Macroscope | Why China is reluctant to ‘live with Covid’. It’s not just politics

China is battling its worst Covid-19 outbreak since the start of the pandemic. Total case numbers have risen to 733,000 since early March, almost nine times the number in the initial wave. At the epicentre of the outbreak, infection numbers in Shanghai have remained stubbornly high despite the citywide lockdown having lasted for more than a month.

The economic costs of strictly adhering to the “zero Covid” strategy are mounting. The notable deterioration in activity data in March offered a glimpse of the growth shock, but that merely scratches the surface given that Shanghai’s lockdown started in late March. The current outbreak, combined with the Chinese government’s determination to persist with the zero-Covid policy, has turned hitting the 5.5 per cent growth target from challenging to impossible even with an aggressive stimulus package.

Despite its insistence on the zero-Covid strategy, the central government’s confidence may have waned in light of recent events. This is not because the strategy has lost effectiveness in containing the virus – the quick resolution to Shenzhen’s outbreak and the successful isolation of the rest of country from Shanghai’s debacle prove that it remains effective in cutting off transmission chains of a highly infectious disease.

Given time, Shanghai’s situation will stabilise. But more worrying is what happens after the city’s lockdowns end. Given the high transmissibility of Omicron, it is very likely that it could return. And, without a policy change from the top, the city – and the nation as a whole – could experience repeated lockdowns that deepen and prolong the damage to the economy and society.