Shanghai's smog gives expats second thoughts(2)

It also removed one in three government cars from the roads. Shanghai is one of a handful of Chinese cities with more than 2 million cars.

The severe pollution has triggered fears that companies in the city will struggle to attract high-quality overseas talent.

Some analysts feel it will deter foreign companies from investing in the recently opened China (Shanghai) Pilot Free Trade Zone, where economic reforms are expected to be tested.

Ioana Kraft, general manager of the Shanghai office of the European Union Chamber of Commerce in China, said, "While members leave for all sorts of reasons, we inevitably hear nearly every time that one of the contributing reasons is the air pollution."

Canadians Leslie Dolman, who recently left her administrative job at Xi'an Jiaotong-Liverpool University in Suzhou, and her daughter Lena are on a month-long tour of China.

"They asked me two months ago if I wanted to stay and this was one of the main reasons I declined," Dolman said. "But what surprises me is that China's been quite open about it."

Noticeably more Chinese and foreigners were wearing masks in Shanghai on Friday. But some younger Chinese who had been wearing masks all week abandoned them in despair at how bad the situation had become.

Several businesses in Tianzifang, a labyrinth of restaurants, boutiques and handicraft shops in the downtown area that is usually bustling with expatriates and tourists, said they are losing business.

"We're usually full at this time," said Kenny Shen, manager of Kommune, a cafe popular among foreigners and which has a large outdoor terrace. The place was almost empty at lunchtime. "Everyone that does come is dressed like a doctor," Shen said, referring to the face masks.

While school classes were canceled for the second day in Nanjing, the capital of neighboring Jiangsu province, classes were not disrupted in Shanghai. Nanjing had an air quality index reading of about 370 by mid-afternoon.

The weather was also putting outdoor charity events at risk, with the Shangri-La Hotel changing the final leg of its "Ride for Hope" — a Shenzhen-to-Shanghai event — so that only six, instead of 50, cyclists will continue from Suzhou on Saturday.

While the weather conditions were bad news for most people, they caused some stocks to rally. Shanghai-listed Keda Industrial, an environmental protection equipment maker, rose by 5 percent to 21.17 yuan ($3.47) a share. Shenzhen-listed Wuhu Conch Profiles and Science, which supplies environmentally friendly building materials, rose by 6.29 percent to 7.34 yuan.