The first cases of the novel coronavirus (SARS-Cov-2) were detected in Wuhan, China, in December 2019. Within mere weeks, the virus had spread rapidly around the globe. The World Health Organization (WHO) declared it a Public Health Emergency of International Concern on Jan 30, 2020, before elevating the outbreak status to a global pandemic on March 11. What ensued was unprecedented in our lifetime, with countries closing their borders and imposing movement restrictions — differing only in the degree of stringency — on their populations.
The virus is still mutating rapidly and new variants (and subvariants) continue to emerge — some strains are more deadly than others, some excel at evading our immune systems (be it immunity from previous infections or vaccination) while most others fall by the wayside without making much of an impact. The Covid-19 pandemic has infected more than 628 million people worldwide (confirmed cases only) while the number of reported deaths directly attributed to the virus is nearing 6.6 million — and counting.
For the majority of the world’s population, the pandemic has now shifted to endemic. In other words, we accept the fact that Covid-19 may never be eradicated, like most viruses. Given its adeptness at evading immunity, early hopes for herd immunity too have been dashed. It is here to stay and, therefore, we must learn to live alongside it, managing our own risks of infection. Economies and borders have, by and large, reopened and life has returned to normal or, for some, a “new normal”.
Against this backdrop, China — with 18% of the world’s population — stands apart. There has been plenty of news coverage in recent days in Western mainstream media, questioning the wisdom of persisting with its zero-Covid strategy, especially against progressively more transmissible virus variants. Certainly, the rising frequency of stringent lockdowns is causing increasing disruptions for businesses and economic damage. But there is also no doubt that the strategy has saved many Chinese lives throughout the pandemic. The previous week, Chinese and Hong Kong stocks surged on speculation of relaxation from this policy, hopes that were quickly quashed after the government reiterated its commitment to stamping out any outbreak with force.
We thought it timely, three years into the pandemic, to assess how well different countries have handled the crisis in terms of lives and livelihoods (economic impact on the people’s well-being) and what, if any, lessons we could learn with the benefit of hindsight. To do this, we highlighted a few metrics that we consider to be key, including speed of vaccination rollout and excess mortality, as well as the economic impact in terms of employment and GDP. The results are presented in a colour-coded spectrum for easier understanding — the darkest shade of green being relative “success” and darkest shade of red being a relative “fail” (see Table).
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Excess mortality is a more comprehensive measure of the true toll that Covid-19 has taken, calculated as the net difference between the actual number of deaths (all causes) and what the expected number of deaths would have been had there been no pandemic, based on historical trends. A recent study undertaken by WHO showed that excess mortality (between January 2020 and December 2021) totalled 14.91 million, far exceeding the reported Covid-19 deaths worldwide of 5.42 million by 2.75 times.
Asia did better than the West in containment, limiting deaths, at outset
Part of the highest death toll occurred during the earlier phases of the pandemic amid widespread confusion over the appropriate response to and treatment for this novel virus, given our limited knowledge then — and before vaccines were developed. Humankind had no prior immunity and even the best healthcare systems were very quickly overwhelmed. There is no question that governments that reacted fastest and decisively, with the most coherent public health policies, fared better, especially in terms of saving lives. In this respect, Asia has done a far better job of containing the virus — even though it was the first region to be affected — compared to the West. Countries including the US, France, the UK, Canada and Germany reported their worst deaths in 2020 and early 2021. As a result, many Asian and Asean countries managed to keep excess mortality lower than Western and Latin American countries (see column E in Table).
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South Korea is one of the standout successes, proving how an early alert system and preparedness for just such an event can save lives. Learning from previous experience with a MERS outbreak in 2015, the country had already undertaken critical reforms of its healthcare and insurance systems and had the necessary infrastructure in place. It successfully flattened the curve early with effective tests (at scale), contact tracing, quarantine and treatment as well as containment measures, aided by the heavy use of technology within a centralised response system. This kept excess mortality (E) relatively low at just 1% — and the country never had to resort to drastic lockdown measures. This was evidenced by the small decline (5%) in Google Mobility data for retail-recreation activity (F) from February 2020 to December 2021, compared with pre-pandemic levels. Successful containment (low local transmission), in turn, enabled economic activities to normalise very quickly by February 2021. As a result, there was minimal impact on the economy and employment. In fact, unemployment fell in 2Q2022 (H) compared with 4Q2019, and GDP in 2Q2022 (I) was in line with the International Monetary Fund forecast made in 2019. All of this was achieved without massive increase in public spending — government debt-to-GDP rose a comparatively modest 10.5% (J).
