Shanghai authorities have urged residents to stay at home this weekend, seeking a toned-down Christmas in the nation's most-populous city as COVID-19 rages nationwide after tough pandemic restrictions were lifted.

A branch of the Shanghai Municipal Health Commission on Saturday urged young people, in particular, to avoid crowded gatherings, due to the ease of spreading the virus and the low temperatures.

Christmas is not traditionally celebrated in China, but it is common for young couples and some families to spend the holiday together.

The Omicron variant is surging weeks after the authorities abruptly ended the country's zero-COVID policy, lifting strict testing requirements and travel restrictions as China becomes the last major country to move toward living with the virus.

While many have welcomed the easing, families and the health system were unprepared for the resulting surge of infections.

Hospitals are scrambling for beds and blood, pharmacies for drugs and authorities are racing to build clinics.

Shanghai typically hosts a large Christmas-themed market in a luxury shopping area along Nanjing West Road, and restaurants and retailers offer promotions to drum-up business.

But the spread of Omicron is dampening celebrations.

Many Shanghai restaurants have cancelled Christmas parties normally held for regulars, while hotels have capped reservations due to staff shortages, said Jacqueline Mocatta, who works in the hospitality industry.

"There's only a certain [number] of customers we can accept, given our manpower, with a majority of team members who are unwell at the moment," she said.

Scepticism about official COVID-19 data