♪♪ >> Hello, and welcome to "GZERO World."

I'm Ian Bremmer, and today, we are talking about the biggest global risk of 2022.

Could it be Russia and Ukraine?

Maybe deep political divisions in the United States.

Maybe it's Big Tech.

[ Record needle scratches ] Not again.

I am so over this.

It's -- yep, that's right -- COVID.

But this time, we dive deep into how China's current coronavirus strategy could pose a big threat to the global economy.

President Xi Jinping's zero COVID policy -- yes, zero -- has done well so far to keep the virus at bay.

But omicron, a variant, said to be at least four times more contagious than delta, could soon make his strategy highly ineffective.

More lockdowns and staffing shortages in China will lead to supply-chain disruptions, higher inflation, and greater political instability worldwide.

I speak to Yanzhong Huang.

He's senior fellow for global health at the Council on Foreign Relations, and he thinks China will soon have to learn how to live with the virus.

Then, do you need some extra cash after the holidays?

You want to win a cow?

I know you want to win a cow.

Well, maybe it's time to get vaxxed, finally.

A global spike in COVID infections has led governments to bring back incentive programs for the unvaccinated.

Don't worry -- I've also got your "Puppet Regime."

>> I prefer good annexation to good education, but learning lessons is also important.

>> But first, a word from the folks who help us keep the lights on.

>> Major corporate funding provided by founding sponsor First Republic.

At First Republic, our clients come first.

Taking the time to listen helps us provide customized banking and wealth-management solutions.

More on our clients at firstrepublic.com.

Additional funding provided by... ...and by... >> Omicron has arrived, and with it, a new challenge in how governments and individuals deal with COVID-19.

But despite mounting concern, this is not March 2020.

The new variant is much more contagious.

It's also substantially less severe than earlier versions.

And while vaccines may not prevent infection, they have, so far, done quite well in preventing worst-case scenarios.

In fact, in 2022, there are even some reasons for optimism.

New COVID drugs will hit the market and change how we treat sick people, while also limiting deaths and hospitalizations.

We can even expect the pandemic to soon become endemic for most advanced industrialized economies -- that means living with the virus.

But that optimistic picture does not apply everywhere, like in China.

Up until now, President Xi Jinping's zero COVID strategy has worked wonders for Beijing.

Lockdowns and tight border controls have kept coronavirus under control.

But that success is unlikely to survive this new, highly transmissible form of the virus.

To make matters worse, China's vaccines use older technology and so far have been much less effective than mRNA jabs found in the West.

That, combined with the zero COVID approach, means virtually none of China's populations has the antibodies necessary to protect them against omicron.

And without an mRNA vaccine of their own, though they are working on one, China can expect larger outbreaks, leading to more severe lockdowns and, in turn, greater economic disruption.

It's the last thing that President Xi wants as China heads toward the Winter Olympics and what's expected to be his third term in office.

Chinese leadership seemed unfazed, though, and it's clear that Xi plans on staying the zero COVID course.

State-run newspaper China Daily clearly wasn't thrilled with my take on all this, as you can see in this political cartoon.

I think that's supposed to be me, the little guy in the middle, but he looks more like Rich Uncle Pennybags from "Monopoly."

But how China handles omicron has global ramifications, and things could soon get a lot uglier.

Staffing and material shortages there will mean more empty shelves in other parts of the world.

Pent-up demand will also lead to persistent and high inflation, which, in turn, will create greater inequality and political instability.

Has the world's most successful policy battling the virus -- that's China's -- suddenly become the least effective?

And is there anything the rest of the world can do to prepare for the failure of zero COVID policies in 2022?

I tackle this and more with Yanzhong Huang.

He's senior fellow at the Council on Foreign Relations and director of the Center for Global Health Studies at Seton Hall University.

Here's our conversation.

Yanzhong Huang, thank you so much for joining us on "GZERO World."

>> My pleasure.

Thanks for having me.

>> Talk to us a little bit about what China's zero COVID policy is.

>> Well, that policy, I think, has been formally in place, you know, after March 2020, when China essentially contained the spread of the COVID virus in Wuhan.

So they want to sustain the achievements they made.

So they launched that strategy with the attempt to contain any sporadic outbreaks.

So that strategy was first tested in the summer of 2020 in Beijing.

When there was like a small number of outbreaks, which were immediately followed by mass testing, aggressive contact tracing, quarantining, and then sealing of neighborhoods, that becomes the standard playbook for other localities to follow in containing the virus spread ever since.

