China’s zero-Covid strategy risks further economic disruption, report warns

China is sticking with its zero-tolerance approach against the coronavirus despite the backlash against the prolonged one-size-fits-all measures

US-based consultancy firm Eurasia Group believes the policy is likely to remain for the remainder of 2022 despite warnings of social and economic damage

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China is still unlikely to pivot away from a very low tolerance for virus cases for the rest of 2022, according to US-based consultancy firm Eurasia Group. Photo: Reuters

Published: 6:30am, 5 Feb 2022Updated: 5:32pm, 15 Apr 2022

China’s continuation with its zero-tolerance approach against the coronavirus will deepen consumption woes and supply chain risks, as well as set back the nation’s efforts to deleverage and rebalance its economy, according to a report.

Even though authorities are making efforts to fine-tune containment policies, shifting from massive lockdowns to more targeted, small-scale closures in big cities, the country is still unlikely to pivot away from a very low tolerance for virus cases for the rest of 2022, according to US-based consultancy firm Eurasia Group.

“Chinese policymakers face a risk that if they really do relax the policies significantly, there could be a major explosion in cases,” said Michael Hirson, practice head of China and Northeast Asia at Eurasia Group.

He cited a low level of acquired immunity within the population and the less effective home-grown vaccines against the Omicron variant.

The bottom line is that the leadership has a tremendous amount at stake politically in ensuring that there are no major setbacks with Covid before the 20th party congress

Michael Hirson

“The bottom line is that the leadership has a tremendous amount at stake politically in ensuring that there are no major setbacks with Covid before the 20th party congress,” Hirson added.

The key party meeting, which is held every five year and is set to take place in the second half of 2022, will be the most important political event of the year and is expected to see a major shake-up of the top leadership team.

But sticking with the stringent containment measures also means more economic disruption will be on the way, Hirson said.