China at a COVID Tipping Point

I have a sinking feeling again... a bad feeling I had 2 years ago, when Wuhan was in a state of panic trying to control the initial outbreak, that the events in China could ripple across the world. I hope I am wrong, but here is why I have this same feeling again...

As of today, mainland China now has city-wide COVID-19 lockdowns in effect in:

• Shenzhen (12.5 million)
• Dongguan (10.5 million)
• Langfang (5.5 million)
• Whole-province-wide lockdown in Jilin (24 million),
• Partial-lockdown restriction in Shanghai (26 million)
• And in Xian (13 million)

Altogether, there's currently over 50 million residents of major cities under strict, stay at home, lockdown, plus almost 40 million more in partial lockdown, plus additional smaller medium cities also in varying degrees of lockdown. Thus, well over 90 million people in China have their daily activities restricted because of the new COVID surge. As result, China's stock market so far this week has seen some of the largest drops in recent memory.

While we will cover how did China get here, I want to first explore where this is going based on what we know about the predominant BA2 variant and how bad this could get:

• As China is reinstating measures to limit the spread of the coronavirus in several cities amid a spike in infections, China is desperately trying to avoid the fate of Hong Kong— HK deaths are surging so high it is approaching NYC in spring 2020.
• Furthermore, experts say HK’s deaths have not even peaked yet. Moreover, cases may not come down for quite a while to low levels until May or even June.
• All while HK is running out of morgue space and hospitals continue to be overrun. Hong Kong was once as strict on COVID-19 as mainland China was.
• Yet somehow it partly gave up and lost control. Compared to 44 other high income counties—HK’s mortality rate is now highest in the world.
• If HK is a country, its COVID-19 death rate per capita would be 5x higher than the next highest country.
• If this hits Shanghai & other major Chinese industrial cities… supply chains worldwide will suffer.

As mainland China has already begun to divert flights away from Shanghai & began partial lockdown this week, which schools either closing or going to remote learning. Moreover, shipping vessels have even stopped departing from Shanghai as a port! This is damn serious—Shanghai is one of the largest ports in the entire world! Along with the lockdown in Shenzhen and adjacent Dongguan, China’s disruption could mean that the world’s supply chain might completely melt down for a period. Already, Apple supplier FoxConn has announced it is suspending all its factories in Shenzhen, among countless other critical technically and industrial factories. While temporary suspensions and brief lockdowns have occurred before, the potential scale of this BA2 wave is massive, and like HK experts warn, could be very long and extensive.

So what is causing it?

Most of the China and HK surges are BA2. BA2, while a subvariant of Omicron, is very different from BA1 original Omicron, and it has shown superior fitness to old BA1 in multiple counties, with a 80-90% transmission advantage per week based on BA2 growth in the US. Notably, in England, cases are surging across every age groups, and both cases and hospitalizations surging, as BA2 is now over 50% dominant. Moreover, BA2 is showing 25-30% higher secondary attack rates both within household and non-household settings, according to UK data. That bodes poorly as it shows faster transmission of BA2.

We have to assume China knows all this, as it’s health officials generally know more than it reveals. They’ve begun to build extra surge hospitals recently too—in Jilin, one 6000-bed isolation center is being constructed 24 hours a day, with goal to complete it in just 6 days! China has also recently approved rapid antigen testing. They had resisted for over 26 months. Something is very different now. Indeed, Shenzhen health official Lin Hancheng warned that this BA2 strain is "highly contagious, spreads quickly and has a high degree of concealment", which can lead to widespread community transmission if control measures are not strengthened soon. This “high concealment” statement has never been used during the 2 year pandemic before and likely suggests something about BA2 that Chinese officials have realized. We should take it seriously.

Outbreak is still early in China, but the surge is near vertical so far —and that bodes very poorly. The fact that it’s simultaneously happening in with lockdowns in multiple cities at once shows urgency that we haven’t seen before. Furthermore, China isn’t alone in this mess. South Korea is also see an epic surge— now surpassing all time pandemic highs. And as expected, South Korea also has surging BA2 levels, now 31% of all variants detected in the country and rising fast. If SK also follows HK’s fate, then that may also be horrible for global crisis.

Meanwhile, Western European leaders have naively believed that they are immune from BA2 after their recent Omicron wave. They are wrong— there is some sobering news for those leaders who claim ‘COVID is over’—they are delusional as cases are soaring across Europe again, this time dominated mostly by BA2 plus with added relaxation of mitigations. Let’s always learn from what’s happening elsewhere, because #CovidIsNotOver.

As you can see, cases are rising everywhere in China. It’s not just in northeast Jilin or south near Shenzhen. 23 of the 31 mainland provinces reported confirmed, symptomatic cases over the past week. Including asymptomatic cases, there were almost 10,000 new cases. Worse, more than half of mainland China’s age 80+ population is not fully vaccinated with at least 2 shots. This could spell tremendous doom if COVID spreads like wildfire, given the overwhelmingly higher risk of death in the elderly.

I’m now confident that BA2 definitely deserves its own distinct Greek letter, separate or Omicron family. BA1 and BA2 are more different than Delta is from original Wuhan 1.0 strain. And the infectiousness and attack rates don’t lie —BA2 is worse by leaps and bounds. The WHO needs to act to reclassify BA2 as a new distinct variant of concern. And so does China need to act even faster to increase vaccinations as well as mitigations, and so does the rest of the world need to wake up that they are not immune from BA2 despite a recent BA1 wave.



Bottomline

I believe China is now teetering at the edge between barely containing BA2 wave of COVID-19 and completely losing control like it has in Hong Kong—which we know could spell horrible conditions outcomes and huge economic difficulties and disruption to the most critical manufacturing and export centers of the world. Thus, this bodes extremely poorly for the rest of the global supply chain crisis and economic stability. And it could even spillover into the Russian-Ukraine driven inflation crisis. What happens in China over the coming weeks will affect the world. COVID is not over — with the world acting slowly only further endangering the world.

God help us.