London Daily

Focus on the big picture.
Friday, Oct 02, 2026

3 reasons Shanghai's lockdown matters to the global economy

3 reasons Shanghai's lockdown matters to the global economy

China is struggling to contain an outbreak of Covid-19 in Shanghai despite a 17-day lockdown that is keeping most of its 25 million residents trapped at home.

Located on the east coast of China, Shanghai is the country's biggest and most affluent city and one of the largest metropolises in the world. Together with the neighboring city of Kunshan — which locked down earlier this month — it plays an outsized role in the global economy.

With no sign that the Chinese government is prepared to ease restrictions soon, concern is mounting about the economic damage they are causing, and the shock waves an extended lockdown will send around the world.

Shanghai is the epicenter of the current Covid outbreak, but it's not alone — analysts at Nomura estimate that full or partial lockdowns are in place in 45 Chinese cities, affecting a quarter of the population and about 40% of the economy.

Premier Li Keqiang warned on Monday for a third time in a week of the threat the upsurge in Covid posed to the Chinese economy. Here's three reasons why the rest of the world should be watching Shanghai closely, too.

A lockdown continues in Shanghai on April 6, 2022, to curb coronavirus infections.


Business and finance


It has the largest GDP of all Chinese cities — 4.32 trillion yuan ($679 billion), the third largest stock market globally by value of the companies that trade there, and the fifth greatest number of billionaires in the world.

Shanghai is also the most attractive destination for international business eying a presence in mainland China.

By the end of 2021, more than 800 multinational corporations had established regional or country headquarters in Shanghai, according to city authorities.

Among them, 121 are Fortune Global 500 companies, including Apple (AAPL), Qualcomm (QCOM), General Motors (GM), Pepsico (PEP) and Tyson Foods (TSN).

More than 70,000 foreign-owned companies have offices in the city, more than 24,000 of which are Japanese companies, according to data from the Japanese government.

With a total market capitalization of $7.3 trillion, the Shanghai Stock Exchange — established in 1990 — trails only New York and London. Trading continues despite the lockdown, but some banks and investment firms have been asking staff to sleep by their desks to keep the market functioning.

The pool of companies listed in Shanghai is heavily focused on large, state-owned enterprises that play a central role in the Chinese economy. They include the world's most valuable liquor maker Kweichow Moutai, banking and insurance giants like ICBC and China Life Insurance (LFC), and state oil company PetroChina (PCCYF).

The Shanghai exchange is also home to China's answer to Nasdaq -— the Star Market.

Trade and logistics


Shanghai accounts for 3.8% of China's GDP. But it has a much higher share — 10.4% — of China's trade with the rest of the world, according to official statistics for last year.

The Port of Shanghai is the world's busiest for container traffic. It moved 47 million 20-foot equivalent units of cargo in 2021, four times the volume handled by the Port of Los Angeles. The number made up 16.7% of China's total container shipments last year.

Shanghai is also a major aviation hub in Asia. The city's airports — Pudong International Airport and Hongqiao Airport — handled 122 million passengers in 2019, making the city the fourth busiest hub in the world after London, New York, and Tokyo.

But the Covid outbreak has made port delays worse and forced the suspension of many passenger flights, sending air freight rates soaring and putting even more pressure on global supply chains.

Shanghai port remains operational, but industry data released in late March showed that the number of vessels waiting to load or discharge had skyrocketed to a record high. State media also reported that many truck drivers were struggling to get containers in and out of the port on time because of travel restrictions.

Manufacturing and tech


The Greater Shanghai Area, which includes Kunshan and several other eastern cities, is a major manufacturing hub for industries from cars to semiconductors.

Volkswagen (VLKAF) and General Motors both run factories in Shanghai in partnership with state-owned automaker SAIC Motor. Shanghai is also home to
Tesla's (TSLA) first gigafactory in Asia. The US electric vehicle maker delivered more than 65,000 cars from its Shanghai factory last month, making it the best-selling EV brand in China.

In January, Ford launched its sixth global design center in Shanghai, highlighting the vibrancy of the city and the growing number of young Chinese designers with a mix of "fresh thinking, local knowledge and global outlook."

TSMC (TSM), the world's largest contract chip maker, runs a major semiconductor factory in suburban Songjiang. Top Chinese chip makers SMIC (SMICY)and Hua Hong Semiconductor have factories in Pudong, in the east of the city.

But the Covid restrictions have forced many factories to suspend operations in Shanghai and Kunshan, threatening to disrupt key supply chains for autos and electronics.

Volkswagen and Tesla's factories in Shanghai have been shut for weeks. Chinese electric-vehicle maker Nio has also been forced to halt production due to Covid-related disruptions in Shanghai and other Chinese cities.

