Shanghai Mass COVID Testing Order Sends Shivers Through Chinese Markets

  • Economy News
Shanghai Mass COVID Testing Order Sends Shivers Through Chinese Markets
Credit: © Reuters.

By Geoffrey Smith -- The city of Shanghai ordered three days of mass testing for COVID-19 in the district of Pudong on Wednesday, triggering fears of fresh restrictions on China's financial capital and its most important trade hub.

The new measures come after authorities discovered 24 cases of variants of COVID on Tuesday, including two cases among people who did not quarantine. That raises the risk of transmission in the wider community - something to which the Chinese authorities have repeatedly reacted with heavy-handed lockdowns, even when the number of cases is only small.

Pudong is Shanghai's most populous district and the home to its port zone, its financial center and, less importantly, Disney (NYSE: DIS )'s Shanghai theme park.

Nine other districts in Shanghai have also announced mass testing requirements in recent days. While that hasn't as yet resulted in any major restrictions on movement or business, Chinese stock markets have reacted nervously, fearing a rerun of the last lockdown in the city that lasted some two months. That was a prime factor behind the slump in economic activity in China this spring and the slew of growth downgrades that followed it. 

Chinese stock markets, which have bounced strongly since the last lockdown ended, closed broadly lower on Wednesday, with the Shanghai Shenzhen CSI 300 index falling 1.5% and Hong Kong's Hang Seng index losing 1.6%. The offshore yuan exchange rate was stable at 6.7075 to the dollar, however. 

Sporadic outbreaks of COVID continue to dog other areas of China, even so. Away from Shanghai, the western city of Xi'an on Tuesday ordered restaurants and entertainment venues to close for a week, while sending the city's schoolchildren on vacation early.

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