By Brenda Goh

SHANGHAI/BEJING (Reuters) – Shanghai on Friday announced its first new COVID-19 cases outside quarantine areas in five days, prompting stricter curbs and mass testing in one district but plans to extend a citywide lockdown on June 1 to finish, appeared on track .

The commercial hub of 25 million people found three new cases in the same family in Qingpu District. All had taken three doses of the vaccine and their infections were detected during regular testing, authorities said.

The three have not left their county seat in the past 14 days, but have visited at least four places, including a supermarket, all of which are sealed off and disinfected, the authorities said.

The more than 200,000 people in the region had been tested again and all the results were negative.

“Our district will follow the precise prevention and control measures, do a good job in epidemic prevention and control, and achieve dynamic cleanup as soon as possible,” Zhang Yan, deputy head of Qingpu District, said at an online press conference.

Other officials said steps to gradually reopen Shanghai were progressing, with parks in the suburbs scheduled to open from Sunday. Other parks could open from June if they meet certain conditions, but park recreation facilities would remain closed.

A plan to reopen four subway lines from Sunday also remained on track, the city government said.

Shanghai has allowed more people to leave their homes in recent days, with many condominiums issuing a limited number of passes for short walks or trips to the supermarket. Still, most people stayed stuck indoors, relying on delivery apps for their groceries and government rations.

The near-total shutdown of Shanghai and strict measures in other cities are the result of a national “zero-COVID” policy to end all outbreaks as soon as they occur, in contrast to the resumption of normal life in the rest of the world.

Beijing, home to 22 million people, reported 62 new COVID infections for May 19, up from 55 the day before.

China’s capital has struggled to end an outbreak since late April, despite significant restrictions on movement, as many residents work from home and a number of shops and venues are closed.

But Beijing’s daily case count has remained in the dozens, rather than skyrocketing like the Shanghai outbreak.

‘NEW NORMAL’

On Friday, Shanghai reported a broad economic downturn in April, with many factories shutting down and workers and consumers stranded at home. The city’s industrial production shrank 61.5% from a year earlier, the largest monthly decline since 2011.

According to a Reuters calculation, retail sales fell 48.3%, significantly more than the nationwide 11.1% drop, and home sales by square footage fell 88%.

The European Chamber of Commerce in China warned this week that many companies and individuals are “seriously considering their presence in China” despite the improvement in the COVID situation in Shanghai and China more broadly this month.

Gravekal Dragonomics analysts estimate less than 5% of Chinese cities are reporting infections, compared with a quarter in late March.

To keep the virus in check, many cities have established municipal border controls, conduct frequent mass testing, and monitor and isolate new infections, including by building lockdowns.

“This new normal should allow manufacturing supply chains to gradually resume normal operations, but will continue to weigh on consumption, the service sector and small businesses,” Gavekal analysts wrote in a note.

RATE LIMITATION

There are signs that the economy is reacting positively to the looser controls in May after contracting in April.

Daily container throughput at Shanghai ports has almost fully recovered to last year’s levels, while air cargo throughput and cargo vehicle traffic have risen to about two-thirds of 2021 volumes.

While still down 21% year-on-year, retail auto sales rose 27% in the first half of May from the same period in April, data this week showed.

China’s yuan appeared set for its biggest weekly gain in a year, posting six straight weeks of losses. Stocks rose too.

Policymakers have promised more fiscal and monetary stimulus to help the economy.

China cut its benchmark benchmark mortgage interest rate more-than-expected at its May fix on Friday, a second cut this year as the government looks to revive credit demand.

Real estate and related industries like construction make up more than a quarter of the economy and were already in a downturn before the lockdowns. A campaign by authorities to reduce high levels of debt last year turned into a liquidity crisis for some major developers, causing bonds to default and projects to be suspended, unsettling global financial markets.

Predicting further easing, Xing Zhaopeng, senior China strategist at ANZ, said: “Policymakers may have reached a consensus on whether to revitalize the real estate sector.”

(Reporting by Brenda Goh, Yifan Wang, and the Beijing and Shanghai offices; Writing by Marius Zaharia; Editing by Himani Sarkar, Robert Birsel)