The Covid-19 outbreak in Shanghai remains "extremely grim," with China's financial powerhouse's ongoing lockdown threatening to damage the country's economy and wreak havoc on already overstretched global supply networks.

Shanghai reported another daily record high of 16,766 cases on Wednesday. The director of the city's working committee on epidemic control told state media that the outbreak was "still running at a high level" in the town.

"The situation is bleak," Gu Honghui stated.

Although the epidemic is small by international standards, it is the deadliest in China since the virus began spreading in Wuhan in January 2020, initiating the global pandemic.

Shanghai's entire 26 million-strong population is now confined, and discontent is increasing among residents who have been living with movement restrictions for weeks as officials steadfastly pursue its zero-COVID strategy of disease eradication.

At least 38,000 medical staff and 2,000 military troops have been dispatched to Shanghai from other parts of China, and the city is mass-testing residents.

Separate outbreaks continue to rage in the north-eastern region of Jilin, and the capital, Beijing, has also seen an increase of nine cases. Workers evacuated an entire shopping complex in the city following the detection of an issue.

There are growing indications that China's economy is slowing significantly due to the lockdowns. In March, China's services sector contracted at its fastest pace in two years, as an increase in cases constrained mobility and weighed on demand. The Caixin purchasing managers' index (PMI), carefully watched, fell to 42.0 in March from 50.2 in February, and a decline below the 50-point level denotes contraction.

The same survey revealed a drop in the country's colossal manufacturing sector last week. Economists cautioned on Wednesday that the situation might deteriorate further as the Shanghai lockdown affects future results.

Capital Economics' Alex Holmes stated that while spillovers to the rest of Asia from China's COVID outbreak have been relatively small thus far, "the possibility of major disruption to supply chains remains a significant and growing risk."

"The longer the current wave continues, the more likely it is," he explained.

"An additional danger aspect is that global supply networks are already extremely stressed following months of interruption along their entire length. There is now a far larger possibility for a little blockage to have significant consequences."

Two years of pandemic disruption have disrupted the global economy's intricate supply lines, resulting in a dramatic increase in the prices of commodities, food, and consumer products.

The Ukraine crisis has exacerbated inflation, particularly oil and food prices, and more Chinese shutdowns could worsen the situation.

Supply-side constraints will persist in the Asia-Pacific region through the year, with energy and raw material cost inflation posing the most significant cost pressures on corporate debt issuers, followed by the effects of transportation bottlenecks, according to a new report from Moody's Investors Service.

"Despite initial signs of a gradual recovery in the Asia Pacific, the Russia-Ukraine crisis and continued pandemic-related disruption will stall supply-side recovery," Lillian Li, senior credit officer at Moody's credit rating agency.

"Through at least the end of this year, all business sectors in the region will face cost pressures from supply-side constraints.

It comes amid warnings from a prominent central bank chief that the world economy may be on the verge of entering a new inflationary age. Consumers will confront persistently higher prices and rising interest rates as globalization retreats. Agustn Carstens, the Bank for International Settlement's chairman, stated that higher rates might be necessary for several years to tackle the UK's 6.2 percent inflation rate.