China’s Factory Hub Takes Risky ‘Light-Touch’ Path Amid Outbreak

(Bloomberg) -- China’s southern manufacturing powerhouse Guangzhou is charting an unexpected course in the world’s last remaining Covid Zero country, resisting a mass lockdown despite racking up more than 2,500 local infections a day. 

The city of 19 million people shuttered three of its 11 districts, and halted in-person classes in eight, as the flareup that emerged at the end of October continues to gather steam. Unlike most outbreaks in China, where restrictions come fast and hard, the curbs aren’t all-encompassing. Residents are allowed to go grocery shopping and drive to other districts even where stay-at-home orders have been imposed.

The approach runs counter to patterns established after Shanghai’s two-month battle with Covid this spring that showed stringent measures were needed to prevent omicron outbreaks from spiraling. It’s also an unusually light-touch for a major city: Chengdu and Shenzhen, whose populations are around the same size, locked down at far lower case levels.

It’s unclear if Guangzhou’s moves portend a softening of the country’s Covid Zero policies or whether they reflect the recent direction from Beijing to minimize disruption caused by the curbs that are damaging the economy and stirring public unrest. Officials may also just be slow to act, in a parallel of Shanghai’s crisis earlier this year.  

“The path of rising Covid case numbers in Guangzhou looks ominously similar to that of Shanghai in March just before its full lockdown,” said Ting Lu, chief China economist at Nomura in Hong Kong. “If Guangzhou repeats what Shanghai did in spring, it will lead to a new round of pessimism on China.”

State media and authorities in Beijing recently repeated criticisms of the one-size-fits-all approach that led to mass lockdowns of entire cities and regions, instead calling for “scientific and targeted” measures. Those have rarely been seen, however, with local leaders instead turning to stealth lockdowns to contain Covid. 

Officials across China have “invested further efforts to optimize” Covid responses, state news agency Xinhua reported Thursday, nothing that central government leaders have told cadres not to engage in “pointless formalities and bureaucratism” when levying restrictions. 

“All localities will further improve the level of scientific and precise prevention and control, strive to achieve the greatest prevention and control effect at the least cost, and minimize the impact of the epidemic on economic and social development,” Xinhua said.

While financial markets recently have latched onto any suggestion of easing, it’s too early to make that call, Lu wrote in a note to clients. 

“Markets surely welcome a soft approach, as people are looking forward to a re-opening in spring 2023,” he said. “However, due to Guangzhou’s special status, even a soft approach does not necessarily mean China is likely to quickly end its zero Covid strategy nationally.”

Stocking Up

The threat of a sweeping lockdown weighs heavily on the minds of residents in Guangzhou, home to many garment manufacturers as well as automakers like EV company Xpeng Inc. 

While grocery supplies currently are sufficient, some residents are ordering items like toilet paper, medicine and instant noodles in bulk. Louisa Chen, a worker in a Guangzhou brokerage firm, said she’s concerned that a city-wide lockdown could be introduced in the coming days.

“I’m among those lucky ones who can still go the office and I feel I must seize the day when I can still go out,” the 34-year-old Chen said. “But Guangzhou’s lockdown policies are more relaxed, and still allow people to drive everywhere. With the relaxed policy, will cases surge like crazy and we’ll eventually be forced to all stay home? That’s the most scary thing on my mind now.”

Chen and her family have been stocking up on frozen meat, rice, rubbish bags and paper towels at the supermarket this week to prepare for a potential lockdown.

Shanghai Fears

Shanghai’s experience is what has residents of Guangzhou on edge. The Chinese financial hub initially used a targeted approach to minimize the impact to businesses and people’s daily lives. Once daily infections climbed to about 4,400 a day at the end of March, it announced a phased lockdown of the city. 

But it was too late to contain the outbreak, which ballooned to more than 27,000 cases a day at its peak in April. Shortages of food and medicine developed in some areas after an abrupt policy change led to home confinement and near total isolation for most residents of the city. 

In contrast, Chengdu, the capital of the southwestern Sichuan province, locked down when there were about 150 daily cases on Sept. 1. It managed to get the flareup under control in two weeks.  

Now Guangzhou is displaying a similar outbreak trajectory as Shanghai. The growth of daily cases in November mirrors that of the financial hub in March, before Shanghai started locking down.

There is a key difference between the two cities: the number of infections found outside the quarantine system. China, which isolates people with confirmed infections and their close contacts in facilities separate from the general public, uses the community case count as a key indicator for whether an outbreak is under control.

Out of the 2,637 cases Guangzhou reported for Tuesday, only 20 were found outside of the quarantine system. On March 26, two days before Shanghai’s lockdown began, it reported 2,676 infections. More than 280 of them were found in the community.

(Updates with Xinhua story in seventh and eighth paragraphs.)

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