2 reasons why China is still in lockdowns, more than 2 years after the pandemic started — and what it'll take for life to go back to normal

• More than two years into the pandemic, parts of China are still in and out of COVID-19 lockdowns.
• The prolonged restrictions are taking their toll on China's economy and spilling over globally.

More than two years into the pandemic, parts of China are still in and out of COVID-19 lockdowns.

In the last few months, traders and bankers in Shanghai slept in their offices to continue working amid a lockdown. Factory workers have been told to live and work on-site intermittently when cases surge. Just this month, China locked down the popular resort island of Hainan after authorities declared it a COVID-19 hotspot, stranding 80,000 tourists.

China's long-drawn exit from pandemic lockdowns is worrying economists and policymakers. China is the world's second-largest economy and a manufacturing powerhouse, so investors and businesses are concerned about the continued restrictions' impact on economic activities.

"The economic dislocations are now spilling into the larger world, fueling inflation, disrupting supply chains, triggering a retreat or pause by some foreign businesses in China, and increasing external concern over China's deepening isolation," wrote J. Stephen Morrison, Scott Kennedy, and Yanzhong Huang for the Center for Strategic and International Studies, a US-based think tank, on June 27.

The prolonged restrictions are already taking their toll on China's economy. Top leaders told government officials in late July that the country may not hit its 5.5% growth target this year, Bloomberg reported, citing people familiar with the matter. Meanwhile, the International Monetary Fund in July downgraded its global growth forecast to 3.2% in 2022 — lower than the 3.6% it had early predicted in April, citing lockdowns in China as a contributing factor.

There could be more pain ahead as it'll likely be "well into" 2023 before China lifts its zero-Covid approach, according to the Eurasia Group, with aggressive testing and lockdowns continuing to stave off a public health crisis — but not an economic slowdown.

Here are two reasons why China is so reluctant to abandon its zero-Covid policy — and what it'll take to eventually get there.

1. Elderly Chinese continue to have vaccine hesitancy

China's vaccination rate is high, with almost 90% of its population fully vaccinated, according to the Johns Hopkins Coronavirus Resource Center.

But elderly vaccination rates have lagged behind the national average, with just 61% of those above 80 years ago immunized, China's National Health Commission reported in a July update. Reports accounting for vaccine hesitancy among China's elderly are sparse, but reasons include concerns about safety, adverse reactions, and the low incidence rate of COVID-19 in the country, according to a study of 92 individuals in China, including those 60 and over, published in the Vaccines journal in November 2021.

And China has not yet developed its own mRNA vaccine — which is hampering the country's exit from the pandemic. Most Chinese are inoculated with inactivated vaccines.

In a bid to bolster public confidence in homegrown vaccines, a top official for the China National Health Commission said in late July that China's state and party leaders have all been vaccinated against Covid-19 with made-in-China vaccines, Reuters reported.

"Vaccination in elderly populations will improve in the coming months but will not be sufficient to eliminate overall health risks for this population," wrote Eurasia Group analysts in a July 25 note.

2. Getting technology in place for the next pandemic

While China can import vaccines as a quick fix, it's of national interest to develop its own mRNA vaccine and not have to rely on imports, experts say. Beyond that, it's also about ensuring the country has the technology in place for the next outbreak.

"It's not just about national pride but also so that vaccine manufacturers will know what to do in the next pandemic," Bo Zhuang, a senior sovereign analyst with Boston-based investment management firm Loomis Sayles, told Insider.

"The Chinese government doesn't want to have to subsidize companies in developing this technology from scratch the next time a pandemic comes around," he told Insider.

He estimates China is likely to end lockdowns only after Chinese New Year, which will be in late January 2023.

Beijing is counting on imported COVID-19 treatments over vaccines so it doesn't have to shift its narrative

Experts say China needs two things to start making its long journey out of covid-Zero: Imported treatments, and a change in public messaging.

"Unlike vaccines, there is a much higher willingness from Beijing to import treatments," wrote the Eurasia Group analysts, led by Scott Rosenstein, the consultancy's special advisor for global health.

Beijing is counting on medicines like Pfizer's Paxlovid pill to treat COVID-19, particularly since it would be hard to reverse early state messaging that cast doubt on the efficacy of foreign vaccines.

"This is likely because Beijing characterized the development of homegrown vaccines as a demonstration of its sophistication in the pharmaceutical space and news media have repeatedly characterized foreign vaccines as inferior products. Therapeutics are not hamstrung by similar government or population reluctance," the Eurasia analysts wrote.

"A pivot out of Zero Covid will likely need a successful deployment of treatments," added the analysts. That's particularly since over 1.5 million people may die in China if the country were to abandon the Zero Covid policy without vaccination or access to medication, according to data modeling by scientists in the US and China, published in a May 2022 paper.

Even with Covid treatments, China will need to embark on a public-messaging campaign to convince the Chinese people that health risks from both vaccination and therapeutics have become reduced — which is unlikely until well into 2023, said the Eurasia Group analysts.

Given that the next meetings of the national legislature and the top political advisory body — known as the "Two Sessions" — take place in March 2023, the messaging will likely only quicken after this meeting, they added.

Official messaging suggests a long trek out of zero-Covid.

"Even if there are some temporary impacts on the economy, we will not put people's lives and health in harm's way, and we must protect the elderly and the children in particular," President Xi Jinping said in June, according to an official transcript.