City Lockdown Divided East and West by Huangpu River for Four Days Each
Public Transportation Suspended and All Citizens Work from Home
Tesla Halts Operations on 28th… Production Disruptions Inevitable for SMIC and GM
[Asia Economy Reporter Kim Hyunjung] Shanghai, known as China’s ‘economic capital,’ is implementing a city lockdown and mass testing of all citizens in response to the spread of COVID-19. Tesla, which operates a manufacturing plant in the locked-down area, has also decided to halt production, signaling inevitable impacts on the global supply chain.
On the 27th, the Shanghai municipal government announced via the official WeChat account, a Chinese social networking service (SNS), that the city will be divided into east (Pudong) and west (Puxi) sides based on the Huangpu River and sequentially locked down, followed by nucleic acid testing for all citizens. The lockdown will last four days starting from the morning of the 28th in Pudong, and four days starting from the 1st of next month in Puxi. This measure is expected to restrict the movement of approximately 25 million Shanghai residents.
◆All Citizens Work from Home... Public Transportation Suspended= During the lockdown, residents within the affected areas must stay indoors, and movement is restricted, including private vehicles. Public transportation services such as subways, taxis, and buses will be completely suspended. Additionally, Shanghai city has issued guidelines requiring all companies within the lockdown zones, except those providing public services such as water, electricity, fuel, gas, and telecommunications, to have all employees work from home. The city stated in its announcement, "This decision is to curb the spread of the infectious disease and ensure the safety of the people," adding, "Those who obstruct epidemic prevention policies without justifiable reasons will be held accountable according to the law."
This policy was announced only 12 days after Shanghai Deputy Secretary Gu Honghui stated at a disease prevention briefing on the 15th that "there is no lockdown plan." Shanghai had been regarded as a relative model city for epidemic prevention, recording 400 infections and 7 deaths over two years since the COVID-19 outbreak, but recently the number of confirmed cases has surged. According to the National Health Commission of China, the daily case counts were 896 on the 21st, 981 on the 22nd, 983 on the 23rd?maintaining below 1,000?then rose to 1,582 on the 24th, 2,269 on the 25th, and 2,678 on the 26th.
◆Tesla Factory Halts... Will Yangshan Port and Pudong Airport Close Too?= The city lockdown decision is expected to inevitably lead to production halts for global companies with manufacturing plants in Shanghai. According to Bloomberg, Tesla’s Shanghai manufacturing plant, the ‘Gigafactory,’ has already decided to suspend production starting on the 28th and is reviewing how long this policy will continue.
Tesla’s Shanghai plant is a large-scale production line accounting for about 50% of its electric vehicle output last year. According to the China Association of Automobile Manufacturers, Tesla delivered 56,516 vehicles from the Gigafactory in February alone. Previously, Tesla opposed the closure of its U.S. factory due to health regulations in California during the early pandemic and relocated its headquarters from California to Texas at the end of last year.
Shanghai also hosts manufacturing plants for China’s largest semiconductor foundry, Semiconductor Manufacturing International Corporation (SMIC), and General Motors (GM). These companies have not confirmed or announced whether they will halt operations or for how long. However, if the city lockdown extends and epidemic control measures intensify, it cannot be ruled out that supply chain issues, including the semiconductor shortage, will worsen.
Shanghai authorities have not yet announced whether the Yangshan container port and Pudong International Airport will be closed under the lockdown policy, making it difficult to estimate the scale of impact on global trade. Earlier this month, Shenzhen implemented a city lockdown, causing manufacturing plants, including Foxconn, a major Apple iPhone supplier, to halt production for a week.
◆Lockdown of China’s Economic Capital Inevitable to Impact Global Markets= Shanghai is indisputably China’s largest ‘economic capital.’ Located between Zhejiang Province and Jiangsu Province, which together account for 20% of China’s GDP, the city generated about 3.7% of China’s GDP (approximately 114.367 trillion yuan or 2,191.4 trillion won) last year.
Chinese economic analyst Gao Xian told Hong Kong’s South China Morning Post (SCMP), "Since Shanghai is the economic gateway to mainland China, the lockdown will cause enormous economic costs," adding, "The sequential lockdown dividing Pudong and Puxi aims to minimize such economic damage."
The Wall Street Journal (WSJ) also noted, "Shanghai is one of the centers of finance, manufacturing, and commodity trade," and warned, "If commercial activities cease here, global ripple effects will occur."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
