China shuts down iPhone, Tech Hub Shenzhen as Covid cases move

(Bloomberg) — China has put 17.5 million residents of the southern city of Shenzhen on lockdown for at least a week, in an effort to stem the growing Covid-19 outbreak with a move that could cause disruption and production delays at a major technology hub and port.

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The shutdown came after virus cases across the country doubled to nearly 3,400, and will be accompanied by three rounds of citywide mass testing, according to a government notice. The measure, announced on Sunday, followed earlier restrictions imposed on Shenzhen’s central business district, and will run until March 20.

All bus and subway systems have been closed, and businesses except for those providing essential services have been closed. Staff were told to work from home if they could. Residents will be banned from leaving Shenzhen – home to the headquarters of Huawei Technologies Co. and Tencent Holdings Ltd. , as well as one of the busiest ports in China – except in limited cases.

The city is home to the headquarters in China and a major manufacturing facility for Hon Hai Precision Industry Co., Ltd. , the main manufacturer of Apple Inc. For iPhone and other products.

The city’s surge in infections is believed to be linked to the runaway outbreak in neighboring Hong Kong, where about 300,000 people are currently in isolation or under home quarantine. The outbreak of COVID in Shanghai also saw most schools return to online learning and travel to the city restricted. Bus services from other provinces have been suspended, and China’s aviation regulator is in discussions with airlines about diverting all international flights to the financial hub, Bloomberg News reported Friday.

Read more: China looks to divert flights from Shanghai as coronavirus spreads

The growing clusters generated by the highly contagious omicron variant in China’s large cities and more developed economic powers have turned into an unprecedented challenge for the country’s Covid Zero strategy.

The policy, which has given China long periods free of the virus 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 coexist with the virus. So far, officials have largely resisted stricter measures such as lockdowns in China’s largest city and have relied more on targeted responses, only to see omicron continue to spread.

Watch China’s reopening plays, Shenzhen Lockdown tech stocks

economic turmoil

Covid Zero’s tactics led to disruption in other cities, with multiple rounds of mass testing in Tianjin in January halting production at the Toyota Motor Corp plant and other plants there for more than a week. Nomura Holdings Inc says this approach will make it difficult for Beijing to achieve its economic growth target in 2022, as the costs of the actions rise. However, China reiterated its commitment to Covid Zero on Friday, with senior health official Ma Xiaowei saying strict controls should remain in place and officials should avoid “war boredom” in their work.

Changchun, a city of about 9 million in northeastern China, was closed on Friday, with residents there also being tested. Reminiscent of the early days of the epidemic in Wuhan, authorities are moving quickly to build temporary hospitals there and in the eastern port city of Qingdao. China is isolating all positive cases of the virus, regardless of severity, to prevent its spread.

Why China is sticking to the Covid Zero strategy: QuickTake

The outbreak of Covid in Hong Kong has posed an unprecedented challenge to Beijing, with tighter border controls in the city and quarantines for weeks that do not match Omicron once it enters the city. Thousands of people have left the Asian financial center to return to the mainland, with Shenzhen and Shanghai being the two busiest ports of entry.

Shanghai Disneyland will operate at a controlled capacity and will require visitors to submit negative Covid test results within 24 hours of entering the theme park.

Hong Kong’s health system and morgues have come under pressure from a record outbreak that has pushed the death rate to one of the highest in the world. While the number of virus cases in the city appears to have stabilized over the past week, the number of deaths has risen, especially among the elderly, who have had some of the lowest vaccination rates despite their extreme frailty.

Chief Executive Carrie Lam said on Wednesday that the Hong Kong government was still making plans for mandatory testing of all its residents, including the timing and how they would ensure essential operations continue if movement restrictions are imposed. For now, authorities will focus on vaccinating older adults living in care facilities — which are seeing a rise in deaths — and increasing the number of hospital beds to treat patients, she said.

Read more: Hong Kong nursing homes are vulnerable to COVID-19

Also a supporter of Covid Zero, Hong Kong has set the limits of strategy with authorities scrambling once Omicron has passed tough border defences. There appears to have been little planning as to whether the virus has spread purposefully in the city, resulting in scenes eerily similar to those seen in the early days of the epidemic in parts of Italy and the United States. Hong Kong’s intensity and political climate make it difficult to lock in. down, and despite pressure from officials in Beijing, they have so far resisted summoning one.

While China remains publicly committed to eliminating Covid, there are signs that the country’s health officials and experts are at least thinking about how to get out of this approach and live with the virus as a pandemic.

China has approved the Paxlovid antiviral pill developed by Pfizer Inc. last month, a move many saw as evidence of such planning. Friday’s introduction of rapid antigen tests may also be a sign, with other states shifting toward using the tests at home when their lab testing systems were overwhelmed by the virus’s wider spread.

However, any turnaround will be slow and unlikely before 2023, given the need to stabilize in a politically important year for President Xi Jinping, people familiar with China’s thinking told Bloomberg.

(Updates with the Apple link in the fourth paragraph.)

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