Authorities in Shanghai have unveiled a plan to lift restrictions on certain residential areas, despite the continuing rise in Covid-19 cases in the city. Gu Honghui, deputy general secretary of the municipal government, said the city divides the associations into three risk categories, with several thousand so-called “prevention areas” to lift the lockdowns if they did not report any cases over a two-week period. However, it was not clear how many people could leave their homes as a result of the changes. The announcement came more than a week after Shanghai was declared a city-wide blockade as part of an escalation of restrictions aimed at curbing the largest coronavirus outbreak in mainland China in the past two years. Financial markets on Monday reflected concern about the impact of the restrictions, which have also been applied to many other Chinese cities as part of Beijing’s “zero Covid” policy. Electric car maker Nio drove Chinese markets lower on Monday as traders weighed in on the impact of severe supply chain disruptions. Shares of Nio closed 8% lower in Hong Kong after the company said at the weekend that suppliers in Shanghai, neighboring Jiangsu Province and northeastern Jilin had suspended production “one after another” and would postpone deliveries. The Hang Seng China Enterprises index of mainland China fell nearly 4 percent and the China CSI 300 benchmark index of shares listed in Shanghai and Shenzhen fell more than 3 percent. The Hang Seng Tech index fell more than 5%. Breakdowns in Chinese supply chains have intensified following Shanghai’s complete lockdown this month, exacerbating transport and logistics pressures as austerity measures have stalled activity at China’s largest land-based economic hub and largest city. Most of the 25 million metropolis remains under a severe lockdown that has sparked bitter complaints about access to food and medicine. Shanghai accounted for the vast majority of more than 27,000 new Covid cases reported across China on Sunday, according to official figures. “Shanghai is economically important for both China’s domestic economy and trade with the rest of the world,” said Johanna Chua, chief economist for Asia at Citigroup. He added that waiting times for semiconductor deliveries had already increased and that “with Shanghai’s significant trade links with East Asia, this could have a secondary impact on regional supply chains”, particularly in South Korea, Taiwan and Vietnam.

The southern city of Guangzhou has ordered most schools to switch to online learning after 27 Covid-19 cases were reported in the city on Sunday. Guangzhou authorities have also begun mass testing of its 18 million inhabitants, raising fears that the production hub could be the next to be locked. The Zhenro Properties group, which became the last Chinese real estate developer to go bankrupt over the weekend, blamed the unpredictable bond payments on the “unpredictable scale and duration of the lockdown in Shanghai”, which said it had stopped some activities and delayed asset assignments. Inflation data released on Monday showed that consumer prices rose nearly 1 percent from last year, mainly due to rising fuel costs and food prices.