China tries to limit economic blow of Shanghai shutdown

BEIJING, March 30 (BNA): As millions of Shanghai residents line up for coronavirus tests in the shuttered capital, authorities are promising tax cuts for shopkeepers and keeping its busy port running to curb disruptions to industry and commerce.

The ruling Communist Party is trying to adjust its pandemic “zero tolerance” strategy to limit job losses and other costs to the world’s second largest economy.

The Shanghai government has announced tax refunds, rent cuts and low-cost loans for small businesses. A government statement on Tuesday pledged to “stabilize jobs” and “improve the business environment.”

State TV reported that the world’s busiest port of Shanghai, operations were normal, and managers made extra efforts to ensure ships “can communicate normally.” The port serves the Yangtze River Delta, one of the world’s busiest manufacturing regions for makers of smartphones, auto components and other goods.

According to online news outlet The Paper, operations at Shanghai’s airports and train stations were normal. Bus service to and from the city of 26 million was previously suspended. Visitors are required to show a negative virus test result.

Abroad, the biggest potential impact on China’s Asian neighbors and the rest of the world is likely to come from developments that reduce demand in the world’s most populous consumer market, economists said.

China is the largest trading partner of all of its neighbors, including Japan and South Korea.

Economic growth was already expected to drop from 8.1% last year due to a government drive to cut corporate debt and other challenges unrelated to the pandemic. The ruling party’s official target is 5.5%, but forecasters say even that looks hard to come by and will require stimulus spending.

From oil and coal to electronics components and consumer goods, China is a huge market for most industries.

“China is the single largest consumer of practically everything. It matters outside of China,” said Rob Carnell, chief Asian economist at ING.

“If China’s consumption is wiped out due to COVID, it will be something that escapes the supply chain and affects countries in the region,” he said.

Chinese officials are trying to ensure goods reach customers and protect supply chains, said Louis Koig, chief Asia Pacific economist for S&P Global Ratings. He noted that after previous closures, factories were able to meet orders by working overtime.

However, Carnell said the impact on Shanghai should be “relatively muted” if the city contained the outbreak, as did the southern business hub of Shenzhen earlier.

Shenzhen, a technology and financial hub of 17.5 million people, imposed a similar citywide lockdown in mid-March and reopened a week later.

Employees of financial industries can work from home, while automakers and other major manufacturers can have workers live in factories in a “closed-loop system” that cuts them off from contact with the outside world.

The Daily Economic News reported that thousands of stock traders and other financial employees were sleeping in their offices to avoid contact with strangers. She said the Shanghai Stock Exchange was operating normally, with fewer employees in a “closed office”.

Nearby, the riverfront Bund, Shanghai’s most popular area, was quiet and free from the usual crowds of pedestrians, the Associated Press reported.

Most restaurants were only allowed to serve diners who order via mobile and wait outside to collect their meals. Visitors to shopping malls were required to wear masks and register using a smartphone app.

A greater threat to industry and commerce looms if disease control restrictions disrupt activity at the Shanghai port.

It serves one of the world’s busiest manufacturing regions, with makers of smartphones, auto components, solar equipment, home appliances and other goods. Shanghai handles the equivalent of 140,000 shipping containers per day.

“If the port was closed, there would be more disintegration, but it’s not like everything is fine now,” Carnell said. “It’s just another thing we don’t need.”

Last year, a month-long slowdown at another major port, Yantian in Shenzhen, accumulated thousands of shipping containers and sent shock waves through global supply chains.

In Shanghai, truck drivers transporting goods were required to show a negative virus test in the past 48 hours and an electronic “delivery voucher”. But deliveries continued.

Rabobank’s Michael Ivry said shivering in the markets earlier in the week may have been an exaggerated “extraordinary reaction” that did not reflect the “real reality of the situation”, but investors were already concerned about China and the global economy.

“We have a whole mountain of problems to worry about, and that’s just one hillock among many,” Avery said. “If that’s all there is to it, the COVID shutdown, it’s not hard to look in the recent history books and see how it’s done. But that interacts with a lot of other issues.”

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