The Chinese government's unwavering insistence on stamping out any trace of the coronavirus is facing its biggest test yet as authorities grapple with Omicron's quickening spread. And, it could cost the world's second largest economy dearly this year.
Omicron, though, threatens to expose some serious flaws in that plan. The variant is much more transmissible than others, making it difficult to contain. And as the rest of the world learns to live with the virus, economists say China's zero-tolerance strategy is likely to do more bad then good in 2022.
Morgan Stanley is taking a similar view that Omicron could mean the costs of a zero-COVID approach outweigh the benefits. Last week, its analysts forecast growth of 4.9% in the first quarter, but suspect it could slow to 4.2%,"should Omicron spread to other regions and lead to multiple city-wide lockdowns."
And then, there are the Omicron cases detected in major port cities. Ship congestion at Chinese ports has worsened recently as more cities implement strict restrictions because of the outbreaks — or as they tighten testing policies ahead of the Chinese New Year holiday season starting January 31. So far, there doesn't appear to have been a lasting impact on trade. Customs data released Friday showed that exports jumped 21% in December from a year ago, exceeding expectations. The country's trade surplus was $676 billion in 2021, an all-time high.
Along with concerns about the health of its population, a handful of significant, upcoming events will likely persuade Beijing to stay the course.
What goes around comes around.
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