My thanks to commentor YY_Sima Qian, who has done so much to keep us all updated on the situation in China since I first started my Covid / Coronavirus Update post:
In last Friday’s Covid post comments, there were some questions of why is China persisting w/ the “Dynamic Zero COVID” strategy, and the costs being incurred. I thought I will share my perspective here, as someone who has lived through the entire pandemic to date within China, in Wuhan, but having family, friends & colleagues throughout Mainland China, as well as Taiwan & the US.
I am also fairly confident that I have followed the course of the outbreaks & their suppression & elimination in China more closely than just about any journalist or commentators in open source anywhere.
First, let’s get the political motivations out of the way. A number have been suggested, all have at least an element of truth, most a considerable amount:
1) The CCP regime in general, & Xi Jinping specifically, need the “Dynamic COVID Zero” strategy to be seen as effective leading up to the 20th Party Congress (scheduled to start on 10/16), where Xi is expected to obtain his 3rd term; the regime has staked its legitimacy as China’s ruling government, Xi has staked his personal credibility as China’s unquestioned leader, & the regime has staked its claim to a “superior” governing model relative to the West, on containing the spread of COVID-19 w/in China’s borders.
2) The CCP regime & Xi cannot afford to have the immensely negative impact of an exit wave from ending of “Dynamic COVID Zero” – overwhelmed hospitals, large number of deaths of the vulnerable elders, massive worker absenteeism from uncontrolled spread – leading up to the 20th Party Congress.
3) To ensure 1) & 2), any dissent, or anything that could be construed as questioning the “Dynamic Zero COVID” (even if unintended) are immediately stifled; these could be (& indeed especially) public comments from high level officials, technocrats in the health care bureaucracy (such as the Chinese national CDC), & respected health experts in academia.
Where foreign (even domestic) commentators tend to go awry is when they extrapolate to conclusions that evidence do not necessarily support:
1) Comparing the CCP regime’s singled minded focus on pursuing “Dynamic Zero COVID” to Mao’s anti-scientific campaigns against sparrows/snakes/weasels, which in the end led to heightened infestations of rodents & locusts.
2) Suggesting that the CCP regime aims to gradually close off China to the world & return to the autarky of the Mao decades, using “Dynamic Zero COVID” as the excuse.
3) Suggesting that Xi & the CCP regime are blind to the economic costs of “Dynamic Zero COVID”.
Based on my close following of COVID developments in China since the beginning, my assessment is that the regime’s actions are still rational within its perceived reality, albeit having certain self-imposed limitations. Most importantly, I believe the regime’s perceived reality is still not too far off from the actual reality (unlike, say, in the case of V. Putin).
1) Even in the face of Omicron BA.5 variants, the tools employed in the execution of the “Dynamic Zero COVID” strategy are still effective in containing, suppressing & eliminating outbreaks; even as massive an outbreak as the one in Shanghai from April-May 2022 was successfully eliminated, though at enormous economic & social cost due to the terrible execution of the lock down there.
2) Even in 2022, for every city (or more likely, townships/sub-districts or counties/districts w/in a city) that goes into a lock down & reach international news, there are a dozen much smaller outbreaks that have been quickly eliminated without significant disruption to most of the city. These do not make international headlines; even now, the vast majority of Chinese population is not under any movement control. Case in point is the most recent outbreak (BA.2.76 variant introduced from Tibet) in Wuhan that emerged two weeks ago, which saw >150 positive cases in ~1.5 weeks, concentrated in Huangpi District, but with a smattering of cases spread across the city, a sub-district in Huangpi was locked down, as well as a few compounds & office towers in the rest of the city. Frequency of community screening was increased to daily; there have not been any new positive cases in the past 3 days. In the meantime the rest of the city carried on as usual; the first week of Fall Semester has been online, but schools are expected to return to in person instruction next week after the Mid-Autumn Festival long weekend, & there is no fear that the students will be exposed to COVID. Without “Dynamic Zero COVID”, Wuhan would have been inundated w/ cases in a matter of weeks, in every part of the city.