Pegatron, a key supplier for Apple (AAPL), has suspended production at its Shanghai and Kunshan plants until further notice. In addition, Taiwan's Unimicron Technology, which supplies printed circuit boards to Apple, and Eson Precision — an affiliate of iPhone supplier Foxconn that also supplies components to Telsa — halted production at their Kunshan facilities earlier this month.

"With Shanghai's significant trade links to East Asia, this could have spillover impacts on regional supply chains," Citi analysts also said in a research note late last week.

"We think Korea, Taiwan, Vietnam and, to a lesser extent, Japan (on vehicles) look relatively exposed [to the disruptions]," they said.

Other industries include pharmaceuticals. In October, AstraZeneca (AZN) opened a global R&D center in Shanghai.

Newsletter

Related Articles

0:00
0:00
Close
Scottish Court to Rule on Bid to Force No-Confidence Vote Against Aberdeen Council Co-Leader
UK Bans Extra Charges for Seating Children Under 12 Beside Accompanying Adults
UK Introduces Vaping Duty and New Licensing Requirements
Greggs to Close Four UK Factories and Cut 740 Jobs
Hundreds of Prisoners Released Early as England and Wales Prisons Reach 98% Capacity
UK Unveils New Russia Sanctions Targeting War Funding and Shadow Fleet
Burnham Says There Are Strong Indications of Iranian Involvement in RAF Fairford Security Breach
Prime Minister Andy Burnham Raises Prospect of Reviewing Britain's Post-Brexit EU Relationship
Markets Price in Bank of England Rate Increases as Inflation Rises to 3.1%
UK Borrowing Costs Climb Toward 5.5% as Global Bond Sell-Off Intensifies
UK-France One-In-One-Out Migration Agreement Expires as London Seeks Alternative Measures
Southwest England Faces Flood Alerts After Heavy Autumn Storms
UK Expands Funding for Rapid Electric Vehicle Charging Infrastructure
Welsh Government Approves Funding to Upgrade South Wales Transport
Northern Ireland Tensions Rise as Orange Order Rejects Drumcree Compromise
NHS Leaders Back Early Design of Proposed National Care Service
More Than One-Third of Regional UK Universities Face Financial Deficits
UK Current Account Deficit Narrows as Cross-Border Financial Flows Remain Strong
Bank of England and FCA Issue New Rules for Stablecoins and Digital Assets
MI5 Warns UK Universities Over Research Links With Chinese Institutions
UK Energy Price Cap Rises 4% as Electricity VAT Is Temporarily Suspended
Equity Calls for UK Personality Rights to Protect Performers From AI Replication
OpenAI Pauses Advanced Model Training Following Safety Concerns
Scottish Government Proposes Replacing 32 Councils With Larger Regional Authorities
Ofgem Raises UK Household Energy Price Cap by 4% From October
UK Counter-Terrorism Police Continue Investigation After Five Arrests Near RAF Fairford
OECD Cuts UK 2027 Growth Forecast to 1%
Labour Says State Pension Triple Lock Remains Protected Through Current Parliament
Andy Burnham Pledges National Care Service With Free Social Care in England
Six Flags Permanently Shuts Landmark X2 Roller Coaster Following Safety Scandals
Metropolitan Police Rule Out Terrorism in Golders Green Stabbing Investigation
Lithium-Ion Battery Identified as Cause of Fatal Merseyside House Fire
UK Department Rejects New Sea Use Framework Due to Stakeholder Fatigue
Major Thames Water Pipe Burst Causes School Closures in London
Aldi Commits £900 Million to Expand UK Supermarket Network
Scottish Affairs Committee Warns Skills Shortages Threaten Defence Sector Expansion
Parliamentary Committee Warns Northern Ireland Budget Deadlock is Stalling Economic Growth
NHS Hospitals in England Face Severe Shortages of Essential Medications
Home Secretary Signals Major Overhaul of UK Immigration and Leave to Remain Policies
Chancellor Promises New Job Schemes Alongside Strict Fiscal Discipline
Energy Secretary Proposes Taxpayer-Funded Green Transition and National Electricity Grid
UK Government to Renationalise Avanti West Coast Railway Franchise in March
Prime Minister Andy Burnham Pledges Major Social Care and Infrastructure Reforms
Five Suspects Released on Bail Following Alleged Bomb Plot Near RAF Fairford
UK Diesel Prices Hit Record High of 199p Per Litre
Transport for Wales and Network Rail Complete Electrification of South Wales Metro
Defra Expands Incentives for Sustainable Farming and Biodiversity in England
Northern Ireland Executive Approves Funding Package to Resolve Public Sector Pay Disputes
Universities UK Warns of Financial Insolvency Risks for Higher Education Institutions
UK Prisons Activate Emergency Protocols to Manage Capacity Pressures
×