Delta outbreak imperils China’s zero-COVID policy—and confidence in its own vaccines

August 5, 2021, 11:32 AM UTC

Until two weeks ago, Chinese officials could justly claim vindication for their “zero-tolerance” approach to battling the coronavirus, which involved harsh lockdowns, strict quarantine rules for citizens returning from overseas, and an almost complete ban on non-Chinese visitors. As the deadly Delta variant ravaged cities in the U.S. and Europe in recent months, China’s people could go about their business without concern for the virus. China’s domestic tourism industry was looking forward to a banner year.

Then came the outbreak in Nanjing.

The first Delta cases were detected in that eastern city on July 20. Authorities traced the infections to a group of airport workers who had cleaned a plane from Russia. The airport workers are believed to have infected four Chinese tourists, who proceeded to Zhangjiajie, a popular tourist destination in central Hunan province known for its dramatic landscape of sandstone peaks and waterfalls.

In Zhangjiajie, the tourists enjoyed a July 22 musical performance about the history and culture of the region in a theater sitting shoulder-to-shoulder with more than 2,000 other attendees—who then traveled back to their home cities, creating a super spreader event.

As Fortune‘s Grady McGregor reports today: “China is now battling its largest and most widespread outbreak of COVID-19 since the virus first emerged in the country in late 2019.” Over the past two weeks, China has recorded more than 500 cases in more than 30 cities across 18 provinces.

By Western standards, 500 cases in a population of 1.4 billion may seem trivial. The U.S. is currently reporting more than 90,000 new cases of the virus per day. But in China, it’s cause for nationwide alarm.

Zhangjiajie, a city of 1.5 million, is on lockdown. In Nanjing, which has registered more than 200 cases, all 9 million residents have been ordered to undergo compulsory testing. The airport is closed. Authorities have shut movie theaters, gyms, and bars. Buses are banned from leaving the city. In Wuhan, the city where COVID-19 first emerged, local officials ordered all 11 million residents to be tested for coronavirus after three cases were discovered there on Monday.

China is battling rising cases in Zhengzhou, as well as the southern island of Hainan. Beijing, which has reported about 20 cases, has barred travelers from high-risk regions.

“We cannot relax,” Zhong Nanshan, China’s leading respiratory disease expert, said at a meeting in Guangzhou on Saturday. “We must pay attention to the control measures.” 

As the Guardian points out, China’s past success in deploying such measures to contain the virus, thereby reviving its economy, has been woven into a national narrative that China’s authoritarian system is superior to democracies in the West.

But Grady argues that “China’s return to the containment strategies of early 2020, even after deploying enough vaccines to cover 60% of its enormous population, suggest the government lacks faith in its homegrown jabs and is unwilling to move past its COVID-zero policy.”

One source of concern for China is that its homegrown vaccines have been found less effective in preventing the spread of COVID-19 than alternatives developed by Western drugmakers like Pfizer-BioNTech and Moderna. It’s unclear how well Chinese vaccines perform against the Delta variant.

Chinese officials report that more than half of the new cases detected in Nanjing were “breakthrough” infections afflicting people who were already fully vaccinated. That begs the question of whether China, with its less potent vaccines, might have to achieve a higher vaccination rate than the West to reach herd immunity, the threshold where enough people have an immunity to the virus either through vaccination or prior infection, that the chain of transmission is broken.

Zhong Nanshan, the epidemiologist, estimated Saturday that China will need to reach an 83% vaccination rate to reach herd immunity. That’s higher than the 70% threshold health experts have said would be necessary for herd immunity in the U.S., and would probably take China at least until the end of the year to attain.

But we may all be in the same boat. Bloomberg analyst Sam Fazeli reports that, according to officials at the Infectious Diseases Society of America, the Delta variant has raised the threshold for attaining herd immunity to 80% for everyone, not just China.

More Eastworld news below.

