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Economics: Omicron could be China’s nightmare

China is not prepared for Omicron

While the rest of the world can probably expect less economic disruption from the more contagious but less deadly variant, China is likely an exception. Its vaccines don’t appear to be as effective, and its natural immunity to Covid is very low.

Tighter external and domestic restrictions are likely

Policymakers appear intent on allowing for a relatively normal Chinese New Year. But if Omicron jumps China’s tightened external controls, it could force policymakers to impose lockdown measures on par with those of the first wave.

If China stumbles back into lockdown, policy support will ramp up

Another quasi-national lockdown in China would weigh on growth and could further disrupt global supply chains. Some of the impact on growth could be offset with more stimulus. More might be done to support households directly this time.

Economics: Omicron could be China’s nightmare
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