3) The tools employed to execute the “Dynamic Zero COVID” strategy have been evolving in response to the changing transmission dynamics of the evolving SARS-CoV-2. Since mid-2020 China has been locking down communities/villages, sub-districts/townships, districts/counties, & entire cities/prefectures when there have been outbreaks. Since late 2020 repeated mass screening campaigns have been adopted. Rapid contact tracing, quarantine of close contacts, & isolation of positive cases have been standard from the start. Now, in the face of the much more transmissive Omicron variants with a higher percentage of asymptomatic/very mild cases, the bedrock of the strategy is no longer lock downs, but regular mass screenings for surveillance purposes & even more rapid & precise contact tracing. The lock downs (as defined by the extent of Medium/High Risk areas) are now more targeted & narrower in scope. Wide area lockdowns & cordon sanitaires are the backstop measures to prevent an outbreak from getting out of hand (which can happen very quickly with Omicron variants) & represent failures of the primary tools. They are now also less frequently imposed, and lengths of quarantines & the duration of elevated risks have been shortened to reflect the shorter incubation periods of Omicron variants. In summary, Chinese response has evolved from lock own at the first instance until elimination, to lockdown then mass test, to regular mass testing to avoid lockdowns as much as possible.
4) While Xi personally & the CCP regime’s propaganda apparatus continue to extol “Dynamic Zero COVID”, the actions & the tools currently employed suggest to me that literal “Zero” is no longer the goal at national or even provincial levels, because they are clearly unobtainable. Each local outbreak will still be contained/suppressed/eliminated, because the epidemiological curve will rebound very quickly with the Omicron variants if they are not snuffed out, but current pandemic response policies suggests that the Chinese government has accepted that the border defenses are porous against Omicron. The cordon sanitaires are leaky, and there is higher probability of a small rebound when restrictions start to be loosened. So why the continued rhetorical drumbeat for “Dynamic Zero COVID”? My take is that it is messaging to the administrative Party-State & the population, in the CCP regime’s fragmented authoritarian system. If the bureaucracy & the population get any whiff of wavering from Beijing, they will take matters into their own hands & loosen up or “lie down” far more than Beijing actually intend; in a way this is how the agricultural privatization movement started at the local level during the 1st years of Reform & Opening in the late 70s.
5) While the virus has greatly increased transmissivity, the tools being employed against it in China are becoming more precisely targeted: if getting to “Zero” ASAP was still the overriding objective, China would be going in the other direction. That China has not done so is not because the CCP regime is incapable of widely implementing such draconian policies, but that such policies will be economically & socially debilitating, given the much increased frequency of Omicron outbreaks. Case in point is Chengdu in Sichuan, which made international headlines when it went into hard lockdown last week as daily incidence reached triple digits; a week later daily incidents have dropped to mid double digits, almost all of them from persons under quarantine or residents in elevated risk areas. Now in 16 districts one member of each household can leave the compound every other day to purchase daily necessities (except those in elevated risk areas, which by definition remain under hard lockdown); in 2020 – 2021, the authorities would wait until 14 days of 0 cases outside of quarantine before starting to loosen restrictions.
6) Different jurisdictions in China are experimenting with a mix of tools to see which ones strike the best (or the least worse) balance between effectively containing/suppressing/eliminating outbreaks & minimizing economic/social impact. Shanghai in March-April 2022 was an example of a glaring failure of such an experiment, where the municipal authorities were so arrogant that they never considered or prepared for the possibility that their experiment would fail & they would need to implement a lockdown as back stop. Shenzhen is the often cited counterpoint: the city went into a one-week snap lockdown to snuff out an Omicron BA.2 outbreak in March as daily incidence reached high double digits; however, in the current BF.14 (an evolutionary descendent of BA.5.2 w/ even greater transmissivity) outbreak the city has eschewed citywide lockdowns even as daily incidences closed on 100, instead, hundreds of sites have been designated as Medium/High Risk & placed under lockdown (a number of my colleagues there have been caught in such compounds. As daily incidents have dropped to low double digits (& very few from the community), most of my colleagues under lockdown are having restrictions lifted & schools in most parts of the city are expected to resume in-person instruction from next week.
