(Bloomberg) -- Companies including China’s biggest chip producer and an Apple Inc. supplier are continuing to operate factories in Shanghai during the city’s lockdown by isolating workers and running a closed-off procedure authorized by local authorities, according to people familiar with the matter.

The Shanghai government is allowing some manufacturers to run so-called closed loop systems where employees are able to keep working as long as they’re confined to the factory campus and adhere to certain Covid and testing protocols, the people said, asking not to be named discussing internal procedures. Production capacity, however, may still be affected to some degree due to disruptions to logistics and supply chains.

Pegatron Corp., which makes iPhones in the eastern region of Shanghai locked down until Thursday, is operating normally, according to a person familiar with the company. 

Similarly, at Semiconductor Manufacturing International Corp., known as SMIC, workers who live close to the chipmaker’s factory site in Shanghai’s eastern district of Pudong can continue to work with negative test results, a person familiar with the operation said. Its complex is operating normally, the company said earlier on Monday.

China’s financial center went into a snap, phased lockdown on Monday after authorities failed to contain an omicron outbreak with less invasive measures. Half of the city will be locked down and mass-tested for an initial four days, then the other half will follow from April 1. While China is the last country in the world to maintain a zero-tolerance approach to suppressing the virus, it has been tweaking the strategy to lessen the economic hit. During Shenzhen’s week-long lockdown mid-March, iPhone maker Foxconn Technology Group and other companies were allowed to reopen plants using closed loop systems. 

China Finds Way to Do Covid Zero While Keeping Factories Open

The compromise comes as President Xi Jinping pledges to minimize the impact of Covid Zero and economists downgrade their outlook for China. 

Olympics System

The world’s second-largest economy faces its worst downward pressure since the initial phase of the pandemic, according to Nomura Holdings Inc., which cast doubt over China reaching its ‘around 5.5%’ growth target for the year because of ongoing outbreaks. 

Closed loops -- which effectively put factory workers in bubbles, insulated from outside infection -- were used during the Winter Olympics in Beijing. Athletes and Games-related personnel were kept separate from the general public, only allowed to travel between sporting venues and their hotels via designated transportation. The system was successful in preventing any Covid spread from the event within the country. 

Why China Is Sticking With Its Covid Zero Strategy: QuickTake

China has kept the virus at bay for most of the past two years using a combination of effectively closed borders, mandatory isolation of all virus cases and mass testing to limit outbreaks. 

But more contagious variants like omicron are challenging the regime, which is becoming more disruptive as infections flare more regularly and the rest of the world opens up. China has imposed more lockdowns in March than at any point in the pandemic, with Shenzhen, Langfang and Tangshan cities near Beijing, the city of Changchun in the northeast and then its surrounding province, Jilin, all put under movement restrictions. 

Jilin remains locked down, with production at factories belonging to the world’s biggest automakers -- Toyota Motor Corp. and Volkswagen AG -- shut down now for more than two weeks. 

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