Shanghai is a major financial centre and port as well as a hub for manufacturing electronics and cars.
"We have seen PMI data, which shows that both manufacturing and services sectors are actually hit hard. And that has not included the Shanghai lockdown. So I think qualitatively we're seeing more downside pressure for the first and second quarters of GDP data," according to Peiqian Liu, China economist for NatWest Markets.
With the number of coronavirus cases rising, there could also be more trouble ahead if there are further lockdowns, especially for small business owners. "So I think the service sector is not only facing a short-term pressure from a three-week lockdown from Shenzhen or a one-week lockdown from Shanghai, but facing much more pressure from the uncertainty that's going down the road with current set of Covid management policies," Ms Liu said.
"The policy has been a political source of legitimacy. The low levels of infections and deaths in China are often compared to other countries in the domestic media. As a result, the majority of the population within China still favour the zero-Covid policy, despite the increasing economic costs," Mr Xu said.
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