InterRegional for Strategic Analysis


        
<p>The spread of the Omicron variant in China at the end of last year sparked fears among various countries and experts, who had hoped that 2023 would see economic activity rebound to pre-pandemic levels. There are concerns about the speed at which the newest COVID-19 variant is spreading among China’s 1.4 billion people. The country is grappling with both high population density and the fact that many people are not fully vaccinated. It is uncertain whether Beijing will have the capacity to provide an adequate healthcare response to this new wave. According to some estimates, more than a million Chinese people are expected to become infected with the new variant.</p>



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<p>Preliminary estimates suggest that this new wave is spreading fast in China, although the Omicron variant has caused fewer fatalities. It remains important for infected persons to observe precautionary measures until they recover from their symptoms. COVID-19 and its repercussions have dominated domestic and foreign policies over the past two years, and it will be important to monitor the effects of this new wave on China and at the global level.</p>



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<p class="has-vivid-red-color has-text-color"><strong>Domestic Policy Challenges</strong></p>



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<p>The new wave of COVID-19 in China has created various domestic policy challenges, which can be summarized as follows:</p>



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<p><strong>1. Mounting pressures on the healthcare sector:</strong> As part of its zero-COVID policy, China prioritized restricting economic activity and public mobility for the past two years rather than expanding the scope of vaccination campaigns or raising public awareness.</p>



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<p>Amid the general lack of information, it is difficult to assess the current state of the Chinese healthcare system. However, experts have managed to draw some possible conclusions based on the experiences of similar countries that have returned to normal after previously imposing a zero-COVID policy. The UK-based data analysis firm Airfinity estimates that China will see 1.7 million severe cases or deaths from Omicron by April 2023, even though Omicron infections are generally not as severe as those caused by the original strain of COVID-19. This estimate is based on data from Hong Kong, which experienced a sudden surge of Omicron &nbsp;cases earlier in 2022. Like China, Hong Kong has low vaccination rates, previously adopted a zero-COVID policy, and struggled to contain its Omicron wave.</p>



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<p>Meanwhile, the Institute for Health Metrics and Evaluation (IHME) in Washington has created a model for the spread of Omicron that projects China will have 300,000 cases with severe symptoms by 1 April, with Omicron cases expected to reach 1.25 million by the end of 2023.</p>



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<p><strong>2. Deepening economic challenges and a falling stock market: </strong>China’s stock market incurred heavy losses as Omicron spread. Other vital economic sectors have also witnessed major disruptions. The Chinese government is expected to impose new restrictions on economic activity, which will significantly limit growth during the first quarter of 2023. In the first quarter, growth is expected to remain under 2%, and if cases continue to increase, China might not be able to achieve 3% growth by the end of the year.</p>



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<p>Tourism and travel to and from China has also been affected by the new COVID-19 variant. For example, Japan and South Korea have imposed travel restrictions to China for both business and tourism. This will also impact tourism and trade flows in neighboring countries, although to a lesser extent.</p>



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<p><strong>3. Increased political pressure on the Chinese government: </strong>During the spread of the original COVID-19 strain in 2019 and 2020, and during vaccination campaigns in 2021 and 2022, mainstream media outlets in China promoted unilateral policy as the most effective way to beat the pandemic and protect Chinese citizens. President Xi Jinping made centralized decisions for the healthcare sector and controlled public mobility to contain the outbreak. He allocated additional funds to the healthcare sector without having to play a political game in which narrow party interests could disrupt critical decision-making. &nbsp;</p>



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<p>Despite Jinping’s success in securing a third presidential term during the Chinese Communist Party (CCP)’s most recent National Congress, the unprecedented Omicron surge has triggered internal criticism and popular discontent towards the CCP and its stances. While there have not been any protests—demonstrations are uncommon in China—Jinping is keen to steer public opinion towards the ruling party’s interests. He will aim to highlight issues that enjoy public support and consensus, such as China’s stance on Taiwan, in order to distract the public from the actual challenges facing China, include dealing with Omicron and slowed economic growth.</p>



