Coronavirus pandemic: China, Omicron and new supply chain fears

The Omicron variant and its spread across Chinese territory is now a huge challenge

unnamed file 7 lockdown, China, measures, OMICRON VARIATION

Despite local lockdowns and strict restraint measures, the Chinese strategy "zero-Covid" (coronavirus elimination shortcut) passes - eve of the Winter Olympics in Beijing - one of the most critical, namely multi-level endurance tests.

The Omicron variant and its spread throughout Chinese territory is now a huge challenge.

The "riddle" for the Beijing leadership is said to be made even more difficult by the contradictory reports regarding the effectiveness of the domestic production of pistons against the new variant.

Parameter, which raises new questions about the true degree of immunization of 85% of the Chinese population, who have so far received both doses.

Concerns are mounting as Omicron cases are being identified in more and more cities and provinces, despite strict measures in force and amid massive diagnostic tests.

In fact, since last weekend, Beijing itself has been officially added to the list, with the recording of the first case of Omicron.

It was reported that he was a person who had not traveled outside the Chinese capital since the beginning of the year and in the meantime had visited many restaurants and shopping malls.

Since the beginning of the week, meanwhile, the total daily cases in the country have reached their highest point since March 2020.

That's two weeks before the Chinese New Year celebrations and three weeks before the start of the Winter Olympics, which will host Beijing and partly the neighboring Hebei Province from February 4.

Beijing under siege

Chinese efforts to avert Tokyo's failure last year and the "zero Covid" Beijing Olympics have already failed.

After the "landing" of Omicron in the Chinese capital, it was announced that their organization will be more or less in a "bubble", which will separate athletes, national delegations and the staff of the Games from the general public.

Those of them who have already arrived in Beijing from abroad are already experiencing it (in total, they are expected to exceed 27.000 people, despite the diplomatic boycott of the West).

Having already ruled out the presence of foreign spectators in the stands, the organizing committee of this year's Winter Olympics announced on Monday additional restrictive measures, with the sale of tickets only to "selected" Chinese, without further details.

For incoming travelers to Beijing, it has been announced that, starting on January 22 and at least until the end of March, a negative diagnostic test will be required for COVID-19 before and after their arrival, as well as the use of a mobile application for continuous health recording.

"Zero-Covid" vs economic growth

As with its previous variants COVID-19, even now, China does not say exactly how many cases of Omicron have been recorded in its vast territories.

However, given the lockdown chains, the second largest economy in the world is now projected to slow down, closing in 2021 with an impressive economic growth of 8,1% of GDP on an annual basis: the highest rate in almost a decade.

"It's too early to conclude that Omicron will thwart China's efforts to control the pandemic," said Mark Williams, chief economist for Asia at Capital Economics.

"But it is clear that the emergence of more contagious variants requires more frequent interventions," he notes. "And that increases the cost."

Goldman Sachs has already lowered its forecast for Chinese economic growth in 2022 to 4,3%, from 4,8%: about half of last year.

On the same wavelength, Morgan Stanley forecasts growth of 4,9% in the first quarter, but then a possible slowdown to 4,2%, "if Omicron spreads to other regions" of China, leading to more lockdowns and production problems.

A development that, as Nomura points out, will reduce the benefits of the "zero-Covid" strategy so far. Hence, its analysts forecast 4,3% growth for the Chinese economy for the whole of 2022.

New risk of logistics "suffocation"?

Fatally, the worries for new, wider από adventures from the local Chinese lockdowns are intensifying.

Both in the domestic, international manufacturing hub, with additional cost increases, combined with high energy and raw material prices. As well as in the global supply chain.

Omicron has already hit major Chinese ports, such as Dalian, Tianjin, Ningbo and

Shenzhen Seku, leading to restrictions on their normal operation, container traffic and, consequently, international trade.

Following an overall increase in Chinese exports of 21% year-on-year in December - exceeding expectations - the latest reports show "increasing congestion and delays associated with the coronavirus in some major Chinese ports since the beginning of the year," he said. information note by Capital Economics' Julian Evans-Pritchard.

"The situation," he said, "is likely to worsen in the short term, reducing shipments this month."

Looking at the bigger picture, however, Eurasia Group founder Ian Bremer and Cliff Kuphan, president of the Institute for Geostrategic Studies, say China's zero-sum Covid policy is doomed to fail.

"It is the opposite of where Xi Jinping wants his country to be in view of his third term" in the second half of the year, according to their latest analysis.

Hence, counting Omicron as a factor in widening the gap between emerging and developed markets, they assess Beijing's pandemic policy as the main geopolitical risk for 2022, worldwide.