BEIJING—A lockdown in Shanghai marks another potential setback for China’s export machine, reigniting concerns over the risk of renewed disruption to global supply chains pummeled by the pandemic and war in Ukraine.

Authorities imposed a two-stage lockdown on China’s most populous city on Monday, the latest reverberation from the country’s zero-tolerance Covid-19 strategy that is facing its toughest test yet from the highly contagious Omicron variant.

Tesla Inc. is suspending production at its car plant in Shanghai for four days, people familiar with the matter said, but chipmaker Semiconductor Manufacturing International Corp., which has two fabrication plants in the city, is producing and operating as usual, a company representative said Monday. Shanghai’s port remains open, but exporters are bracing for delays as the lockdowns hit warehouses, transport and staffing, a pattern experienced during similar targeted lockdowns such as the one in the southern city of Shenzhen.

Though China is getting better at keeping ports open and factories humming when restrictions tighten in response to rising caseloads, economists and company executives say the repeated flare-ups and logistical headaches of navigating shifting public-health measures are nonetheless weighing on industry, keeping up inflationary pressure on a world economy already struggling with surging prices.

“China is getting better at managing the shocks, but the shocks are getting bigger,” said Hui Shan, chief China economist at Goldman Sachs in Hong Kong.

A surge in coronavirus cases earlier this month prompted Chinese authorities to impose lockdowns and factory closures in chunks of the country, including manufacturing hubs such as Shenzhen and the city of Changchun in the northern province of Jilin.

Shanghai ordered citizens on the eastern side of the city to stay home Monday and shut down public transportation for four days while public-health officials conduct a testing blitz. The lockdown is due to switch to the western half of the metropolis of about 25 million on April 1.

For now, the city’s port remains open 24-hours-a-day as usual, according to operator Shanghai International Port Group. Essential workers and service providers such as medical staff, police and food delivery workers will still be allowed to move about provided they show a work pass.

Companies and factories will be allowed to maintain operations under “closed-loop production,” municipal authorities said, a system that involves staff working, living and staying within the factory campus.

But even with such measures, keeping the flow of goods moving from factory to port to customers overseas is tricky as the lockdown ensnares truckers, warehouses and other critical links in supply chains.

Source: wsj.com/articles