China, too, managed to limit the impact of the virus throughout 2020 and 2021 on both lives and the economy — albeit by adopting far more draconian measures, including rigorous and mandatory mass testing, stringent quarantines and lockdowns for the few outbreak events. The total number of deaths would actually have been fewer than expected had there been no pandemic (negative excess mortality). For much of 2020 and 2021, life in China largely went about normally for most people, as the number of cases stayed very low and economic activities did not suffer as greatly as they did in the rest of the world.
China was the only major economy to register positive growth in 2020, of 2.2%, even as world GDP contracted 3.3%. Growth gained momentum in 2021, expanding 8.1%. Exports and trade surplus surged — China’s manufacturing sector gained market share as the rest of the world shut down (see Chart 1). Having said that, its zero-Covid strategy is now causing greater disruption as the virus mutates into far more transmissible variants, resulting in more widespread and frequent lockdowns. Export growth has turned lower in 2022, though this is also likely due to the reopening of other economies (export competitors) and, more recently, slowing global demand (see Chart 2).
Speed of vaccination saved lives
In addition to fast and effective early suppression measures, the speed of inoculating the people has also played a critical part in saving lives. WHO approved the first vaccine, from Pfizer-BioNTech, for emergency use in December 2020, just one year after the initial outbreak. This was soon followed by several other vaccines. Not only were these produced in record time in terms of vaccine development, but most had remarkably high efficacy levels. The table shows a strong negative correlation between the speed of vaccination (B) — the time taken to vaccinate 60% of the population — and excess mortality (E). In other words, countries that inoculated more of their population faster saw lower excess deaths, and vice versa.
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It took just 7.2 months for 60% of Singaporeans to complete the initial vaccination protocol (two doses for most vaccines) — compared with 7.8 months in Canada, 8.3 months in the UK, Germany and France and more than 11 months in the US. Excess mortality in Singapore, estimated at 2.6%, is far lower than that in all the above-mentioned countries.
That Singapore would excel in vaccination rollout is to be expected, given its relatively small geographical area and population size, excellent infrastructure, high level of public trust and confidence in the government, highly efficient public service as well as educated population.
For Malaysia to also achieve the 60% target in 7.2 months is something we should all take great pride in. We did better than Japan (7.4 months), South Korea (7.8 months), China (eight months), Thailand (9.4 months), Vietnam (9.9 months) and Indonesia (15.8 months). And this is despite the severe shortage of vaccines at the start of Malaysia’s vaccination programme in late February 2021. Supply did not start to improve until around June. We have no doubt that the speedy vaccination rate, once vaccines were available, saved lives — the resulting immunity significantly reduced the number of cases and the severity of illness for the infected. Case in point: the most recent surge in Covid-19 cases in March 2022 did not result in higher hospitalisation and, critically, deaths. WHO estimates excess mortality in Malaysia at only 1.9%. While any loss of life is tragic, we — the people and the government — did comparatively better than many other countries in the world, despite our inborn scepticism and reflex perception.
India and Indonesia, on the other hand, took far longer to hit the 60% target, almost 16 months. This most likely contributed to their comparatively higher excess mortality, of 25.6% and 27.5% respectively. As we said, the pace of vaccination is influenced by a number of factors, including geography, population size, infrastructure, government effectiveness in managing vaccine procurement, distribution logistics and communication with the people — especially given the amount of misinformation on social media. To get doses in arms requires the people’s willingness to be jabbed.
Ability to spend on fiscal stimulus/aid helps speed up economic recovery
Apart from the trade-off between mobility restrictions (to save lives) and economic growth (earlier reopening), there also appears to be a positive correlation between the economic fallout and size of fiscal aid/stimulus. Notably, governments in rich developed economies spent far more on pandemic aid than emerging and low-income developing countries — because they could. Developed countries in general could sustain higher public debt-to-GDP ratios, without major negative consequences.
