Analysts say that China could double down on its zero- Covid approach as the new omicron variant reignites concerns about another Covid wave in the global pandemic.
The strategy may be in trouble because of the spread of highly transmissible variants. Mark Williams, chief Asia economist at Capital Economics, said in a note Friday that the authorities are more likely to double down in the short-term.
Many people will stay at home because of the constant local lockdowns, while they worry about being flagged as a close contact.
The omicron variant was first reported in South Africa. The World Health Organization designated it as a variant of concern on Friday due to the large number of mutations. The UN health agency said preliminary evidence suggests an increased risk of reinfection with this variant.
The College of Arts and Information Engineering of the Dalian Polytechnic University in the town of Zhuanghe has volunteers in protective suits who handle garbage outside. More than 60 students in the university town of Zhuanghe city have been diagnosed as COVID-19 cases.
The WHO is unsure if the omicron Covid variant causes more severe disease than other strains.
The managing director of a Hong Kong-based investment firm echoed the same sentiment.
She said on CNBC that if omicron is a major threat, China will continue to stay isolated.
The near-term economic impact is likely to be limited, but reopening efforts will likely be pushed out further.
Even though many countries moved to live with the virus, China remained with its zero-covid strategy. As the highly infectious delta variant spread quickly, countries abandoned their aggressive approach of mass lockdowns and strict social restrictions.
Morgan Stanley said in a report on Monday that the new omicron strain could cause more delays to reopening in Hong Kong and Taiwan.
The economies have largely kept their Covid-zero strategy. The emergence of this new variant means that reopening efforts will likely be pushed out further, delaying a stronger rebound in consumption growth.
Even if just a few cases are detected, China has an ultra-strict zero- Covid strategy. Extensive testing, heavily controlled or closed borders, as well as robust contact tracing systems, are included.
The Asian giant has put in place strict checks at its ports to prevent cases from entering the country.
Williams said that the new variant will hit the capacity of exporters.
Williams said that tight controls on air and shipping crew as well as possible port shutdowns will place further limits on their capacity to meet orders.
A study by Peking University mathematicians said that China could face more than 600,000 Covid-19 infections a day if it lifted travel curbs.
The Chinese Centre for Disease Control and Prevention reported in China CDC Weekly that China cannot afford to lift travel restrictions without more efficient vaccinations or specific treatments.