7) The currently strategy allows China to concentrate its medical resources to areas with outbreaks, a standard practice for large outbreaks since Wuhan in Spring 2020. Case in point, medical teams from across the country converged on Shanghai, Hainan, Xinjiang, & Tibet in their outbreaks. Another case in point, the 4 cases found at Enshi Prefecture in Hubei Province on 9/7 were transferred to the main infectious disease hospital in the provincial capital of Wuhan as soon as they tested positive, which is 9 hrs away by expressway & 5 hrs away by high speed rail, to benefit from the better facilities & the more skilled/experienced staff. These actions would not be possible if there were outbreaks in every jurisdiction & every hospital was full.
8) China is clearly trying to avoid, or at least postpone, the massive exit wave. Using western mRNA vaccines would reduce the sizes of waves of hospitalizations & deaths somewhat compared to Chinese domestic inactivated whole virion vaccines (data out of Hong Kong suggests the effectiveness of the Sinovac against deaths among the >80 y.o. is equivalent to the BioNTech after boosting), but there will still be a massive wave of hospitalizations & deaths compared to the “Dynamic Zero COVID” baseline. The current vaccines do little against infection; Taiwan suffered ~10K deaths since the start of the Omicron wave in May in a population of 24million, South Korea suffered ~24K deaths since the start of Omicron in late 2021 in a population of 51million. Extrapolated to China’s 1.4billion that would mean more than 600K deaths in a matter of months, not to mention the overwhelmed hospitals for months on end & Long COVID.
9) Foreign commentaries on China’s “Dynamic Zero COVID” have focused on the costs of the strategy, without considering or modeling what would happen if China exits the current strategy. The alternatives facing China is not “Dynamic Zero COVID” with significant economic/social disruption, versus far fewer restrictions resulting in “just a little more spread” with less economic/social impact. The likely result of significantly reducing restrictions is a COVID-19 tsunami that collapses health care systems & rampant worker absenteeism from falling sick, with still significant (possibly higher) economic/social damage. Much has been made about the threat of snap lockdowns in Chinese cities to the global supply chain. In fact companies & authorities in China have become practiced at keeping manufacturing operations going in face of outbreaks & movement restrictions; on the other hand, if high worker absenteeism due to massive infections cannot be mitigated, then we would see the effects to global supply chains (we have already seen a version of this when Delta swept across SE Asia in Fall 2021). The majority of my colleagues in Taiwan have contracted COVID-19 at some point in the past few months. The effect on work efficiency is noticeable due to the number of people out of office/labs at any given time — what used to take 1 week to turn around now often takes 2-3 weeks. Taiwan just posted the slowest economic growth in Q2 2022 since the beginning of the pandemic (actually saw a seasonably adjusted Q-to-Q decline) as it exited “Zero COVID”. In contrast, China has continued to expand its share of global exports throughout the pandemic, including in 2022 to date, certainly not a sign of Chinese policies hurting the manufacturing juggernaut in the aggregate.
10) The hospital is the primary point of health care for the vast majority of Chinese, many of whom visit even for minor ailments such as the common cold. As a massive exit wave results in a surge of infections, hospitals will be overwhelmed & will squeeze out people seeking care for other illnesses. China has considerably lower health care resources per capita than Taiwan or South Korea; the situation needs years or decades to address, not weeks or months.
11) China has been slowly loosening entry requirements for foreigners in recent months, even setting up charter flights to finally bring the foreign students hitherto attending Chinese universities remotely into China; people going overseas for study or business (just not for leisure) are still issued passports, hardly signs of a regime looking to close itself off to the world.
Now on to the costs.
1) No question, disruptions from “Dynamic Zero COVID” have had significant economic/social impact, especially when there is a snap lockdown implemented that lasts weeks. The hardest hit sectors are in service industries — as I said, factories are generally kept running (or can resume operations quickly) through the lockdowns, but shops/eateries/malls are all closed for the duration. For the most of the pandemic, domestic travel industry has benefited from the loss of international travel, but recent Omicron outbreaks across the country have heightened the risk of getting caught in movement restrictions & quarantines, & have depressed domestic travel (& associated hospitality industries).
