Covid restrictions tighten amid policy uncertainty

The Covid situation within China remains highly volatile with renewed uncertainty about the direction of the policy after sharp reversals over the past week. The current trend is toward tightening restrictions and this will continue to pose a major headwind for demand, including agricultural demand. 

Shijiazhuang, the capital of Hebei, announced citywide mass testing on Monday. This comes less than a week after the city had announced it would be closing testing sites which fueled hopes of reopening. 

Guangzhou announced the closure of its main interprovincial bus terminal as well as the shutdown of several metro stations in hard-hit parts of the city. The city also announced most public venues in the central business district of Tianhe were to close.

Cases in Beijing continue to rise to new records with a large portion being found outside of quarantine, a sign that health officials are struggling to contact trace infections and numbers are likely to continue to rise. 

New data on vaccination rates was published which shows the vaccination rate for people over 80 years old is only 65.7% and only 40% had received a booster shot.

Additionally, the pace of vaccination for people over the age of 60 has slowed to a crawl. In August, 85.6% of the over-60 population had been vaccinated, which rose to just 86.4% in November. In August, 67.8% of the same population had received a booster, which rose to just 68.2% in November. 

This low vaccination rate creates a large challenge to China’s eventual reopening. 

Even if the government started an aggressive vaccination push, this would still take months to roll out and see results. Data from Hong Kong additionally shows that three shots of the Chinese vaccine are required to see a similar level of protection provided by two shots of the Pfizer mRNA vaccine. Currently, China only administers booster shots six months after a second dose. 

If vaccination rates in the elderly population is a metric the government is assessing in regards to its reopening, that creates a timeline of at least six months before the 35% of the over-80 population would be adequately protected. 

Despite the central government issuing guidelines to reduce the impact of zero Covid policies in the country, the policy direction is now back towards strict controls which will weigh on demand and negatively impact economic growth.