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<p><strong>4. Negative impact on technology supply chains:</strong> COVID-19 has taken a heavy toll on the technology sector in China, especially since transportation is already struggling with severe crises. Recent reports indicated that Apple had asked its staff to reduce the production of AirPods and MacBook in the first quarter of 2023 due to declining demand in China and the country’s increase in COVID-19 cases. Moreover, tech companies in China are struggling to find the labor force necessary to maintain production levels after many workers resigned due to COVID-19. This prompted companies to increase salaries to attract new labor. For example, Foxconn, one of the largest iPhone manufacturers, increased its salaries by $2,000 in order to increase its labor force in China.</p>



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<p class="has-vivid-red-color has-text-color"><strong>Global Repercussions</strong></p>



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<p>The repercussions of the new COVID-19 wave are not limited to Chinese domestic affairs and will also affect China’s foreign policy and relations with other major powers. These issues can be summarized as follows:</p>



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<p><strong>1. Western countries impose pressure on China: </strong>The Chinese government could take advantage of the new variant to distract public opinion from the slowdown in economic growth, and use COVID-19 as a pretext to explain why economic growth rates are not improving during 2023. However, Western countries could also use COVID-19 to pressure Beijing. From the West’s standpoint, the huge Omicron surge in China attests to the ineffectiveness of Chinese vaccines in protecting against this variant, while also underlining the Chinese Communist Party’s failures in handling the crisis, despite the Chinese government’s claims to the contrary.</p>



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<p><strong>2. Renewed international accusations about China’s information blackout:</strong> The new wave of COVID-19 cases has led to further international accusations that China has adopted a policy of information blackout. The same accusations were made in an earlier phase of the pandemic, towards the end of 2019. Mike Ryan, Executive Director for the WHO Health Emergencies Programme, said in a press conference on 4 January that the "current numbers being published from China underrepresent the true impact of the disease in terms of hospital admissions, in terms of ICU admissions, and particularly in terms of deaths."</p>



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<p><strong>3. Expanding precautionary measures for travelers from China: </strong>The rapid spread of COVID-19 again in China has prompted many countries to adopt strict precautionary measures for travelers coming from China. Some Western countries have avoided imposing bans on travel to or from China because they feel that such measures will only temporarily limit one particular strain from spreading, while other potentially more dangerous strains continue to spread in Europe, the United States, and elsewhere. However, some countries, including the United States, India, Italy, and Japan, have begun to impose partial restrictions. They require travelers coming from China to obtain a negative COVID test 48 hours before their flight, regardless of the traveler’s nationality.</p>



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<p>In response, the Chinese Ministry of Foreign Affairs issued a statement on 3 January describing these measures as excessive and unacceptable, and threatened to respond with their own appropriate measures.</p>



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<p>Nevertheless, it is unlikely that significant travel restrictions will be imposed since most countries are trying to ramp up economic activity to pre-pandemic levels and have critical trade ties with China.</p>



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<p><strong>4. Encouraging international cooperation: </strong>Despite some tensions arising from the new COVID-19 wave in China, there may also be opportunities for international cooperation. Given the spread of Omicron in China, some Western countries such as the US and the UK announced plans to send free doses of Western vaccines to China, including the Pfizer BioNTech vaccine. The European Union also offered China vaccines and medical aid to help combat the spread of the virus, reduce economic repercussions, protect the interests of European companies operating in China, and stimulate growing bilateral trade relations. Reports indicate that Pfizer had already signed a deal with a local Chinese company on vaccine deployment.</p>



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<p><strong>In conclusion, the Omicron outbreak in China, the Chinese government’s imposition of certain precautionary restrictions, and slowed economic growth at the domestic level are unlikely to have major global repercussions. Most countries have been dealing with the Omicron variant for more than a year. However, Omicron’s spread poses a new challenge for the Chinese government, which must now deliver on its promises about combatting the virus, while also dealing with European pressures regarding certain political interests.</strong></p>

      

What are the Implications of the New COVID-19 Wave in China?