China’s Covid-Zero Strategy Risks Leaving It Isolated for Years

China this month saw the contagious delta variant of Covid-19 that started in Nanjing pop up in more than half of 31 provinces. The outbreak has spread despite water-tight border controls, triggering yet another round of targeted lockdowns, travel curbs and mass testing across the country. While the outbreak is the most widespread in China since the initial flare-up in Wuhan last year, the World Health Organization said total cases last Friday were 141 -- around .01% of the new infections that day in the U.S.

The aggressive moves to tame a relatively small caseload in a country with one of the world’s highest vaccination rates shows how politically invested the Communist Party has become in achieving zero Covid-19 infections. Chinese authorities are increasingly trumpeting their success in containing the virus as an ideological and moral victory over the U.S. and other nations now treating Covid-19 as endemic.

In the short term, Chinese leaders have an incentive to maintain strict controls at least through next year: They don’t want any major outbreaks derailing the Winter Olympics or clouding a once-in-five-year Party Congress at which President Xi Jinping is expected to get a third term in office. The problem, however, is the rising economic and political costs in maintaining that policy indefinitely, particularly as the virus spawns new variants that can breach restrictions more easily.

“China will have to pivot from its containment strategy, sooner or later - you can stay Covid Zero for a while, but you can’t stay Covid Zero forever, because the virus swoops in before you know it,” said Chen Zhengming, an epidemiology professor at the University of Oxford. “My worry is that they won’t actively pursue a tactic change as Covid Zero has become an entrenched mentality. Especially when you hold officials accountable, no one dares to go easy on the outbreak.”

Right now it’s nearly taboo in China to even suggest a different approach. In a commentary published over the weekend by a health news app run by the official People’s Daily newspaper, former health minister Gao Qiang called for stronger measures to keep the virus out of China while blasting the U.S., U.K. and other countries for easing too early.

“Their sole reliance on vaccination and pursuit of the so-called ‘co-existence with the virus’ have led to a resurgence of the virus,” he wrote. “This is a misstep in Covid decision-making caused by the deficiencies in their political mechanism and the result of upholding individualism.”

After Gao’s piece was published, Chinese social media users began attacking Zhang Wenhong, director of infectious diseases at Shanghai Huashan Hospital, who had earlier called on Chinese authorities to find “the wisdom to co-exist with the virus long term.”

China isn’t the only country that’s sought to snuff out the virus, with Singapore, Australia and New Zealand also pursuing the strategy dubbed Covid Zero. But as the rest of the world opens up and the prospect of global elimination recedes, others are starting to back away from a playbook that prevented deaths but left them cut off and fixated on case counts.

China’s commitment to Covid Zero has implications for investors, many of whom are already reeling from Xi’s sweeping crackdown on technology firms that at one point erased $1.5 trillion from Chinese stocks. Economic risks are building in the second half of the year, with growth set to slow while inflation pressures pick up. Goldman Sachs Group Inc. and Nomura Holdings Inc. downgraded growth forecasts for China this month over Beijing’s measures to curb the virus.

While China’s Covid policy would lead to a relatively safe domestic environment, “the cost is that China will stay isolated,” Zhang Zhiwei, chief economist at Pinpoint Asset Management, wrote in a note on Sunday.

“The zero tolerance policy is costly for economic growth,” Zhang said. “Mr. Gao’s article shows China is willing to pay the price.”

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