Clay Chandler

This edition of Eastworld was curated and produced by Yvonne Lau. Reach her at  


Thai tumble

The Thai baht has tumbled more than 9% against the dollar since the end of 2020, as Thailand struggles to contain the COVID-19 pandemic and reinvigorate its once-hot tourism sector. Bolstered by tourism funds, Thailand’s pre-pandemic account surplus stood at $40 billion; it had a current account deficit of $2.2 billion in the 12 months ended June. Last month, Thailand launched a ‘sandbox’ scheme to get vaccinated tourists back into the country—but the government is now battling the worst wave of infections since the start of the pandemic. FT

Blacklist no more  

On Tuesday, a U.S. federal inter-agency body voted to remove Changji Esquel, Hong Kong-based Esquel Group's Xinjiang subsidiary, from the Commerce Department's Entity List. Esquel Group is one of the world's largest cotton shirt producers and was blacklisted by the U.S. last July over allegations of forced labor. In early July, the apparel giant sued the U.S. for what it deemed an “erroneous” blacklisting. The litigation is ongoing. SCMP

Southeast Asia production halts

New COVID-19 outbreaks spurred by the Delta variant are wreaking havoc on Southeast Asian factories and their production capabilities. Thailand recorded a daily high of 20,200 new infections on Wednesday and has been experiencing both worker and supply shortages. Toyota halted vehicle production at three of its Thai plants last month, citing a parts shortage due to the pandemic. Malaysia, meanwhile, hit the grim milestone of 1 million COVID-19 cases on July 25. The country has been in lockdown since June, which has curbed factory activity. The country produces nearly 70% of the world’s rubber gloves. Reuters

India braces for third wave

India is now bracing for a third wave of COVID-19 infections after just escaping the throes of a devastating second wave that peaked in May. Last week, in-country infections picked up again with the number of daily cases growing 6% to over 40,000, as economic activity accelerated and restrictions on daily life eased. Experts say that India is far from a virus-free future: “About a third of [Indians] are still susceptible. It will be incorrect to assume that we have achieved herd immunity,” says K. Srinath Reddy, president of the Public Health Foundation of India. FT


Tencent curbs – Tencent has pledged to limit the time minors can spend playing its (highly-profitable) online games. The Internet giant announced Tuesday that it’d restrict playtime to one hour on weekdays and two hours during holidays. Its moves came a day after Chinese state-owned media denounced video games as “spiritual opium”—and name-checked Tencent’s flagship game, Honor of Kings. Tencent’s stock dropped as much as 11%, wiping out $60 billion in value.

China’s most profitable – State-owned banks and technology conglomerates are China’s most profitable companies (as measured by gross profit), according to this year’s Fortune Global 500 list. China’s ‘Big Four’ state banks—ICBC, BOC, ABC and CCB—recorded modest profit increases of roughly 1% to 3% amid the pandemic. And COVID-19 actually boosted China’s Big Tech and financial giants. Tencent, Alibaba and Ping An recorded surges in their online games, e-commerce, and health segments, respectively. The seven firms raked in a collective profit of $182.2 billion over 2020.

Alibaba slowdown – Alibaba’s earnings for the quarter ended June failed to meet analyst expectations for the first time in two years. Its revenue grew to $31.8 billion, but fell short of the expected $32.4 billion. Its bread-and-butter e-commerce business grew 14% year-on-year—a steep drop from the 40% growth the previous quarter as it loses market share to rival and online grocer Pinduoduo. Alibaba’s cloud computing business also slowed down to 29% growth after ByteDance dropped Alibaba Cloud for its international markets in late May.

Samsung and South Korea’s CBDC – Samsung Group has joined the Bank of Korea’s digital CBDC project, also known as the ‘digital won.’ The conglomerate will join forces with Internet giant Kakao Corporation and the central bank to carry out a digital currency simulation, which will take place from late August until June 2022. The project will test out issuance, remittance, and payments.

Bullish banks – Global banks remain bullish on China, despite Beijing's heavier state hand over its firms and growing geopolitical tensions between Beijing and Washington. Standard Chartered CEO Bill Winters said on a Tuesday media call: “We don’t see a structural or fundamental change in terms of the business opportunities for [the bank]." Winters' remarks are aligned with the positions of other western banks such as HSBC, Citigroup and Credit Suisse, which have all pointed to its profitable businesses in the region.

Final Figure

505 megatonnes

Summer wildfires in Russia's Yakutia region—just north of Mongolia and eastern China—have emitted a record-breaking 505 megatonnes of carbon dioxide equivalent, or CO2e (a unit for measuring carbon footprints) since June, says the European Union’s Copernicus Atmosphere Monitoring Service. Last year's summer blazes released 450 megatonnes of CO2e. Sparked by heatwaves, this year's wildfires, which began in May, have burned through 4.2 million hectares of land in the region and are thought to be one of the worst air pollution events on record. Scientists are warning that the fires will trigger further melting of Yakutia's permafrost—or frozen ground—which will release even more carbon emissions.

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