While the rest of the world battled wave after wave of coronavirus, China's sealed borders,

rigorous testing and strict quarantine policies enabled life to proceed largely as normal.

However, the emergence of the highly contagious omicron variant and its sub-strains have the

potential to change all that.

So how long can China maintain its strict Covid policies?

And what matters most to the Chinese government?

China has gone to great lengths to keep Covid-19 at bay.

After the original strain of the virus ripped through Wuhan at the end of 2019,

the national government adopted one of the world's strictest approaches to tackling the pandemic.

Until recently, this strategy was extremely successful:

it kept case numbers down and national pride up.

The success of that strategy in sustaining extremely low levels of infection in comparison

to the failure of the liberal democracies,

including the United States, in handling the Covid outbreaks,

that convinced the central leaders that this is not just a success of the zero-Covid strategy.

It could be used to showcase the superiority of the Chinese political system.

So in a way, it's sort of like a projection of China's soft power.

But in March of 2022, China faced a major outbreak in its largest city Shanghai, a financial

hub with a population of 26 million people.

Covid-19 cases skyrocketed, and the city was locked down in April.

Shanghai's outbreak is the biggest since Wuhan 2020.

So just in terms of case numbers, it by far exceeds anything we've seen since then.

Shanghai is China's most international city.

It's a hub of manufacturing, so the impact on global supply chains could be quite substantial.

CNBC reporter Evelyn Cheng covered the outbreak from Beijing.

Shanghai is usually upheld as one of the most organized places in China.

The level of disorganization, the lack of preparedness,

and even how they're trying to organize distribution of vegetables, this is really

uncharacteristic of Shanghai.

In Shanghai, most people are being sent to these quarantine centers,

where reports say it's very cold, or there's no showers and very primitive.

The lockdown forced many factories to shut, while some opted to stay open by using a “closed-loop system.”

This is essentially a bubble, like the ones China used to host the Winter Olympics in Beijing.

Workers are tested frequently and can't leave the area unless there is an emergency.

For factory workers, that meant sleeping on the factory floor.

A lot of the factories are located in industrial parks, in sort of the suburban parts of major cities.

So, if you have all your workers on-site, and that site is basically cut off from the

neighboring towns, then you can keep on producing on that site.

Otherwise, Shanghai residents were confined to their homes.

Struggling to get food and other basic items due to logistics and supply chain issues,

residents turned to 'Group Buying.'

This is when a group of people get together, often in the same residential compound, to

buy groceries and other daily essentials in bulk.

So, the world began to wonder – could the outbreak in Shanghai force the end of China's no-tolerance policy?

While the language has changed somewhat with talk of a “dynamic zero-covid” approach,

analysts tell me there has been no fundamental change in strategy.

They are fundamentally the same.

We thought that this is going to signal there's some significant relaxation of this zero-Covid strategy,

turned out we were wrong.

So why is China so reluctant to abandon its policy?

Well, easing restrictions bears major risks.

Leadership in Beijing is bent on avoiding a situation like the one in Hong Kong,

where the omicron variant ripped through the densely populated financial center

and overwhelmed the healthcare system.

Hong Kong was absolutely a cautionary tale for the mainland leadership about worst-case

scenarios for what an outbreak would look like on the mainland.

When hospitals become overloaded, it can create quite ugly scenes, quite chaotic scenes,

that mobilize public anger and undermine confidence in the government.

Thanks in part to China's zero-tolerance policy, the country is now uniquely vulnerable to the virus.

Because fewer people were exposed to Covid, China's population boasts lower immunity

from natural infection than other parts of the world.

On top of that, China has relied on homegrown vaccines from Sinopharm and Sinovac,

which offer little protection against infection from Omicron.

And the vaccination rate among China's elderly population is worryingly low.

The concern is that if China opens up, the healthcare system will be overwhelmed by a surge in cases,

and that will be dangerous politically and epidemiologically.

Even though China's existing vaccines provide better protection against severe disease;

the sheer scale of China's population means thousands would likely require hospitalization.

Its public health infrastructure and ICU capacity remain inadequate to respond to a surge in cases too.

Its number of intensive care beds per 100,000 people is just a fraction of other major economies.

That's even worse in rural areas.

Doctors also lack the practical experience that Western peers have after two years of

treating patients with the virus.

China could focus on a new vaccination campaign to boost immunity.

Chinese companies are racing to develop their own mRNA vaccine, but it remains to be seen

when and if a new shot will be ready.

Alternatively, China could look to deploy the mRNA vaccines used in the West.

At this point, I think it's quite clear that politics and nationalism have played

a role in the Chinese government's approval of foreign vaccines.

And it looks unlikely they'll grant approval for those vaccines, at least until a new Chinese

homegrown vaccine is on the market.

But China's commitment to zero-Covid has economic costs.

Its people are buying less, supply chains have been disrupted, and investors are leaving

the Chinese market in droves.

The issue of the pandemic response has been so politicized.

When it's used to showcase the superiority of the Chinese political system.

When it's framed as a competition between liberal democracy and an authoritarian system.

These political stakes become so high; the economic costs become secondary.

The idea of avoiding scenes of chaos is a key consideration for the leadership, perhaps

even more so than reducing case numbers or ensuring no one dies.

And I think that's why the zero covid policy remains in effect.

Most experts agree that the real milestone to watch is the 20th National Congress of

the Chinese Communist Party, due to take place at the end of 2022.

Changing policy at this point would inject potential instability in the months leading

up to this party congress.

The party is preparing for the leadership transition that is expected to occur in the 20th party congress.

They don't want any surprise now that would derail the transition that undermines President Xi's leadership.

As for the Chinese public, they've been mostly supportive of Beijing's zero-tolerance approach.

It was a source of national pride for the Chinese people that case numbers have been

low throughout the last two years

in a period when Covid has ravaged much of the rest of the world.

It was also advantageous from an economic perspective because

China was able to maintain production and, in some cases,

gain export market share while other countries suffered shutdowns.

But could food shortages, a struggling health system and controversial policies, like separating

Covid positive children from their parents in Shanghai, change that?

Despite all this discontent, dissatisfaction on the zero COVID strategy, the overall public

support for the strategy remains strong.

Especially in smaller Chinese cities or in the countryside, where people have only limited

access to alternative information.

There's a sense that public opinion may be shifting.

And the hardships we've seen in Shanghai,

whether it's people having trouble getting groceries or

whether it's the extreme lack of freedoms that people are suffering now,

entering, in some cases, more than 20 days in complete lockdown in Shanghai.

It's wearing on people's nerves.

The official figures show that deaths have been very, very low in Shanghai.

Although there is reason to distrust the official figures –

but I think it still gives a broad indication of the seriousness.