Tesla halts production in Shanghai as COVID lockdowns split China’s financial capital in two

March 28, 2022, 9:21 AM UTC

Health authorities in Shanghai placed half of the Chinese financial capital under COVID lockdown Monday, essentially dividing the city of 26 million into east and west districts, separated by the Huangpu River that flows through the city center.

Public transport has been suspended, and bridges and tunnels crossing the river are mostly closed as the eastern bloc endures a four-day lockdown to weed out any Omicron cases in the area. The western district will be next, with a lockdown scheduled on Friday.

Officials imposed the mass lockdown after denying they would take such drastic measures to curb a surge of Omicron cases. Shanghai reported 2,600 new cases on Sunday, up from single-digit cases at the beginning of the month.

At a news conference on Saturday, Wu Fan, an official of Shanghai’s Health Commission, said the city could not undertake a mass lockdown because Shanghai “plays an important role in the national economic and social development, and even has an impact on the global economy.”

For weeks, authorities had been fighting the COVID outbreak with localized lockdowns, subjecting individual residential compounds to days of isolation and daily COVID tests, but COVID cases continue to rise.

The lockdown of the eastern half of the city has shut some factories in the city. Bloomberg reports Tesla closed its Shanghai Gigafactory on Monday, halting production at the automaker’s largest global production hub for four days. The lockdown threatens to snarl other supply chains that snake through the coastal city, too.

Shanghai is China’s largest port. Port authorities said Monday that operations will remain normal during the lockdown, but landside operations, such as unloading of container and transport of goods to and from the dock, may be delayed. Shanghai has closed some cross-border transport, and truckers need to present a negative COVID test before entering the city.

The shutdown in Shanghai mirrors another citywide lockdown that took place in Shenzhen, China’s southern production hub and major port city, two weeks ago. The local lockdown stoked fears of major supply chain disruption. Apple supplier Foxconn was among the major manufacturers forced to close productions sites for several days in Shenzhen.

Curtailed operations at docks in Shenzhen slowed port procedures, too, which logistics operators warn could lead to higher shipping costs this summer as ports gradually work through the congestion.

On Monday, futures on Brent crude—the international oil index—dropped roughly 4% on fears the Shanghai lockdown could dent demand for energy, with fewer factories and ships burning fuel in the city. But stock markets have shrugged off the Shanghai lockdown. The SSE Composite Index, which tracks trading on the Shanghai Stock Exchange, ended Monday up nearly 1%. Hong Kong’s Hang Seng Index benchmark climbed 1%, too.

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