(Yicai Global) March 17 -- China faces its most severe outbreak of covid-19 since that in Wuhan in early 2020. Megacities have been placed into lockdown. The lockdowns affirm a continuation of China’s strict zero-covid policy, whilst other countries in the world have moved to forfeit restrictions altogether. The developments have subsequently rattled markets in China, as well as provoked widespread fears for global supply chains, with several global firms such as Foxconn being forced to temporarily halt production. Shenzhen is, after all, one of the world’s most crucial manufacturing hubs.

Contrary to the rest of the world, China’s zero covid policy is continuing for a number of reasons. First of all, the country’s leadership has vowed to “follow the science, not politics”- contrary to what has been done in countries such as Australia, the United Kingdom, and the US, where soaring death tolls have been tolerated purely out of political and economic conveniences. Thus, China will not end zero-covid until it is confident the human toll of doing so will not be costly, requiring more serious attempts to garnish immunity through vaccinations, of which is no easy task given China’s population size, and ensuring that hospital capacity, which continues to be limited in rural provinces, will not be pushed to the brink.

As a result, China continues its traditional tactic of engaging in targeted local lockdowns, mass comprehensive “all of population” testing regimes, work at home orders, and traffic light code travel authorizations. Although Omicron’s increased transmissibility is making this clearly more challenging, hence South Korea, a nation previously praised for handling covid recently gave up, nonetheless China’s unique hand has a proven record of ending these outbreaks in just under a month or so, usually with minimal casualties. Residents have Shenzhen after all, have been told to get tested three times. Although the mainstream media have been quick to frame such tactics as detrimental to China’s economy, particularly on the aspect of consumerism, in the long term this approach has in fact brought longstanding economic stability to China which has allowed it to have a strong economic performance throughout both 2020 and 2021, with minimal government investment.

Given this, it is inevitable that the disruption to global supply chains from these lockdowns will be oversold by the mainstream media, and will only be temporary as opposed to permanent, although they nonetheless add to a broader environment of global uncertainty and inflation aggravated by other factors such as the Russia-Ukraine conflict. China’s logistical supply chains otherwise remain the most resilient in the world given their capacity, affordability, and efficiency. The 2020 shutdown in lockdown was heralded as a so-called “gamechanger” for such, but this ultimately did not materialize either, and will not this time in a scenario that continues to be less severe in scope.

Concerning China’s economic performance in 2022, it will also be argued that these events constitute setbacks, especially pertaining to reaching its 5.5% designated GDP goal. However, as this is a year of party congress it seems implausible that China will allow itself to fail in this regard and is likely to respond to increased disruption with a looser monetary policy and stimulus, something economies in the west do not currently have at their disposal. It may be the case that later in the year, as the summer brings typically better conditions which naturally reduce transmissibility, China may change course providing the situation is right and move towards compromise.

But for the time being, the public should not panic at this situation in China. Although it comes with large-scale economic risks in the short term, China is making a statement that it is safeguarding the health of its population. The western approach to covid may guarantee economic recovery, but it is ultimately ideological on the premise of populations who are not compliant, and ultimately comes with a large-scale cost in human life.