Asian stocks tumbled after China announced the metropolis of Chengdu would lock down its 21 million residents as authorities battled a new Covid-19 outbreak.
In China's Western region, officials in Chengdu launched massive Covid testing and requested residents to abide by "stay home in principle" from 6 pm on Thursday. The new measure allows one person per household the ability to procure essential items at places like supermarkets.
"The current state of epidemic control is abnormal, complex, and grim," officials said, adding the lockdown aims to "decisively arrest the spread of the outbreak and guarantee the health of all citizens."
Chengdu is the biggest city to shut down since Shanghai's lockdown earlier this year. The move to lock down Chengdu will generate even more macro instability for the world's second-largest economy. It accounts for 1.7% of the national economy and is one of southwestern China's most important manufacturing hubs.
As the capital of Sichuan province -- the 6th-largest province in terms of annual GDP -- the metro area is home to 96 listed companies in the automobile, aerospace, IT, machinery, and pharmaceutical industries.
Automakers, including Toyota Motor Corp. and VW China. Foxconn Technology Group, the world's largest assembler of Apple Inc.'s iPhones and other devices. All have manufacturing facilities in the city.
The lockdown was unexpected and caught investors off guard: Hong Kong's Hang Seng Index slumped almost 2%, and CSI 300 Index dropped by nearly 1% to its lowest in three months.
All residents in the southwestern Chinese city will be confined to their homes until they test negative for Covid. There was no guidance from officials on how long the lockdown will persist.
Also, in the Nanshan district in Shenzhen, tighter Covid measures beginning today through Sunday will close indoor public places, including cinemas, gyms, and bars, and halt in-person tutoring services to contain an outbreak.
New lockdowns will pressure Beijing's economic planners as the economy slips into the abyss as a worsening property market slowdown is causing turmoil among developers.
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