China’s economy is undergoing its most serious test since the COVID-19 virus outbreak in Wuhan 2 years ago.

The emergence of new strains and sub-strains of COVID-19 was always likely to challenge Beijing’s zero-tolerance policy, forcing it to adopt even tighter restrictions to contain a disease that was becoming less dangerous but more contagious.

And so it has turned out to be. Omicron and its BA.2 sub-variant broke through the country’s defenses. Even the official data, which many thought understated the actual situation in Wuhan, now showed the highest incidence of the disease in 2 years. They have not confirmed any deaths from the disease in the last week, but unverified footage on social media suggests that the country’s health system is under immense strain.

While other countries can now handle more infections without overloading their health systems, Beijing has no such confidence. It continues to insist on a so-called policy of total virus suppression, or “dynamic zero.”

It’s not supposed to be that way. Xi Jinping made it clear in a mid-March speech that the government would make every effort to minimize the impact of health system constraints on economic life. Instead, nearly all of Shanghai’s 25 million residents are stranded – some in offices, but most at home. Factories are closed and port delays are lengthening again, threatening a new wave of supply chain problems for Western industry and retailers.

The Shanghai Port Authority denied reports over the weekend that more than 300 ships were waiting in line to call at the port, but similar measures at the port of Shenzhen earlier this year reduced port capacity by one-third, according to consultancy FourKites.

Domestic travel has also been hit hard, with official figures showing the number of air travelers on the weekend before the Qingming holiday this week was down 87 percent from last year to just 562,000.

Such a disruption is almost certainly big enough to jeopardize China’s official economic growth target of 5.5% this year. Already in March, the country’s manufacturing sector, the world’s largest, began shrinking again: both the official business activity index (PMI) (which tracks mostly large state-owned enterprises) and the PMI from Caixin, which tracks small and private businesses, fell below the 50 level that signifies growth.

But the disruptions also threaten to create a shortage of fresh produce in Western markets, ensuring that the spike in inflation at both the producer and consumer levels stays higher and lasts longer than expected. The U.S. Chamber of Commerce in Shanghai said 82% of its members have suffered “slowed or reduced production” as a result of the quarantine. Tesla’s (NASDAQ:TSLA) plant, which produces 16,000 cars per week, has been closed since March 28.

The only good news from an economic perspective is that this wave of outbreaks comes at a time when global demand for manufactured goods is starting to return to average after a spike during the pandemic. Consequently, the strain on global supply chains may be less than a year ago. COVID-19 is largely gone in almost all of China’s key export markets. Global mortality from the virus is at its lowest level since March 2020. Hospitalizations have fallen sharply, although the incidence rate is near record highs, mask-wearing requirements have been lifted, and stadiums and restaurants are once again crowded. Data from the US released last week shows a clear shift back to spending on services such as eating out.

However, the country that COVID-19 hit first may now be its last major victim. Nature has gotten ahead of politics. Unless Beijing can adapt as quickly as the virus does, it risks undoing much of its remarkable success in taming it.