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Major Chinese Cities in Lockdowns, Sparking Fear of Luxury Slowdown – WWD

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LONDON — China’s strict zero COVID-19 policy is facing its toughest challenge yet.

Mainland China on Sunday reported 1,437 new cases, the National Health Commission said Monday. While the number pales in comparison with the rest of the world, it is the highest for China since the Wuhan lockdown two years ago. Some 8,531 patients are still under treatment on Sunday, of whom eight were in severe condition. No deaths were reported.

Economic centers like Shenzhen and Shanghai, and manufacturing powerhouses such as Jilin and Hebei provinces, logged thousands of cases over the weekend.

As a result, Shenzhen, the neighboring city to Hong Kong, and the headquarters of top Chinese firms like Tencent and China Resources, has entered a government-ordered lockdown. The 17.5 million people living in the city are expected to stay home for at least a week and undergo three tests in the coming days. Factories, local transport and shopping malls, except for essential services, have all been shut down.

The city is home to some of the most important luxury shopping centers in China, including The MixC in Shenzhen Bay, where Burberry opened a 5,800-square-foot store in collaboration with WeChat’s owner, Tencent in 2020.

It’s estimated that Shenzhen attracted more luxury brands than any other Chinese city during the pandemic since the border with Hong Kong remained shut, forcing its high net worth citizens to shop locally. Some 27 brands including Hermès, Chanel and Cartier opened stores there last year.

The city is also home to one of the world’s largest ports, shipping a wide range of products made within the Pearl River Delta, from Nike shoes to Huawei smartphones, to the rest of the world. The lockdown will further stress the global supply chain.

The situation in Shanghai is also escalating. The city reported four locally transmitted COVID-19 cases with mild symptoms and 34 local asymptomatic cases on Monday afternoon. More than 600 confirmed cases have been found since late February.

Shanghai now has 10 medium-risk COVID-19 areas dotted across the city, including downtown areas Huang Pu and Jing’an districts, where top luxury retailers including Sun Hung Kai Properties’s iAPM, New World Development’s K11 and Daimaru Department Stores, Wheelock Group’s Lane Crawford, Bailian Group’s TX Huaihai, Lai Sun Group’s Hong Kong Plaza, Shui On Land’s Xintiandi, Kerry Properties’s Jing An Kerry Centre, Hang Lung Properties’s Plaza 66 and Swire’s HKRI Taikoo Hui are located.

While Shanghai has not entered a full lockdown, movement has been restricted in and out of the city, school children are back to online learning, and neighborhoods around the outbreak areas are subject to a 48-hour lockdown and massive testings.

Certain malls and offices in the city are shut if they are linked to a positive case.

A handful of communication managers at the China offices of French and Italian luxury houses told WWD that the teams have been working from home since last week.

Bohan Qiu, founder of the Shanghai-based communication agency BoH Project, added that all events planned for the next month have been postponed or moved online, especially those during Shanghai Fashion Week, which was originally scheduled to be held from March 25 to April 1. New dates have not been announced.

“The sudden arrival of Omicron has disrupted all fashion plans and calendars, as shows and gatherings are no longer allowed, and all previous permissions granted by the government during fashion week had been revoked. Some photography studios are closed also, with many buildings and individuals under quarantine,” he said.

He is not too concerned over the lockdown’s impact on the brands, however, since Shanghai Fashion Week held a successful digital edition during the first outbreak back in March 2020 in partnership with Alibaba’s Tmall.

At the time, some 150 brands showcased their fall 2020 collections while selling items from the current season via livestreaming to Tmall’s 800 million active users. More than 2.5 million people watched the fashion week’s opening ceremony, and 6 million watched the shows on the first day.

The current situation in Beijing was better as strict rules have been in place since before Winter Olympics. The city reported six cases, sources said on Sunday.

The regional lockdowns in China put more pressure on those luxury brands hoping the country will continue to deliver robust growth in 2022, with tactics like rounds of price hikes, appointing top athletes as ambassadors, and expanding online channels with JD.com and TikTok’s parent company ByteDance.

Bain already warned in its annual China Luxury Report that luxury growth in China might further slow in 2022 as the country began to crack down on the tech, entertainment, real estate and tutoring sectors under the name of common prosperity, as well as sporadic COVID-19 outbreaks.

During the Wuhan lockdowns in 2020, luxury houses saw their revenue on average plummet by 15 to 30 percent in the period.

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