2) Outbreaks in China in the age of Omicron are far more frequent & less predictable, despite regular mass screening in most parts of the country, meaning onset of restrictions in response to outbreaks are also far more frequent & less predictable. Many outbreaks & clusters do not have their sources identified; this has increased uncertainty for businesses & helped to depress investment, & increased psychological pressure on everyone.
3) The cost of regular mass screenings indeed weighs on local government finances, & local finances across the country are under severe pressure.
4) Chinese trade surplus has been ballooning for the past year, partly due to increasing strength of the export machine, but also because of lackluster domestic demand suppressing imports.
5) The overriding focus (at least rhetorical) on maintaining “Dynamic Zero COVID” inevitably leads to overzealous implementation at local or grassroots levels, such as hospitals refusing to admit persons w/ medical emergencies if they do not have negative RT-PCR results w/in 24 or 48 hrs., or pandemic response workers refusing to open the door to allow residents of a tower under lockdown to evacuate during an earthquake. However, most of them are isolated incidents, quickly corrected after inciting popular outrage.
6) International travel restrictions have led to a collapse of Track 1 (governmental), Track 1.5 & Track 2 (non-governmental) exchanges w/ the rest of the world, especially the developed West, which has contributed (at least marginally) to the deteriorating relations w/ the developed West in general & the US in particular.
While the Chinese economy is indeed facing severe challenges, IMHO the foreign (& domestic) commentators who cite “Dynamic Zero COVID” as the primary driver are misleading their audiences, either deliberately or out of ignorance, presented without any attempt at serious analysis.
1) China is not the only economy facing significant challenges. Those who have let COVID-19 repeatedly rip through their populations, as well as those exited “Zero COVID” after reaching vaccination targets, are all under duress; there are both cyclical & structural dangers to the global economy as a whole.
2) The main headwinds to the Chinese economy are the deflating real estate bubble (~25% of the economy, & in parts of the country the bubble has burst) & the regulatory campaign against private sector monopolies & oligopolies. Both are direct result of government actions initiated by Xi in the 2nd half of 2021 when China’s economy was strong, taken to address long standing & widely recognized structural imbalances. Unfortunately, the timing proved quite poor (the Omicron tsunami, the Russian invasion of Ukraine, & inflation have all heightened global uncertainty), & too much stress was placed on the economy simultaneously in a deteriorating environment. The ever intensifying technology war between China & the US (almost entirely driven by US sanctions & export restrictions against Chinese entities) have also introduced great uncertainty into global supply chains, & will have a further inflationary effect everywhere.
3) The cost of regular mass screenings is a burden the local governments do not welcome (though done to reduce the risk of greater costs of lockdowns or rampant spread). But the far greater factor stressing local government finances is the deflation of the real estate bubble; for decades, sale of land usage rights to developers has been a critical part of local government revenue stream, & that stream is drying up for the time being. Sentiments among buyers & developers of real estate are quite depressed, although the current low is probably not the new market equilibrium. While there is a huge stock of housing built & building, and there is significantly oversupply in parts of the country, overall there is also a substantial quantity of housing stock built in the 50s – 80s of low quality that will need to be replaced. There are still 600million people currently living in rural areas, a majority of whom will eventually move to urban areas, & people who bought small 2nd/3rd hand apartments as their first homes will eventually look to upgrade to newer & larger dwellings. Nevertheless, the golden age when housing prices largely moved one way at a fast pace, & an ever more bountiful revenue stream to local governments, is truly over.
4) Consumer sentiments in China is in the doldrums: stresses in local government finances have seen many public servants’ salaries/bonuses cut. There has been a negative wealth effect from the deflating real estate prices. There have also been substantial layoffs in the targeted private sectors (real estate, internet platforms, after-school education, etc.). As I said, restrictions associated w/ “Dynamic Zero COVID” do negatively affect consumption of services when they are in effect, but I think it is very hard to argue they are more significant than the other factors.
