Shanghai Eases Its Lockdown: A Victory For Zero COVID?

Not Exactly. Beijing Just Wants To Avoid Total Economic Collapse

With COVID-19 cases dropping below 20,000 for the first time in nearly two weeks, Shanghai is allowing more people limited movement from their homes.

A total of almost 12 million people in the city of 25 million are allowed to go outdoors following the first round of easing last week, health official Wu Ganyu said at a news conference. Wu said the virus was “under effective control” for the first time in some parts of the city.

Under the latest changes, more than 4 million people are included in areas where the status shifted from closed to controlled, said Wu. He said some are not allowed to leave their neighborhoods and large gatherings are prohibited.

Exactly what “effective control” means is unclear, as Shanghai is still the epicenter of China’s latest and worst COVID-19 outbreak to date.

On Wednesday, the government reported 19,927 new cases in China’s mainland, all but 2,761 of which had no symptoms. Shanghai accounted for 95% of the total, or 18,902 cases, of which 2,495 had symptoms.

While Shanghai officials are using the “effective control” rubric in announcing the easing of restrictions, it surely is no coincidence that the easing comes as the city attempts to resume operations at key factories.

Shanghai has been trying to resume production at 666 key manufacturers, including Tesla and the country’s largest chip maker Semiconductor Manufacturing International Corporation (SMIC). Tesla’s Gigafactory 3 in Shanghai, which has been idle since March 28, restarted assembling Model 3 and Model Y electric cars on Tuesday evening.

How smoothly the restart will go is still a question, although if Tesla is any indicator, the restart efforts are likely to be uneven, as factories deal with the same supply chain dislocations that have plagued the global economy for months.

Tesla will deploy a single shift to run at full capacity for the next three to four days, and tap its components inventory to assemble new cars, according to a report on state-owned Shanghai Television, quoting the carmaker’s senior director of manufacturing Song Gang.

Building cars from spare parts “reopens" Tesla’s Gigafactory, but unless the inventories are soon replenished production will be problematic.

It is difficult to avoid the conclusion that Shanghai's easing is driven more by economic reality than any actual “victory” over the virus. With growth forecasts for China’s economy in 2022 already slashed by a full percentage point from Beijing’s official target, and the spring plantings in jeopardy, the probability that the easing is more about avoiding economic chaos than preening over a Zero COVID “victory” remains significant.

And lest anyone be lulled into a false sense of liberty, Shanghai gave this warning:

“The battle against the virus in Shanghai is at a critical moment, so no let-up is allowed,” the Shanghai government said in a statement, citing Vice-Premier Sun Chunlan, who has been overseeing the city’s antivirus work since April 2. “Any relaxation in the anti-pandemic work is unacceptable.”

When If cases rise again, look for the lockdown to be reimposed with a vengeance. Pandemic Paranoia remains the order of the day in China.