On September 1, Chengdu, Sichuan, China was suddenly locked down. The incident has not only damaged local business and people’s ability to move about, but also affected country sentiment. Experts say China’s economy could be more adversely affected.

According to Chengdu’s official announcement, the city of 21 million has been ordered into lockdown for at least 4 days, which could be extended if more COVID-19 cases are detected. Bloomberg experts said that the incident could lead to a decline in retail sales and restaurant spending. If people can’t leave their homes factories and companies may have to close.

Although the authorities did not use the phrase “city lockdown,” residents are in principle ordered to stay at home and cannot go into the community at will. All residents must take PCR test for four consecutive days.

Many fear this could be a repeat of Shanghai’s shutdown earlier this year. At that time, Shanghai, China’s main financial center, was only planning an 8-day lockdown and mass testing, but it was extended several times due to the increase in the number of cases. 

According to Bloomberg, Chengdu’s economy accounts for 1.7% of China’s gross domestic product (GDP), making it the sixth largest city in China after Beijing, Shanghai, Shenzhen, Guangzhou, and Chongqing.

Chengdu, also the capital of Sichuan province, has suffered from severe heat, droughts, and floods in recent weeks. A power crisis caused by high temperatures forced the temporary shutdown of several manufacturing plants last month.

Economist David Qu wrote in a report that the Chengdu lockdown “will deal another major blow to the economy when it’s already struggling from a barrage of shocks.”

While this isn’t as damaging as the lockdown in Shanghai earlier this year, he said: “We do expect a widespread impact on sentiment that amplifies the damage beyond the direct hit to activity.”

Since the beginning of this year, Chengdu’s economic activity has been quite weak. In the first six month of the year the economy grew only 3%, much lower than the 13.1% in the same period in 2021. And retail sales fell in the first seven months, government revenue fell, and industrial output lost momentum, according to The Epoch Times.

Chengdu is not the only major city in China currently under lockdown. The cities of Tianjin and Shijiazhuang near Beijing and Dalian in the northeast, as well as several districts in the southern manufacturing hub of Shenzhen, announced strict pandemic control measures.

Shenzhen stepped up its COVID-19 control measures on September 1. In addition to a number of districts under lockdown, authorities announced that Nanshan District, where many high-tech companies are located, and Dapeng New Area must be subject to full control measures. Lu Ting, an economist at Nomura Holdings, wrote in a report: “Covid hotspots are shifting away from several remote regions and cities — with seemingly less economic significance to the country — to provinces that matter much more to China’s national economy.”

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