5) Investor sentiments are also depressed in many sectors, due to uncertain economic outlook & regulatory uncertainty, the latter primarily due to the perception (& partial reality) that the regulatory assault on select sectors have been sudden & arbitrary (even though Xi had telegraphed his intentions months in advance).
6) The Chinese government is capable of giving the faltering economy an immediate sugar high by removing regulatory pressure on targeted sectors, turning the spigot fully open again for infrastructure spending, & taking on more debt, at the cost of exacerbating the structural imbalances & ballooning debt in the medium to long term. However, so far the government has only carried out targeted modulations of policy to provide a bottom, and refrained from the types of massive stimulus seen in the past. It appears the Chinese leadership is willing to accept an extended period of slower growth to see through the correction of structural imbalances. One of the greatest structural correction required is increasing domestic consumption, which will necessitate massive wealth transfer (from the state to the population & from one segment of population to another), which is a politically fraught subject in every polity regardless of form of government. The other is the structural imbalance between central & local government finances, where almost all of the tax revenue go to the central government but not enough is returned to local governments to cover the liabilities & responsibilities that the central government has designated to local authorities. (This is partly the reason local governments came to rely upon sale of land usage rights, a model borrowed from Hong Kong). If & how the CCP regime navigates these structural corrections (more likely by muddling through) remain to be seen, but it seems to be trying to confront these challenges head-on.
Having said all of that, there are clear signs that the “Dynamic Zero” is unlikely to be sustainable in China even in the medium term.
1) Fatigue & weariness in the population is increasingly evident: the risk of being caught in lockdowns & quarantine is now higher in the age of Omicron compared to 2020 – 2021, even if the risk is not high in the absolute sense & durations now tend to be shorter. The incompetently managed outbreak in Shanghai dealt a body blow to trust & confidence in the competence of the authorities, because the city locked down a day after publicly declaring it would not do so, & declared a 3 day lockdown that ended up being 2 months long. (I told my colleagues there to prepare for >6 weeks, based on the epidemiological curve & the geographical spread). Many residents were poorly supplied in the initial weeks; now, whenever a local authority declares a 3-day “quiet period” to conduct mass screenings after finding evidence of community transmission, everyone thinks they will be locked down for weeks (when epidemiological data might indicate that the risk of extended lockdown to be very low).
2) Many people see that the rest of the world has “returned to normal”, they see the very high percentage of asymptomatic/very mild cases & very few reported deaths, & they do not understand the need to continue “Dynamic Zero COVID”. What they do not see is that the “normalcy” in the rest of the world is really a bad situation normalized. (If a flu bug came around in 2019 that resulted in the current level of COVID-19 hospitalizations & deaths, in the “off season”, public health emergencies would have been declared in every country). They have not come to grip with experiencing the inevitable massive exit wave from ending “Dynamic COVID Zero”. They have also failed to consider that the current level population immunity in the rest of the world has been achieved over a mountain of dead bodies, many more disabled from Long COVID, & 2+ years of economic roller coaster. This is the same challenge the world has faced since the beginning — the risk to the individual (except the most vulnerable) has always been low, but the aggregate effect to society has always been severe.
3) The level of response the Chinese government is currently willing to use is just about enough to contain Omicron BA.2.76, BA.5 & BF.14 outbreaks in summer; if an even more transmissive variant arrives (making it more transmissive than measles?), or with the onset of winter, the virus might render China’s strategy ineffective & inoperable.
4) It has been reasonably speculated that China is waiting/hoping for better vaccines that are actually effective in stopping transmission (which is none of the current or coming ones) and/or a less virulent variant to emerge. At this point they appear to be forlorn hopes. If the new bivalent vaccines targeting Omicron variants are effective against transmission, we should have heard by now, & the Omicron variant is as dangerous to immunologically naive populations as the earlier variants (except Delta).
There have been several notable failures or oversights in the CCP’s policies so far.