>> Now, I mean, usually when I hear "zero COVID," I kind of think that they mean really low COVID.

But, like, I saw a Shanghai Disneyland, they had one person that had exposure, they thought, to someone with COVID, and they locked down 28,000 people for the day.

I mean, are they literally saying, if you find one case of COVID, what do they do?

>> Well, it depends on how they perceive the risk is, and it also depends on what locality you are in, right?

So, in a place like in Shanghai, they are very proud of the so-called precision of pandemic control.

You know, so when they first identify a local transmission -- Well, keep in mind, we talk about local transmission, not imported cases.

So if they identify the local transmission, they're going to assess, you know, what kind of risk this is going to pose.

And then, you know, follow that with the corresponding measures to undertake, you know?

So if they perceive, you know, that the risk is relatively low, it has not caused any, like, wide spread of the virus, then they probably just are going to have the measures targeting, like, a particular neighborhood or, like, a particular place, like a hospital, you know, and then measures will be imposed in that place.

>> They believe that their policy so far has been enormously successful, right?

I mean, they're quite proud of what they've accomplished through zero COVID to date.

>> That's true.

You know, in fact, this policy itself has now been so closely connected to the success of the Chinese pandemic control model, and in a way also linked to to the success or superiority of the Chinese political system, especially when you compare what is going on in China and the United States.

One could easily point out the mass failure in the U.S., in terms of the number of cases and deaths while, you know, in China, the level of infection remains extremely low.

>> We were obviously very skeptical of data that was coming out of China in the early days after they had obscured the human-to-human transmission to the World Health Organization about numbers of cases and even deaths in Wuhan.

Do you feel quite comfortable and confident that the numbers of cases and deaths that the Chinese government has been reporting more recently are accurate?

>> Overall, these numbers are trustworthy, right?

Especially if you consider that local leaders, you know, facing strong pressures -- right?

-- to reset the cases to zero.

So if we go, "One more case is found," when they claim, you know, there's zero infections in a locality, if one more case is found, he's going to be in big trouble.

So, I think after March 2020, the numbers on the infection and on the death toll is overall trustworthy.

>> So what that implies is that very, very few Chinese, to date, have actually gotten COVID.

There are very few Chinese with antibodies against -- natural antibodies against this disease.

>> Well, exactly.

Well, this is where the risk -- right?

-- is.

When China is facing this looming omicron threat, because you have such a large, vulnerable population, a few of them develop a natural immunity because they're not exposed to the virus.

And then, you talk about the vaccines.

But despite the very high vaccination rate -- we talk about 86% of people fully vaccinated.

But we know the vaccines are not effective in terms of preventing new infections.

So, you know, the antibody levels that is in the entire country's very low.

So, you know, when you sustain that approach of zero COVID for too long, you are going to expect that there's a so-called immunity gap, where it's going to become even larger between China and the outside world.

And that would be very dangerous.

You know, consider what happened in the 16th century -- right?

-- when the Conquistadors arrived, the New World, and that immunity gap contributed to the death and the mass die-off of the Indigenous population.

>> And so you're talking about the lack of utility of the Chinese vaccines against omicron.

The mRNA vaccines, especially the booster shots, are much more useful, Pfizer and Moderna.

But the Chinese government hasn't actually approved either of those vaccines for use in their own population.

Why not?

>> Well, the main reason is that they don't -- It's not necessarily that they don't trust the mRNA vaccines.

In fact, they are developing their own mRNA vaccines for using as booster shots.

You know, that clinical trial has been started in Guangxi Province, expected to complete by the end of this month.

The problem is that they prefer to have the homegrown vaccines to imported ones.

So I expect that once they approve their own mRNA vaccines, you know, it makes it more likely for them to approve the BioNTech's vaccines.

>> So what do you think is going to happen in China over the coming months?

Because we know that omicron is vastly more transmissible than delta and other previous variants.

And yet the Chinese policy is orienting at stopping precisely that.

>> Yeah, I think the coming month will be crucial, right?

Because, for the government, they're not -- you're not going to expect them to abandon a zero COVID strategy.

But, indeed, you're going to see them to double down on the campaign against the virus.

And in the meantime, they're facing a variant that is so highly transmissible -- right?

-- it makes the existing approach very difficult -- right?

-- to achieve its objective, you know, resetting cases to zero, and the cost associated with that approach will become, I would say, exponentially higher.

