The impact of China's extreme lockdown measures is now becoming more apparent in Shanghai as the city lost its position as the nation's top currency trading hub for the first time ever. Shanghai dropped to second place, right below Beijing, which is now the top trading hub among the nation's 36 provinces and municipalities.

The State Administration and Foreign Exchange report showed that Shanghai had made fewer currency deals than Beijing last month. The drop in transactions was directly attributed to the nation's "Zero-Covid" policy, which saw large portions of the city completely shut down to prevent the disease from spreading.

In order to soften the impact of the lockdowns, some traders had volunteered to sleep and work in their offices and inside trading floors. However, this did little to keep trading volumes up over the past month. Bank settlement and sales in Shanghai fell 30% to US$61.8 billion in March. According to statistics dating back to 2019, that's 15% of the national total, compared to a stable proportion of roughly 20% prior to the lockdowns.

According to Liu Peiqian, chief China economist at NatWest Group, the figures clearly show that the lockdowns have significantly impacted economic activity. Even if financial services may have been maintained functioning regularly to a considerable extent, buying and selling activity of currencies had been disrupted.

Extended Covid-19 lockdowns have harmed China's economic prospects, prompting banks like UBS and Goldman Sachs to lower their growth predictions for this year. The economic impact on Shanghai has been devastating. Last month, the city sold zero cars, and its industrial production fell more than 20 times faster than the rest of the country.

Shanghai is still not out of the woods despite the relaxation of restrictions. Last Monday, the city's vice mayor stated that the city hopes to resume normal operations and industrial production by mid-to-late June. As part of its goal to become a worldwide financial hub, the city wants to increase the total amount of financial transactions to nearly 2,800 trillion yuan (US$419 trillion) every year by 2025. However, confidence in its ability to reach that goal has declined with the lockdowns.

The currency trading halt could hardly have happened at a more inconvenient time. Concerns over a Covid-stricken economy drove withdrawals from the nation's financial markets last month, while a widening monetary policy difference with the United States depressed foreign demand for Chinese debt. Analysts said they still expect Shanghai to recover, but it will be gradual and still subject to potential lockdowns in the future.