Is China Worried About Taiwan’s COVID Strategy?

Many were looking for China’s 20^th National Congress to mark the end of China’s zero-COVID policy (ZCP). The Congress has ended, but the policy remains. In fact, Li Qiang, who ended up having to impose Shanghai’s lockdown, was promoted to become the second-highest ranking official after Xi Jinping. New COVID restrictions were also introduced in the centre of Guangzhou – one of the most important commercial cities in China. So why has the ZCP continued? Some point to political reasons such as ZCP giving the state more powers to control the population, while others point to an ineffective vaccine strategy. But another factor could be the experience of Taiwan.

Since the outbreak of COVID in 2020, Taiwan pursued a ZCP much like China, but in April 2022 it switched to a new policy of mitigation. This has seen a surge in COVID-related deaths. At the end of March 2022, Taiwan had seen a total of 850 COVID deaths. Today, that number has jumped to 12,385 deaths. This works out to be 53 deaths per 100,000 population (Chart 1). This puts Taiwan at a worse death rate than Japan, which had less restrictions throughout COVID.

Taiwan is not alone in seeing a surge in deaths after tight restrictions were lifted. Both Australia and South Korea saw something similar earlier this year (Chart 1). Indeed, the Australia case was likely used as justification for the Shanghai lockdown in March 2022. Hong Kong, meanwhile, was unable to hold back an Omicron wave in March 2022 that saw its death rate jump dramatically. An important factor for the sharp increase was vaccine hesitancy amongst the population.

The worry for China then is whether they would see a similar surge in deaths as Taiwan, Hong Kong or Australia. Currently, China has reported a total of 5,226 COVID deaths since 2020. If China was to re-open and end up with a similar COVID death rate as Taiwan, the death count would jump to 745,000. Therefore, we would be cautious in extrapolating recent talk of China easing quarantine restrictions for inbound travellers as the end of China’s ZCP.

Bilal Hafeez is the CEO and Editor of Macro Hive. He spent over twenty years doing research at big banks – JPMorgan, Deutsche Bank, and Nomura, where he had various “Global Head” roles and did FX, rates and cross-markets research.

(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)

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