By JOE McDONALD – AP Business Writer
BEIJING (AP) — As millions of people queue in Shanghai for coronavirus tests, authorities are promising tax refunds for shopkeepers in the closed metropolis and keeping the world’s busiest port operating to limit disruption to industry and commerce.
The suspension of most activity in China’s most populous city this week to contain virus outbreaks rocked global financial markets, already on edge over Russia’s war on Ukraine, higher US interest rates and a Chinese economic slowdown.
On Wednesday, the government reported 8,825 new infections nationwide, including 7,196 in people without symptoms. Among them were 5,987 cases in Shanghai, of which only 329 showed symptoms.
China’s case numbers in its latest surge in infection are low compared to other major countries. But the ruling Communist Party is enforcing a “zero tolerance” policy aimed at isolating any infected person.
Around 9.1 million of Shanghai’s 26 million residents had undergone a virus test as of Wednesday, health officials said. They said “preventive disinfection” would be carried out on apartment complexes, office buildings and shopping malls.
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Shanghai recorded more than 20,000 cases in its latest outbreak as of Monday, according to state media.
The party is trying to refine its strategy to stem job losses and other costs for the world’s second largest economy.
The Shanghai government announced tax refunds, rent cuts and cheap loans for small businesses. A government statement on Tuesday promised to “stabilize jobs” and “optimize the business environment”.
The port of Shanghai remained open and managers made extra efforts to ensure ships “can call normally,” state television reported. The port serves the Yangtze River Delta, one of the busiest manufacturing regions in the world with thousands of manufacturers of smartphone and car components, home appliances and other goods.
According to online news outlet The Paper, operations at Shanghai’s airports and railway stations have been normal. Bus service to and from the city was discontinued earlier. Visitors must show a negative virus test.
Abroad, the biggest potential impact on China’s Asian neighbors and the rest of the world is likely to come from developments that dampen demand in the world’s most populous consumer market, economists said.
China is the largest export market for all of its neighbors, including Japan and South Korea.
Economic growth was already forecast to slow from last year’s 8.1% on a government campaign to deleverage companies and other challenges unrelated to the pandemic. The ruling party’s official target is 5.5%, but forecasts say even that looks difficult to achieve and will require stimulus spending.
“China is the largest single consumer of practically everything. It matters outside of China,” said Rob Carnell, chief economist for Asia at ING. “If China’s consumption is shut down by COVID, it will filter down the supply chain and affect countries in the region.”
Officials are trying to defend China’s role in global manufacturing supply chains by making sure goods get to customers, said Louis Kuijs, chief economist for Asia-Pacific at S&P Global Ratings. He found that after previous closures, factories were catching up on orders by working overtime.
“The impact on supply chains is not as great as many outside observers fear,” said Kuijs. “These restrictions tend to have a greater impact on the spending and demand side in China.”
The impact on Shanghai should be “relatively muted” if the city contains its outbreak, as Shenzhen’s southern business hub previously did, Carnell said.
Shenzhen, a tech and financial hub of 17.5 million people, imposed a similar citywide shutdown in mid-March and reopened a week later.
Financial industry workers can work from home, while automakers and other major manufacturers can let workers live in factories in a “closed-loop system” that isolates them from contact with the outside world.
General Motors Co. and Volkswagen AG said their Shanghai factories were operating normally. GM said in an email it was conducting “contingency plans on a global basis” with suppliers to reduce uncertainties related to COVID.
Elsewhere, a total of 2,957 new cases were reported in the northeast’s Jilin province, including 1,032 with no symptoms. Access to the cities of Changchun and Jilin in that province has been suspended.
The BMW Group said its Changchun factories halted production on March 24 following an outbreak.
In Shanghai, thousands of stock traders and other financial workers slept in their offices to avoid contact with outsiders, the Daily Economic News newspaper reported. It said the Shanghai Stock Exchange is operating normally with reduced staff in a “closed office”.
China’s stock market benchmark, the Shanghai Composite Index, rose 1.3% on Wednesday lunchtime. Most other Asian markets also grew.
Nearby, on the riverfront of the Bund, Shanghai’s most famous district, it was quiet and devoid of the usual crowds of pedestrians.
Most restaurants were only allowed to serve guests who ordered by cell phone and waited outside to pick up meals. Shopping center visitors had to wear masks and register via a smartphone app.
A greater threat to industry and trade looms if disease-fighting restrictions disrupt activities at the port of Shanghai. It handles the equivalent of 140,000 freight containers every day.
“If the port were to close, there would be more disruption, but it’s not like everything is fine now,” Carnell said. “It’s just one more thing we wouldn’t need.”
Last year, a month-long slowdown at another major port, Yantian in Shenzhen, caused a backlog of thousands of shipping containers and sent shockwaves through global supply chains.
The financial market shocks may be an exaggerated “knee-jerk” that does not reflect the “true reality of the situation,” but investors are already concerned about China and the global economy, Rabobank’s Michael Every said.
“We have a whole mountain of issues to deal with, and this is just an extension of many,” Every said. “If that’s all it is, a COVID lockdown, it’s not difficult to look into the recent history books and see how it’s shaping up. But that has interfaces with many other topics.”
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