastern port city of Qingdao. A Toyota Motor Corp. joint venture plant that makes RAV4 SUVs in Changchun suspended operations on Monday given the lockdown, the Nikkei reported, citing the company.
Covid Zero tactics have led to disruption in other cities, with multiple rounds of mass testing in Tianjin in January halting production at another Toyota plant there for more than a week. The approach will make it harder for Beijing to hit its economic growth target in 2022, as the costs of the measures rise, Nomura Holdings Inc. says. Still, China reiterated its commitment to Covid Zero on Friday, with top health official Ma Xiaowei saying strict controls needed to be kept in place and that officials should avoid “war-weariness” in their work.
As of March 9, 14 of China’s provinces had been declared high or medium-risk for the virus, accounting for 54.4% of gross domestic product, according to Bloomberg Economics.
CHINA INSIGHT: 54.4% of GDP Affected by Virus Flags Growth Risks
The Covid surge in Hong Kong has provided an unprecedented challenge to Beijing, with the city’s tight border controls and weeks-long quarantines no match for omicron once it entered the city. Thousands of people left the Asian financial hub to return to the mainland, with Shenzhen and Shanghai some of the busiest entry ports.
Hong Kong’s health system and morgues have been under pressure from the record outbreak that’s pushed its death rate to one of the highest in the world. While the virus case count in the city appears to have plateaued over the past week, fatalities have risen, especially among the elderly, which had some of the lowest vaccination rates despite their greater vulnerability.
The Hong Kong government is still formulating plans for the mandatory testing of all its residents, including timing and how they’ll ensure essential operations can continue if movement restrictions were to be imposed, Chief Executive Carrie Lam has said. For now, authorities will focus on vaccinating older people living at care facilities — which are seeing a surge in fatalities — and increase the number of hospital beds to treat patients, she has said.
Read more: Hong Kong’s Nursing Homes Are Unvaccinated Hotbeds of Covid
Also an adherent of Covid Zero, Hong Kong has laid the limits of the strategy bare with authorities scrambling once omicron got through the tough border defenses. There seems to have been little planning for if the virus flared meaningfully in the city, resulting in scenes eerily similar to those seen in the early days of the pandemic in parts of Italy and the U.S. Hong Kong’s density and political climate makes it difficult to lock down, and despite pressure from Beijing officials have so far resisted calling one.
Rapid Tests
While China is publicly still committed to eliminating Covid, there are signs the country’s health officials and experts are at least considering how they may exit the approach and live with the virus as endemic.
China approved the antiviral pill Paxlovid developed by Pfizer Inc. last month, a move seen by many as evidence of that planning. The introduction of rapid antigen tests on Friday may also be a sign, with other countries shifting toward use of at-home tests when their lab testing systems were overwhelmed by broader circulation of the virus.
That said, any shift will be slow and unlikely to occur before 2023, given the need for stability in a politically important year for President Xi Jinping, people familiar with China’s thinking have told Bloomberg.
Zhang Wenhong, one of China’s top infectious disease experts who advises the Shanghai government, said in a social media post Monday that despite omicron being less virulent than other variants, China needs to stick to Covid Zero for now as opening up would cause a run on hospitals and lead to excessive deaths.
He pointed out the “fairly high” number of elderly people and those with underlying diseases still not yet vaccinated because of concerns about side-effects from the shots. There would be “inconceivable consequences” should infections spread widely among them, Zhang said.
China has in the past voiced concern about elderly vaccination rates in some areas. Though nearly 90% of the country’s 1.4 billion people have been fully inoculated, they’ve not provided details on the figures for specific age groups.
(Updates with Foxconn suspension from first paragraph.)
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