So, you know, if the existing approach, especially if it fails to contain the spread of the new variant and leads to the explosion of the cases in the country, you know, that is basically why this means that the -- China will be experiencing the devastating impact of this new variant.

>> This is a policy that is identified very closely with the President of China, Xi Jinping.

How far do you think this potentially goes if they get explosive case transmission?

>> Well, if they indeed get this explosive -- right?

-- the cases in the country, well, that is tantamount to basically suggest that this approach is done -- right?

-- is over, right?

It has to be abandoned.

But, you know, China certainly will suffer the short-term pains, and, potentially, there could be sociopolitical implications.

But if they can muddle through the crises -- that might take like a couple weeks, you know, for the whole country is being exposed, right?

So they might be actually in much better shape, right?

They're learning to coexist with the virus.

>> So, in other words, you know, it's possible that taking the pain, as difficult as it would be, might be preferential to trying to maintain the zero COVID policy, where you have to continue to lock down and lock down more and more where the economic costs, both in China and globally, are going to be much larger.

>> Well, exactly.

So this is essentially what is the trade-off between the short-term pain and the long term pain.

In my opinion, I think the long-term pain, would be a problem for China, considering the socioeconomic costs and the impact on China's foreign relations.

>> So if you were advising the Chinese government right now, would you be telling them to jettison the zero COVID policy?

>> Absolutely.

But I think the timing is not good for now because of the Winter Olympics -- right?

-- that is around the corner.

But I would say, after the end of the Winter Olympics, there is a policy window that the Chinese government should seize upon, in terms of lowering people's expectations.

You know, teaching people to correctly understand what this new -- this COVID virus is, including the new variant.

And also, no longer frame the risks, you know, the virus as like, you know, a horrible, you know, so dangerous problem to China.

And in the meantime, you know, start to approve the new mRNA vaccines, to use them as booster shots, especially on immunosuppressed population.

And if the new antiviral drugs become available, I think it will also help.

So in this way, you know, you are going to minimize, you know, this potential -- right?

-- the devastating impact that even a small opening is going to cause by -- to the entire country.

>> But you don't think that is going to happen.

>> Well, that's -- I think it is possible.

You know, if you look at how the government abandoned their previous unfunctioning or unpopular policy, it's not going to be like, you know, the government formally announced the end of the policy.

They just quietly abandon it or replace it with a new policy.

And people seem to be fine with that.

>> So, Yanzhong, I mean, in a matter of weeks, China is going to be hosting the Beijing Olympics.

And I mean, my God, if any of these athletes end up showing up with COVID, I mean, you know, what kind of a message is that going to be sending to the Chinese people who are dealing with these incredibly repressive measures at home?

>> Well, I think that they're confident that those precaution measures they just announced will be sufficient to minimize new infections in the bubble and also to minimize the exposure of the Chinese people to the new variant.

You know, so certainly they have drawn lessons from the Tokyo -- the Summer Olympics and tried to fix the loopholes.

You know, like, the Tokyo Games, you know, the people, even they are not -- they were not fully vaccinated, could still participate.

But now, what China basically told them, "You have to be fully vaccinated.

Otherwise, you have to spend three weeks in China before you can enter the bubble," right?

So people also, those participants are not allowed to leave the bubble before the Games are over.

So they hope over there that these measures will be effective.

Even though there might be, like, you know, small outbreaks or even new infections, it's going to be confined in the bubble.

>> Because we know fully vaccinated doesn't cut it when it comes to omicron.

So, again, it just sounds like they're taking, suddenly, with the Olympics, they're taking a lot more risk than they're taking around anything else in China.

>> Yeah, absolutely.

This is the problem of that zero COVID strategy is that they cannot tolerate even, like, one infection, no matter how mild it is, right?

But we know even the best of vaccines cannot prevent people from getting infected.

Right?

So in that sense, but even the high -- the high vaccination rate, as high as 86%, becomes irrelevant, in terms of fulfilling expectations of that strategy.

>> You know, one of the things that's been interesting to me is the fact that the Chinese, of course, through all of this, are traveling so much less.

And, indeed, the Chinese president has not left the country since January of 2020.

Do you feel that Chinese leaders, Chinese elites, are themselves becoming more isolated from the rest of the world?

And do you think that some of that may end up permanent even after we're done with the pandemic?

>> Well, I think the last thing China wants or Chinese leaders want, is to be isolated at the international stage, right?

I mean, diplomatically, economically, and politically.

