China Poised for Reopening

By: Saniel Chandrawat, Daniel Zhou and Phil Lee


China Poised for Reopening

In our view, China is poised for reopening and is less likely to implement stringent, extended lockdowns going forward. We believe that the National Health Commission (NHC) will further adjust its Covid policy and gradually do away with daily mass testing (even in cities with no cases) and quarantine measures. Key to watch is the number of severe/fatal cases as the total case count goes up and the take-up of booster vaccinations, especially for the elderly.

Key Takeaways

  • Mutations of Omicron variants appear milder and much less severe than earlier Covid variants.
  • Domestically developed vaccines appear to be effective in reducing the severity of symptoms with the booster dose, as seen from Hong Kong data.
  • We are witnessing the early days of increasing vaccination rates among the high-risk population, particularly the elderly.
  • We believe the recent adjustment to Covid-19 measures is a step in the right direction.

Current Omicron Variant is Less Severe

Based on our analysis of case surges in Hong Kong, Singapore, Korea, and China, it appears that the current variant of Omicron is less severe and fatal than earlier Covid variants. In fact, data from Hong Kong and Singapore suggest that the BA.4/5 and XBB variants are even less severe than the BA.1/2 variants. This could be either due to the less fatal characteristics of current variants or the broader adoption of booster vaccinations.

Our analysis of Covid case surges in China in 1H22 and 2H22 suggests much less fatality with the current surge.

Domestic Vaccines Have Proven Effectiveness

While the initial efficacy data for domestically-developed vaccines were sub-optimal, booster doses of domestic vaccines are still effective at reducing the severity of symptoms. We analyzed booster data from HK by comparing one of China’s domestically-developed vaccines (Sinovac) with BioNtech’s mRNA. The data suggest that Sinovac’s vaccine is still fairly effective in protecting against fatalities if a booster dose has been administered. This is encouraging and fulfills a condition for opening up. China could not do away with its zero-Covid policy earlier, as its vaccines were not as effective against previous variants until now.

Uptick in Boosters for High-Risk Elderly Group

Though early days, we are witnessing a pick up in booster doses, especially among the high-risk elderly group. China achieved full vaccination (2 doses) very quickly, with over 90% of the population receiving two doses, but the booster shot rate has slowed down in recent months, especially among the 60+ age group. However, recently we have seen multiple municipal governments promoting boosters (including Shanghai, Guangdong, Jiangsu, and Tianjin), which is encouraging and could be a precursor for opening up.

New Easing Measures Are a Positive Sign

In our view, the recent adjustment to China’s Covid-19 measures is a step in the right direction. Following the Politburo Standing Committee’s (PSC) meeting on 10 November, the State Council released a notice to loosen pandemic controls while insisting on a dynamic zero-Covid strategy. The key takeaways include the following:

  • Shortening the quarantine period for overseas travelers and close contact to “5 days in centralized quarantine + 3 days home quarantine” from the previous “7 days in centralized quarantine + 3 days home self-monitoring”;
  • Mass PCR tests only if the infection sources or the transmission paths are unclear, community spread lingers for a long time, or for correcting unreasonable practices such as “two tests a day” and “three tests a day”;
  • Removing circuit breaker mechanism for inbound flights and adjusting the requirement on 48-hour nucleic acid test before the flight from twice to once;
  • Promoting Covid vaccination rate, especially booster rate among elderlies; and
  • Accelerating the research and development (R&D) of effective anti-Covid vaccines and drugs.