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China’s vaccine diplomacy is losing traction in Southeast Asia

August 26, 2021, 11:27 AM UTC

This is the web version of Eastworld, Fortune’s newsletter focused on business and technology in Asia. Subscribe here to get future editions in your inbox.

On Tuesday, U.S. vice president Kamala Harris’s visit to Hanoi was delayed by three hours because of concerns about what White House press secretary Jen Psaki termed an “anomalous health incident” in the Vietnamese capital.

Psaki’s turn of phrase vaulted Harris’s hold-up into global headlines; it’s State Department shorthand for “Havana Syndrome,” the mysterious combination of dizziness, nausea, migraines, and ear pain that has afflicted hundreds of U.S. diplomats and intelligence officials in cities around the world since it was first experienced by employees of the U.S. embassy in the Cuban capital in 2016.

U.S. officials still don’t know what triggers the condition, but many of those afflicted report feeling unwell after hearing a harsh mechanical sound and experiencing uncomfortable pressure. The U.S. Central Intelligence Agency has said it suspects Russia is behind past incidents.

But in Hanoi, the beneficiary of Harris’s delay was a different U.S. antagonist: China.

Harris was en route to a meeting with Vietnam’s prime minister Pham Minh Chinh where she planned to announce, to great fanfare, that the U.S. will donate an additional one million doses of Pfizer-BioNTech’s coronavirus vaccine to the pandemic-stricken country, taking the total U.S. donation to Vietnam to six million doses.

Instead, as Harris cooled her heels in Singapore, China’s ambassador to Vietnam, Xiong Bo, seized the moment to arrange his own audience with Chinh—during which he one-upped the U.S. vice president by pledging that China would donate two million vaccine doses.

Bo’s adroit maneuver highlights the intensity with which the two superpowers compete for allies in Southeast Asia—and the explicit manner in which Washington and Beijing now use vaccines to win friends and influence people all over the world. But it also says a lot about Chinese leaders’ anxiety that their vaccine diplomacy efforts are faltering in a strategically crucial region.

As China’s drug manufacturers ramped up production of their vaccines last year, Beijing saw an enormous opportunity to use Chinese-made jabs to cultivate goodwill in Southeast Asia. In the early months of the pandemic, the region, with more than 650 million people, struggled to secure vaccines made by Western drugmakers. The New York Times, citing Bridge Consulting, a Beijing-based research company, reports that China stepped in with a promise to provide the region with more than 255 million doses. Southeast Asian leaders welcomed the offer; the alternative, in most cases, was to go without any vaccines at all.

Per the Times, half a year later, “that campaign has lost some of its luster. Officials in several countries have raised doubts about the efficacy of Chinese vaccines, especially against the more transmissible variant. Indonesia, which was early to accept Chinese shots, was recently the epicenter of the virus. Others have complained about the conditions that accompanied Chinese donations or sales.”

In Thailand, health officials are mixing vaccines made by AstraZeneca for people whose first jab was China’s Sinovac. In Indonesia, authorities are using shots from Moderna as a booster for health care workers who have received two doses of China’s Sinovac vaccine. Malaysia last month said it will stop using Sinovac when existing stocks run out. Even Cambodia, a close Chinese ally, has begun offering AstraZeneca vaccines as a third dose for up to a million frontline health care workers.

As the Washington Post concludes: “Southeast Asian countries that had widely rolled out Chinese-made coronavirus vaccines are turning away from the shots in favor of Western alternatives as they scramble to contain deadly outbreaks caused by the Delta variant.”

In the case of Vietnam, the government may have trouble distributing the additional doses promised by Ambassador Bo.

Vietnam is in desperate need of more vaccines. As Fortune‘s Grady McGregor reported yesterday, the country, which managed to all but eradicate the virus within its borders until May, over the past two months has been overwhelmed by the Delta variant. This week Vietnam reported record-high infection rates with new cases averaging 10,680 per day and COVID-related deaths surging to 360 per day. No matter how tightly Vietnam seals its borders or locks down its cities, the country is acutely vulnerable to the virus because it has one of the lowest vaccination rates in the world; as of Tuesday, less than 2% of Vietnam’s 98 million people were fully vaccinated.

The reason for Vietnam’s low vaccination rate isn’t that its people are vaccine-hesitant; on the contrary, a study published February in The Lancet found Vietnam to have the world’s highest vaccine acceptance rate. But the country wasn’t able to secure vaccines made by Western drugmakers in the early stages of the pandemic, and initial success in containing the virus lulled the government into complacence about a vaccine rollout.

Vietnam launched its vaccination campaign in March with doses from Britain’s AstraZeneca as well as Russia’s Sputnik V vaccine. In July, health authorities sought to bolster the country’s supply with doses from Pfizer, Moderna and five million jabs from Sinopharm, the giant Chinese drug-maker.

But backlash against the Chinese vaccines was immediate and intense. As The Diplomat reports, when Vietnam’s Ministry of Health announced plans to administer a million Sinopharm doses to residents of Ho Chi Minh City, the public outcry among residents was so severe that the government immediately backed off.

