Chinese vaccines
Chart of the Week: China tracking 6%+ 4Q
As per our GDP Nowcasting model, given the favourable flow of October data points (positive momentum from exports, non-oil imports, bank credit, retail sales, and services PMI), the Chinese economy is on track for 6.1%yoy real growth in 4Q. For activities to come back this strongly after an historic contraction in 2Q, both external (July onward) and domestic (the last couple of months) demand had to fire up. As both engines are now running, China is ending the year on a strong note.
Commentary: Chinese vaccines
Global news headlines have been dominated in the past week by vaccine-trial progress. Interim analyses from Moderna and Pfizer, two US companies, are impressive and encouraging. Using Messenger-RNA technology, both vaccines have shown high degree of effectiveness in large-sample, worldwide, double-blind phase-3 trials. It seems likely that both will be approved expeditiously, following safety checks, marking the fastest pace in vaccine history, from development to usage.
One issue with mRNA vaccines is their high degree of instability, requiring them to be stored in freezing temperatures, making storage and shipment costly. Pharma companies are busy developing the requisite modes of storage and transportation.
Beyond these two vaccines, the one under development by Oxford University (manufacturing to be done by AstraZeneca) has shown promising outcome among the elderly. Sputnik V, developed in Russia, has been associated with successful results, but received skeptical reception from Western scientists owing to small sample sizes.
In the middle of all this news, largely ignored is the fact that considerable runway has already been covered by several Chinese firms. SinoVac, CanSino, and SinoPharm have been hard at work, with much less fanfare. Reports suggest that their efforts have yielded positive results.
On November 20, SinoPharm reported that almost a million people have been given their vaccine as part of an emergency-use program authorized by Beijing. Outside of China, several developing countries (Indonesia, Malaysia, Mexico, Pakistan, the Philippines, and Turkey) have signed deals with Chinese Pharma companies to both trial and produce their vaccines locally. Considering the billions of doses needed, and the risk falling at the back of a very long line for Western vaccines, the appeal of the Chinese vaccines is apparent.
There is another major factor at play: cost. Given traditional technologies used, the Chinese vaccines do not require to be stored in extremely low temperatures, nor is their production process as capital intensive. Hence, they are likely to be cost competitive and logistically easier to handle.
Finally, politics. Having been the country of origin of the coronavirus that has ravaged the world this year, and having made only limited progress in the hearts-and-minds arena by sending subsidised or donated medical equipment to developing countries, China needs a big diplomatic, image-boosting win next year. On this front, we see greater push toward debt-rollover or partial forgiveness for some poor countries. But a far wider-reaching move would be to aggressively produce and deliver vaccines worldwide. It goes without saying that any treatment for the global pandemic ought to be a public good, and nations that put the purpose of helping the global community over profit will certainly be seen in a favourable light.
We therefore expect a lot of vaccine diplomacy from China next year. From supporting COVAX, a USD18bn WHO-supported effort to provide coronavirus vaccines to developing countries, to signing bilateral agreements to do the same (already, nearly a hundred countries have some sort of vaccine link with Chinese producers), China will find it very much in its interest of global leadership and soft power projection to keep up its efforts. With antagonism vis-à-vis the US not fading and trust deficit built up with many other countries, vaccine diplomacy could mark an area where China can do genuine global good and enhance its image.