China's Shenzhen extends COVID curbs but stops short of full lockdown

Some districts of China's southern tech hub Shenzhen extended curbs on public activities, dining out and entertainment venues on Friday, but city officials stopped short of a full lockdown as they try to rein in rising COVID cases.

Restrictions in the central business district of Futian and Longhua, home to a major campus of Apple (AAPL.O) iPhone assembler Foxconn (2317.TW), have been extended until Sunday, while residents in several areas across the city were asked to work from home if possible.

Most of Shenzhen's nearly 18 million residents are now under COVID controls amid the city's most serious outbreak since spring. But unlike its swift decision in March to lock down the city to fight community infections, Shenzhen has taken a more considered approach in the current flare-up since late August.

Curbing activities of tens of millions of people intensifies the challenges for China to cushion the economic impact of its "dynamic-zero" COVID policy that has kept its borders mostly shut to international visitors, and made it an outlier as other countries learn to live with the coronavirus.

Read: China Covid outbreak grows with millions under lockdown

On Thursday evening, officials sought to quell rumours that the city would undergo a full lockdown as it did for a week in March, and said people could leave and return to their homes with a 24-hour proof of testing.

So far, authorities have largely avoided shutting down offices and factories.

"We need to get the virus under control, we can't just give up like some countries," said a woman surnamed Tang, who has been volunteering to help food deliveries arrive at a locked down compound in Futian, Shenzhen's most severely hit district.

CHENGDU LOCKDOWN

In southwestern China, the megacity of Chengdu went into lockdown late on Thursday with mass testing for COVID-19 planned through the weekend. Uncertainty remained whether the lockdown would be lifted after the testing ends on Sunday.

The city of about 21 million people and capital of Sichuan province reported 150 new local cases for Sept. 1, official data showed on Friday, compared with 157 infections a day earlier.

In Chengdu, non-essential employees were told to work from home. Industrial firms engaged in key manufacturing and able to manage on closed campuses were exempted from work-from-home requirements.

Toyota Motor's (7203.T) Chengdu plant, which has an annual production capacity of 105,000 vehicles, is "operating normally", and inside a closed loop at the request of the Sichuan government, a company official told Reuters.

Sweden's Volvo Cars (VOLCARb.ST), majority owned by Chinese automotive company Zhejiang Geely Holding Group, has shut its plant in Chengdu, a company spokesperson said on Thursday.

'WORSENING'

China's blue-chip stocks sagged on Friday as the tighter COVID-19 curbs cloud the outlook for an economic recovery.

The world's second-biggest economy slowed sharply in the second quarter due to widespread COVID-19 lockdowns. Growing evidence suggests the nascent recovery in the third quarter is in danger of stalling due to the fresh COVID flare-ups.

"The situation has been rapidly worsening over the past few days as some mega cities with populations greater than 10 million including Guangzhou, Shenzhen, Chengdu, Tianjin, Shijiazhuang, Wuhan and Shanghai have significantly tightened their COVID containment measures," Nomura wrote in a note.

"We believe markets still underestimate the severity of this round of (COVID)."