More Eastworld news below.

Clay Chandler
clay.chandler@fortune.com

This edition of Eastworld was curated and produced by Grady McGregor. Reach him at grady.mcgregor@fortune.com

Eastworld news

Succession: Chinese pork

In recent months, a bitter succession dispute within the family that controls the WH Group—the world’s largest pork processor—has grabbed the attention of the Chinese public and frightened away global investors. Yet this is more than a China squabble: the WH Group’s ownership of Smithfield Foods means the U.S. pork industry also has a stake in the outcome of a family struggle taking place thousands of miles away. Fortune

A different tack

Chinese entrepreneurs see opportunity in the Taliban’s takeover of Afghanistan. Vice spoke to half a dozen Chinese businessmen seeking to trade goods like electronics and fertilizers who believed that warming ties between Beijing and a Taliban-controlled Kabul could help to open a relatively untapped market. Beijing may not be as keen to see Chinese businesses flock to such a risky environment, and likely remains skeptical that the Taliban could keep its word in protecting Chinese workers and projects. Yet some businessmen appear determined to go regardless. Vice

Common prosperity

Chinese President Xi Jinping’s ‘common prosperity’ campaign is aimed at helping equalize one of the world’s most financially unequal societies. But the policy’s success may hinge on his ability to gain control over China’s runaway housing market. The distorted market is exemplified by places like Hengshui city in Hebei province. Hengshui is a small backwater town that has become a goldmine for property developers due to strong local schools that have a reputation as a launchpad to China’s top universities. As a result, Hengshui's property prices have skyrocketed, showing that the ability to buy an expensive house and enroll in top schools is seen as a golden ticket to the top–entrenching prosperity among the elite. Financial Times   

Overrun

Japan’s worst COVID-19 outbreak is spiraling out of control as daily infections surge to more than 25,000 per day and hospitals across the country are forced to turn away infected patients. Japan’s deepening health crisis is, in part, structural: its health care system prioritizes preventative care over emergency facilities and many hospitals and clinics are privately run and are not equipped to treat infectious diseases. Still, deaths, while rising, remain relatively low given that Japan has vaccinated over 90% of its elderly population. Fortune

Pivoting from COVID-zero

Singapore is about to become the first to go from a zero-tolerance approach to COVID-19 to one that will allow COVID to become endemic in its population. The city has had its borders largely closed since March 2020 and used strict social distancing and quarantine controls to keep the city relatively safe from the virus. But Singapore's high vaccination rates and need to regain its status an international trade and business hub is pushing it to reopen, making the city an experiment to see if it’s possible to transition safely away from COVID-zero. Fortune

Markets and movers

Xiaomi – The Chinese smartphone maker posted a 64% increase in second quarter revenues on Wednesday and announced that it is buying autonomous driving firm DeepMotion for $77.4 million. Xiaomi recently topped Apple to become the world’s second-largest smartphone vendor, and said in early August it plans to become the top smartphone seller in the world within three years.

Pinduoduo – The Chinese e-commerce giant announced this week that it would donate $1.5 billion in future earnings to support Chinese farmers following President Xi Jinping’s calls to address inequality. Pinduoduo also posted its first quarterly profit since listing on Nasdaq three years ago, leading to a 22% boost in its share price.

Volvo – The Swedish carmaker is buying China’s JMC Heavy Duty Vehicle for $123 million, capitalizing on a booming Chinese logistics industry and the Chinese government relaxing its decades-old ban barring foreign companies from full foreign ownership of domestic firms.

TSMC – The Taiwanese chip giant said Wednesday that it will raise prices for its semiconductors by as much as 20%, its largest-ever one-time price hike, as demand continues to outstrip supply and the company seeks funding for major expansion projects in the U.S. and Japan.

Tencent – The Chinese social media firm is re-deploying staff and resources to a new streaming team a month after Chinese regulators blocked a proposed deal to merge two game streaming platforms that Tencent had invested in, Huya and Douyu, on antitrust grounds.

Sing Tao – The U.S. Justice Department has forced Sing Tao, a private Hong Kong-based newspaper that has branches in New York, Los Angeles, and San Francisco, to register as a foreign agent, meaning it will have to file periodic updates on its activities to the Justice Department. Sing Tao says it is not controlled or influenced by the Chinese government, but in June it sold a majority stake to the daughter of a mainland Chinese property developer.

Jet fuel – India’s jet fuel sales spiked 61% from June to July and are up to 45% of pre-COVID levels, signalling that people in India are returning to the skies after months of enduring a deadly wave of infections. Two weeks ago, the U.S. relaxed its travel warning for India to the second-lowest level amid a drop in infections.

Final figure

0.75%

South Korea became the first major Asian economy to raise interest rates since the start of the pandemic after the Bank of Korea raised interest rates from 0.5% to 0.75% on Thursday. The decision comes as its government worries that Korea’s export-led recovery from the pandemic has masked broader issues in the economy. Korea also hopes the move can counteract inflationary pressure on the economy. In July, housing prices were up 14.3% compared to the same month the year before.

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