What happens when omicron hits China

China’s zero-Covid policy of lockdowns and quarantines has been so strict that the country’s president, Xi Jinping, hasn’t left the country in about two years. Now that the highly transmissible omicron variant has been reported in China, what will it mean for the Olympics — and for us?

One thing is certain: With the Beijing Olympics a little more than a month away and the politically significant National Congress of the Chinese Communist Party to be held in the fall, the harsh localized lockdowns that have defined China’s response to the pandemic are likely to persist throughout 2022, maybe even longer.

China’s policy is basically the polar opposite of how the US has been trying to live with the virus. Any positive case is quarantined. Contact tracing, enabled through surveillance tech and artificial intelligence, can pinpoint a flare-up: Buildings, city blocks, or even whole neighborhoods are sealed when a case is reported. “It’s pretty brutal. It’s a blunt tool,” said Megan Greene, an economist with the Kroll Institute. Yet as a result of the policy, China has had many, many fewer deaths.

But zero Covid is going to be much more difficult to implement with a more transmissible variant, and the lessened effectiveness of Chinese vaccines against variants suggests that this policy will only be hardened. (To be fair, two doses of the mRNA vaccines aren’t doing great in preventing omicron infection, according to initial studies, although they still offer strong protection against severe illness.)

“On the surface, [the spread of the new variant] seems to have vindicated that approach,” said public health expert Yanzhong Huang of Seton Hall University. “They seem to be confident with the existing approach and strict implementation.” And that existing approach had an effect on markets and supply chains, and now it’s likely to do that again.

Just a few cases of omicron have appeared in China so far. One infected person in a southern city bordering on Vietnam has caused 200,000 people to go into lockdown and the city of 13 million to be shut down, according to the Washington Post. With the Lunar New Year approaching, experts say even more precautionary measures, such as travel bans, may come next.

The country’s leadership will now face a major public health headache as the omicron variant collides with the Beijing Olympics. The February games were going to be a chance to celebrate China on the global stage, and now the prospect of athletes coming from across the world will put a spotlight on what many see as a severe policy of lockdowns, one that is much more intense than Japan’s last summer. “I think omicron coinciding with the Olympics is keeping a lot of people up at night in Beijing,” said former diplomat Daniel Russel of the Asia Society.

“Strong as its weakest link”

Over the last two years, with certain products missing from our favorite stores and crucial items like N95 masks and Covid-19 tests sometimes in short supply, we’ve all learned about the fragility of the supply chain. Electronics, cars, and consumer products have been highly sensitive to these types of disruption.

Many shortages are connected to China’s lockdowns: A single case can close down a giant port. But China is so big that many instances of lockdowns at a local level have gone under the media’s radar, notes economist George Magnus of Oxford University. “Shutdowns have been happening constantly without global consequences. A small town of a million in the middle of the country’s butterfly-wing effects are obviously pretty small, but a big entrepôt in a coastal province in China will be observed and commented upon,” Magnus said.

The good news is, despite some shortages, supply chains have proved mostly resilient and major retailers have adjusted. “It’s amazing how well supply chains have held up,” said David Dollar, a senior fellow at the Brookings Institution think tank. “China is big enough that it’s shown it can lock down a particular port for coronavirus reasons, but it’s got 20 other ports.”

Experts are divided on how consumers will feel the effect of omicron. Even localized shutdowns at China’s manufacturers, ports, or hubs could have an impact, warned Per Hong, an expert on supply chains at the advisory firm Kearney. “The chain is only strong as its weakest link, and when it comes to the global supply chain, there are weaknesses everywhere,” Hong said.

With demand on the rise in the United States — after two years of isolation, everyone seems to be spending right now — there will be some shortages, and it’s very difficult to predict what will be in short supply in the coming months. Supply chain disruptions can take up to half a year to be felt by consumers.

The Chinese economy was already slowing down because of the burst of the Chinese real estate bubble and a crackdown on tech companies, like e-commerce giant Alibaba. Now, with omicron entering the mix, economists warn of less growth in China, which will also have effects on the US economy. “China pulled us out of the global recession because it has so much demand globally. This time we know we can’t rely on China to pull us out of it since they’re in a slowdown,” said Greene, the Kroll Institute economist.

Watching the Olympics

China may be trying to control the weather to rid cities of smog and turn the sky blue for the Olympics. Millions will watch remotely, with spectator-less stadiums as backdrops. But more important than how Beijing projects itself in the Olympics is how the zero-Covid policy affects China’s place in the world.

What experts call draconian policies are likely to stay in place past the Olympics and until the Party Congress in the fall, maybe long after.

Though economic knock-on effects are concerning for China and the world, a bigger issue might be the isolation of China. “If the rest of the world learned to live with Covid, is China going to be the only country that locks itself out of conferences, international travel, and students going there? They are going to pay a high price for going this path,” Dollar said.

The absence of “real communication channels” between officials, businesspeople, and students will exacerbate the US-China relationship, according to Russel. And it might lead China to be a lot more socially distant. “The most extreme and usually the most paranoid actors in both systems get the final word,” Russel said. “The insulation has been stripped off the wires of the complicated relationship, and the wires have been exposed. It’d be very easy for a crossed wire to short-circuit the relationship.”

For analysts like Gabriel Wildau of the consulting firm Teneo, it means he hasn’t visited China since 2019. Neither have most of his friends or colleagues. “I do worry about the long-term impact,”’ he said. “The human relationships formed are really important for the US-China relationship.”