1) Although China has achieve very high vaccination & relatively high boosting rates for its population, uptake is perversely the lowest among the oldest & most vulnerable population: vaccination has slowed to a trickle in the last month, 10% of the >60 y.o. cohort still have not taken a single shot, likely concentrated in the >80 y.o.
2) Like everyone else, I am somewhat mystified by China’s failure to mandate vaccination for the elders & other vulnerable populations. The government has put pressure on civil servants, public sector employees, & Party members in general to get their elderly relatives & acquaintances vaccinated, cash/material incentives were rolled out, everything but a hard mandate. My only guess is that a few thousand deaths of elders from post-vaccination complications (or so perceived) under a mandate is more damaging to the regime than a few hundred thousand deaths from COVID-19 run rampant — the latter can be argued as damage from a force of nature, & the former can be construed as direct result of policy. Furthermore, many/most of those still not vaccinated were probably advised against taking the shots due to underlying conditions, often the same underlying conditions that make them the most vulnerable in the 1st place (the same issue had plagued uptake among elders in Hong Kong & Taiwan); to increase uptake among the most vulnerable, the medical guidance has to change.
3) Like everyone else, I too am deeply disappointed that China has not approved foreign mRNA vaccines, especially the BioNTech one where a Chinese private company (Fosun Pharma) invested before Pfizer. The motivation has to be political; no word on the availability of the domestic Abogen-Walvax mRNA vaccine, whose Stage III trial should have ended at the beginning of 2022. Even widespread usage of mRNA vaccines would not prevent China’s hospitals from being overwhelmed in an exit wave. The performance of Chinese vaccines after boosting is pretty close, but fewer hospitalizations & deaths is fewer hospitalizations & deaths.
4) The current vaccination strategy in China is befuddling: > 90% of the population is fully vaccinated & nearly 60% boosted, but most of them the last shot came in late 2021. There is no plan announced for additional boosters heading into winter. Chinese pharmaceutical companies have been working on Omicron specific vaccines for nearly a year, but no word on the timing for their availability. The approval of the CanSino inhalable vaccine is certainly welcome, but that one still targets the original variant, & China needs more than that to boost its population.
5) The CCP regime has not explained to the population why “Dynamic Zero COVID” is still being maintained, & the real dangers & costs of exiting the strategy given experiences in the rest of the world. Nor has it started to prepare the population for the inevitable exit wave when “Dynamic Zero COVID” does end, either as a policy choice or forced by the evolving virus. Long COVID is not often discussed in China, either, most of my relatives, friends & colleagues are not even aware of the issue, probably because so few in China have caught COVID-19 to begin with, even in Wuhan. Being über-paternalistically authoritarian, the regime generally does not deign to explain itself to anyone, foreign or domestic.
So, where do I see things go from here? Hard to predict. I didn’t think China’s “Dynamic Zero COVID” would still be viable in face of Omicron BA.1/2, let alone BA.5, but it has held on, enough time to get my daughter vaccinated. However, whether the strategy is still tenable w/ BA.5/BA.2.76/BF.14 going into winter is unknown.
Xi is going to Uzbekistan next week for the Shanghai Cooperation Organization summit, where he is to meet Putin & Modi. He will also head to Indonesia in November for the G20 summit, where a meeting w/ Biden (& presumably other leaders) is planned. So China is slowly emerging from its shell.
Chinese population will inevitably adjust to the exit wave when it comes, just as people in Taiwan & New Zealand adjusted. In 2020 – 2021, a few positive cases in a city would empty the public spaces. Now, a dozen cases a day in one district, & life carries on as normal in the other parts of the city, restaurants are still full (if the waiting lines may be shorter), & rush hour traffic is still rush hour traffic. People will adjust to the new “normal”.
Nevertheless, I do not subscribed to the notion prevalent in the rest of the world that “it will probably fail at some point anyway, so let’s give up now”. I do not relish the prospect of Long COVID from repeated infections. I still hope a vaccine that is effective in stopping transmission can be developed somewhere, though I am not that hopeful.
My apologies for the wall of text, but I feel discussions concerning China tend to lack any nuance.