Since start March, confirmed Covid cases in mainland China has seen an increase of ~5%, mainly driven by the province of Jilin and Hong Kong’s neighboring Guangdong province – with increases of 488% and ~23%, respectively. In response, China has imposed lockdowns for both Shenzhen and Changchun, with the former stated to last “at least a week” and which marks the largest lockdown since Wuhan’s lockdown at the start of the pandemic. Supportive of its prevailing zero-Covid policy, China’s Centre for Disease Control and Prevention recently stated daily Covid-cases in Guangdong could rise to more than 75k if curbs were to be removed and travel allowed – stating that “…a suppression strategy should be maintained to ensure that the resulting Covid-19 pandemic can be maintained under control”.

With a back of the envelope calculation using the observed fatality rate of 21.5% for unvaccinated people above 80 years of age – a status applicable to 50% of China’s 36m elderly – would suggest potential fatalities of ~4m people from this demographic alone. This compares to global deaths current just above 6m and implicitly assumes the Sinovac vaccine would effectively protect the 50% vaccinated elderly, although researchers have questioned the efficacy of the vaccine variant against recent mutations.

The port region of Guangdong is widely described as a key manufacturing hub and home to Shenzhen Yantian port, one of China’s (and the world’s) busiest ports. Bloomberg states that the port remains operational, though with tighter Covid controls. In our view, a prevailing zero-Covid policy amid an outbreak could have widespread implication for Chinas production and port efficiency, potentially lowering exports and commodity import requirements, while adding to congestion issues and scheduling difficulties in the region. However, lower Asian export volumes from such a disruption could allow US ports to recover from the strain witnessed during the pandemic and further increase US port’s throughput efficiency, and thereby alleviate some of the lingering effects of the pandemic on the container shipping industry.