So, you know, I think, especially when other countries learn to live with the virus and that the pandemic's becoming endemic -- right?

-- I think that China will find that zero-tolerance strategy unsustainable.

But it may be still able to sustain it for another like one year.

But, you know, I doubt it's going to take know longer than one or two years.

So, eventually, they have to abandon that approach anyway.

Opening up then becomes, I think, a more likely prospect.

>> Yanzhong Huang -- incredibly important topic -- thanks so much for joining us today.

>> Thank you, Ian.

♪♪ >> If you happen to live in New York and are one of the city's 18% of unvaccinated residents, shame on you.

No, now might be a good time to go get jabbed, and not just because of omicron.

In late December, now former New York City mayor Bill de Blasio announced the city would start offering gift cards, not to mention free roller-coaster rides on Coney Island and trips to the Statue of Liberty to those who get their shots.

It's not just the Big Apple.

As infections jump, vaccination incentive programs are being brought back around the world.

For example, in vaccine-hesitant Missouri, the Show Me State, they've earmarked $11 million for gift cards worth 100 bucks each.

That's 110,000 cards -- just did that math.

Even Vermont, which has consistently had one of the best-performing vaccination programs in the country, is awarding schools with per-pupil bonuses -- that's right, one for each eye -- if they hit rates higher than 85%.

However, cash prizes are kind of vanilla compared to some of the other incentives that we've seen globally.

For example, the mayor of San Luis, in the Philippines, is encouraging residents to get vaccinated against COVID-19 by raffling off a cow every month until August 2022.

Pretty good.

Hong Kong enticing their residents to get vaccinated with more than $15 million in prizes that included a $1.4 million apartment, gold bars, and a Tesla.

Who needs democracy?

Meanwhile, back in November, one Austrian brothel, called the Fun Palace -- yeah, you hear that right -- offered patrons 30 minutes of free hanky-panky to anyone who got vaccinated on the site.

And they say Austrians are boring.

Well, maybe Austria remains one of Western Europe's least vaccinated countries.

It's unclear how effective any of these programs, even Austria's, have actually been in increasing vaccination rates.

One recent study from the Boston University School of Medicine found that incentive programs in several states, including one in Ohio that entered people into a $1 million lottery, failed to move the needle, as it were.

Some experts argue that a more effective way to increase rates is for officials to make daily life more difficult for the unvaccinated.

France's President Emmanuel Macron certainly seems to agree.

And now it's time for "Puppet Regime."

It's a new year and a brand-new season for "Putin' It Out There."

It's honestly one of my favorites.

Roll that tape.

>> Yeah, let's get this nightmare started.

Hello.

Hi.

Privet.

Welcome to world's most powerful call-in show, "Putin' It Out There."

Today's first call comes from Marcus in Lower Manhattan.

Marcus, you're on.

Put it out there.

>> Hi.

First time, long time.

I'm going through the independent school application process for my 9-year-old, and it is exasperating.

Do you have any advice?

>> I prefer good annexation to good education, but learning lessons is also important.

Do you have any particular school in mind?

>> We do, but we've been waitlisted.

>> Sorry to hear your kid is not sharpest tool in shed, but you can still make this happen.

I love to root for underdog.

Tell me, is it getting cold where you live?

>> Yeah, it is.

>> Like, really cold?

>> Pretty cold, yeah.

>> Well, then solution is easy.

First, you will demand entrance for this rich child of yours.

You will take him to school, dress him in uniform, leave him in lobby, create fact on ground.

>> But that might be -- >> Ah, da da da.

Listen.

And then -- then -- and this is most important part, Marcus.

>> Uh-huh.

>> You will cut off all gas and electricity to the school so that everybody freezes to death inside of this school.

Do you understand?

>> I mean, I guess I could call the gas company, but how would I even -- >> Well, well, Marcus, what can I tell you?

This is why I am president of Russia and you are lousy parent.

Okay, next caller.

>> ♪ "Puppet Regime" ♪ >> That's our show this week.

Come back next week, and if you like what you see, if you want a cow for a vaccination, I know where you can go get your cows.

All you have to do is check us out at gzeromedia.com Free cows.

♪♪ ♪♪ ♪♪ ♪♪ >> Major corporate funding provided by founding sponsor First Republic.

At First Republic, our clients come first.

Taking the time to listen helps us provide customized banking and wealth-management solutions.

More on our clients at firstrepublic.com.

Additional funding provided by... ...and by...