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Delaying the Omicron Inevitable

On 1 February, Denmark became the first EU country to lift its COVID restrictions, including the use of face masks. They were criticised for being a bit premature with their actions because case rates were still high, but soon enough, other countries began following suit. In early March, Ireland and Hungary followed suit, and on 20 March, Germany celebrated its long-awaited “Freedom Day”. But just because COVID case rates, deaths, and restrictions are disappearing throughout Europe, Omicron is still going to be wreaking havoc on the world economy. Much of that has to do with one country: China.


For the last two years, China has embraced a “Zero COVID” policy. Unlike other nations, which were much more lenient when it came to lockdowns and outbreaks, China has been incredibly swift and strict with its containment measures. Travellers to China have been met with brutal quarantines of greater than one month, and when any cases have been discovered, the government has been unafraid to lock tens of millions of people in their homes for months at a time. This strategy seemed effective early in the pandemic, but with the rise of Omicron, it has proven to be too lofty a goal. The fact is that China cannot contain the highly infectious variant, and the tricks it has used thus far are proving too costly. One country’s COVID policies would not typically impact the global economy so much, but this country is China, the home to more than one-third of the world’s manufacturing. Now that several of China’s largest cities and manufacturing hubs are facing outbreaks, the world’s manufacturing backbone is taking hard blows.

The inevitability of Omicron is squaring up against stiff competition: the stubbornness of the Chinese government. Instead of modifying their Zero COVID approach in light of a more realistic stance, all signs are pointing to them doubling down. According to the New York Times, “Officials in Beijing and an ever-lengthening list of cities and provinces say that the virus is still spreading and that the government must take ever-tougher measures to stop it”. For example, officials have suspended work at key electronics and industrial factories in south and central China. “Cities near Shanghai have closed highway exits or demanded that each driver show a negative PCR test — requirements that have also created miles-long lines of trucks trying to carry crucial components among factories”. All of these closures seem important in the abstract, but their impacts are very real. One of the key indicators demonstrating this impact is the price to ship goods from Asia to the United States. Two years ago, the price was roughly 2000 USD. This price rose to over 5000 USD in 2021, and because of the latest restrictions, the current cost is over 16,353 USD.

With more stringent lockdowns looming, the world is wondering when China will give in to COVID’s inevitability. The rest of the world has defeated COVID, at least temporarily, in part by succumbing to it. China’s approach means that Omicron has not swept through its population, meaning the worst is still yet to come. The longer that China delays this inevitable outcome, the higher the business risk will be in the country for the foreseeable future.