Shanghai Mass COVID Test Announcement Sparks Fear in Chinese Markets

The city of Shanghai ordered three days of mass testing for COVID-19 in the Pudong area on Wednesday, triggering fears of new restrictions in China's financial capital and most important commercial center.

The new measures come after authorities detected 24 cases of the COVID variant, including two cases among people who were not quarantined on Tuesday. This increases the risk of transmission to the wider community, which Chinese authorities have repeatedly imposed heavy quarantine measures, even though the number of cases is very small. Pudong is Shanghai's most populous district and home to the port area, the financial center and, more importantly, Disney's Shanghai theme park. Nine other districts in Shanghai have also announced mass testing requirements in recent days. While this has not yet led to any major restrictions on movement or business, Chinese stock markets have reacted nervously, fearing a repeat of the recent lockdown in the city, which lasted nearly two months. This was a major factor behind the decline in economic activity in China this spring and a series of growth downgrades that followed. Chinese stock markets, which had rallied strongly since the end of the last lockdown, closed broadly lower on Wednesday, with the Shanghai Shenzhen CSI 300 index down 1.5% and Hong Kong Hang Seng index down 1.6%. However, the offshore yuan exchange rate held steady at 6.7075 to the dollar. Sporadic outbreaks of COVID continue to affect other parts of China. The western city of Xi'an, far from Shanghai, ordered restaurants and entertainment venues to close for a week on Tuesday and sent schools in the city on early vacation.