By KEN MORIT­SUGU | AS­SO­CI­AT­ED PRESS

BEI­JING (AP) — A two-phase lock­down of Shang­hai’s 26 mil­lion peo­ple is test­ing the lim­its of Chi­na’s hard-line “ze­ro-COVID” strat­e­gy, which is shak­ing mar­kets far be­yond the coun­try’s bor­ders.

Chi­na’s largest city on Tues­day en­tered the sec­ond day of the lock­down’s first phase, which in­cludes the Pudong fi­nan­cial dis­trict and ad­ja­cent ar­eas on the east side of the Huang­pu Riv­er that di­vides the cen­tre of fi­nance, man­u­fac­tur­ing and trade.

The mea­sures con­fin­ing Pudong res­i­dents to their homes, clos­ing nonessen­tial busi­ness­es and re­quir­ing mass test­ing are to be lift­ed Fri­day. At that time, the vast Puxi area on the op­po­site side of the riv­er will go un­der lock­down.

With pub­lic trans­port sus­pend­ed and bridges and tun­nels con­nect­ing the two sides of the city closed, usu­al­ly bustling city streets — in­clud­ing the fa­bled river­side Bund in Puxi with its cen­tu­ry-old his­toric build­ings — were un­usu­al­ly qui­et.

Zhang Meisha, a 39-year-old free­lancer tak­ing a morn­ing jog along the Bund, said she was try­ing to get as much sun­shine as pos­si­ble be­fore Puxi goes un­der lock­down.

“I hope the Shang­hai spring can wait for us,” Zhang said.

Shops along the near­by Nan­jing Road pedes­tri­an shop­ping street were most­ly closed, with few peo­ple out and about. Restau­rants were of­fer­ing on­ly take­away ser­vice and a long line formed out­side a Mc­Don­alds of peo­ple await­ing their or­ders.

The shut­down adds to anx­i­ety in fi­nan­cial mar­kets over Rus­sia’s war on Ukraine, the U.S. Fed­er­al Re­serve’s ef­fort to cool surg­ing in­fla­tion by rais­ing in­ter­est rates and oth­er eco­nom­ic chal­lenges.

Mar­ket re­ac­tions in­clud­ing Mon­day’s 7% drop in oil prices in Lon­don don’t re­flect the “true re­al­i­ty of the sit­u­a­tion,” but in­vestors al­ready were un­easy about Chi­na and the glob­al econ­o­my, said Michael Every of Rabobank.

“We have a whole moun­tain of prob­lems to wor­ry about, and this is just one foothill among many,” he said. “If that’s all it is, a COVID lock­down, it’s not dif­fi­cult to look in re­cent his­to­ry books and see how it plays out. But this in­ter­faces with a lot of oth­er is­sues.”

The new omi­cron BA.2 sub­vari­ant is wide­ly blamed for bring­ing a new surge in cas­es to Shang­hai, which had suf­fered rel­a­tive­ly lit­tle ef­fect from the pan­dem­ic that was first de­tect­ed in the cen­tral Chi­nese city of Wuhan in late 2019.

Else­where in Chi­na, new cas­es have con­tin­ued to de­cline in Hong Kong fol­low­ing a re­cent wave that has led to more than 7,000 deaths. The se­mi-au­tonomous city record­ed 7,680 new cas­es, with no im­me­di­ate word on whether au­thor­i­ties plan to pro­ceed with mass test­ing of all of its 7.4 mil­lion peo­ple.

The north-east­ern province of Jilin ac­count­ed for 1,055 of the 1,228 new con­firmed cas­es and 812 of the 5,658 asymp­to­matic cas­es re­port­ed on the main­land Tues­day.

In Shang­hai, pan­ic buy­ing struck mar­kets and some res­i­dents have re­port­ed short­ages of meat and veg­eta­bles, in­clud­ing on on­line plat­forms. Au­thor­i­ties are work­ing to en­sure food sup­plies and have con­vert­ed gym­na­si­ums and ex­hi­bi­tion cen­tres to house pa­tients, most of whom show no symp­toms.

Gov­ern­ment work­ers in haz­mat suits, joined by about 68,000 vol­un­teers, have fanned out and are sta­tioned at check­points around res­i­den­tial com­pounds walled off with traf­fic di­viders and im­pro­vised bar­ri­ers.

Shang­hai record­ed 4,477 new cas­es on Mon­day, all but 95 of them asymp­to­matic. De­spite a na­tion­wide surge, num­bers of new COVID-19 deaths have re­mained low, with two more added on March 20 for a to­tal of 4,638. The low num­ber of deaths and to­tal of 145,808 cas­es since the start of the pan­dem­ic are a frac­tion of the toll in the U.S. and oth­er coun­tries, and are tout­ed by Chi­na as ev­i­dence of the wis­dom of its ap­proach.

The Shang­hai lock­down stands to be­come the largest of any city in Chi­na’s cam­paign against the virus, in which mil­lions have been con­fined to their homes for weeks at a time in cities across much of the coun­try.

De­spite calls for a more tar­get­ed ap­proach and some tweak­ing of the sys­tem, con­di­tions in Shang­hai show the gov­ern­ment’s con­tin­u­ing re­liance on ex­treme mea­sures, re­gard­less of the so­cial and eco­nom­ic costs.

Au­thor­i­ties say the two-phase ap­proach was de­signed to re­duce dis­rup­tions, and un­like in past sit­u­a­tions, def­i­nite end dates have been giv­en for the lock­down in Shang­hai. Asymp­to­matic pa­tients are be­ing quar­an­tined in fa­cil­i­ties out­side hos­pi­tals to free up lim­it­ed med­ical re­sources.

“Chi­na should be able to con­tain the virus in the next few weeks, as lock­down is ef­fec­tive,” glob­al fi­nan­cial ser­vices firm Mac­quar­ie Group said in a re­port.

“But COVID does pose sub­stan­tial growth down­side risk in the rest of this year, as lock­down is al­so very cost­ly,” the re­port said, adding that con­sumer busi­ness­es and the prop­er­ty sec­tor were set to take the biggest hits.

The Shang­hai lock­down in­di­cates Chi­na will stick with its hard-line COVID-19 strat­e­gy at least un­til the rul­ing Com­mu­nist Par­ty holds its once-every-five-year con­gress this fall or win­ter, the re­port said.

Xi Jin­ping is ex­pect­ed to be grant­ed an un­prece­dent­ed third five-year term as par­ty leader at the con­gress. Au­thor­i­ties have pro­mot­ed the need for sta­bil­i­ty above all in the runup to the event.

“Ze­ro-COVID” has been cred­it­ed with pre­vent­ing mass na­tion­wide out­breaks and Chi­na boasts a vac­ci­na­tion rate of around 87%. How­ev­er, that per­cent­age is much low­er among se­niors who are the most like­ly to be sick­ened by the virus.

Wang Hui, who runs a shop near the Bund, said high rents and a lack of cus­tomers could cost him his busi­ness.

“I don’t know how much longer we can last,” Wang said.

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As­so­ci­at­ed Press re­searcher Chen Si in Shang­hai and busi­ness writer Joe Mc­Don­ald in Bei­jing con­tributed to this re­port.