Countries with the largest pandemic fiscal packages (as a percentage of GDP) were the US, the UK, Canada, Germany, Japan, Australia and Singapore. We have written previously of how the developed world has effectively socialised private sector debt in this pandemic, resulting in huge excess household savings that went on to support consumption. As a result, their economies were able to recover more quickly, with minimal damage to employment.
This rich-poor divide could not be clearer than in the hugely inequitable distribution of vaccines. Rich nations were able to secure — and hoard — far more vaccines than required for their populations while poorer countries had little to none. The failure of the Covid-19 Vaccines Global Access (Covax) programme is a lesson for the world — for placing naïve faith in the rich world’s solidarity with the poor, in its expectations for supply, funding and logistical support. No government will prioritise others — no matter how critical the need — at the expense of their own citizens, certainly not any democratically elected government.
There is no ‘one size fits all’ strategy
To summarise, leadership during the pandemic directly affects the impact on the people and economy. Governments that were better prepared at the outset of the outbreak and were able to respond quickly and decisively with coherent public health policies were able to prevent unnecessary loss of lives. We must learn from this and formulate contingency plans that can be activated, with speed and at scale, before the next pandemic strikes.
Having said that, in reality, policies are influenced and shaped not just by science but also by political structure, culture and societal values. And their effectiveness is heavily dependent on the people’s behaviours and attitudes towards individual rights and freedom versus civic duty and responsibility to community. It is also a reflection of the level of public trust in their governments.
As we said, to get doses in arms requires the people’s willingness to be jabbed. There appears to be a big divide between the West and Asia. In Asia, at least 81% of the population has received at least one dose, compared with 70% in Europe. In the US, only 68.5% of the population has completed the initial protocol, despite being first in line to acquire the vaccines in December 2020. In Malaysia, it is 84% and in Singapore, 88%. Evidently, in the West, there is a much stronger belief in personal rights and freedom of choice over public health interest and, for some, even family, as well as a different perspective on (the acceptance of) death.
We think this the main reason for the current scepticism of Western media over China’s zero-Covid strategy — because they are looking at it based on their own culture, beliefs and values, perhaps more so than with malicious intent. The West simply cannot understand why the Chinese people can tolerate such draconian testing and lockdown requirements — just as the Chinese cannot comprehend the West’s seemingly cavalier attitude towards the risks of infection and death. China’s reported Covid-19 deaths is just over 5,200, a tiny fraction of the 1.1 million lives lost in the US.
Still, it does appear as though Western media has ganged up on China and Russia, based on how similar photos and headlines are on, say, BBC and CNN when reporting on the war in Ukraine. This creates risks for those who rely on Western media for news, the fear that one will lose a balanced perspective and context. Case in point: Despite the slew of news reports citing mounting public frustration and highly publicised pictures/videos showing workers “escaping” lockdowns on a Foxconn campus in mainstream media outlets, we think the zero-Covid strategy retains broad public support in China. Of course, there will be pockets of discontent, but the absence of mass protests in the streets — unlike those seen across Western countries — is telling.
For the Chinese government, the probable loss of lives, if restrictions were lifted, would be unacceptably high. Even if the Omicron fatality rate is low, cases are likely to be extremely high, given that its population has less immunity — because of far fewer cases of previous infections, lower vaccine efficacy and a low vaccination rate among the most atrisk elderly. Its public healthcare infrastructure and experienced medical personnel outside major cities are under-equipped to handle a surge in cases. The chaos in Hong Kong during the recent outbreak in March 2022 despite its world-class healthcare system, when hospitals and morgues overflowed, has to be an ominous warning for China. Therefore, to the Chinese, the extra caution is worth the tradeoff in terms of weaker economic growth in the short term — but perhaps not to the West.
We wonder whether criticism of zero-Covid stems from the fact that it affects Western economic interests. Given China’s key position in global supply chains, persistent disruptions may be keeping costs and prices (inflation) higher than they should be. Stringent restrictions also affect the production and sales of foreign multinational companies operating in the country. For instance, Apple now expects lower shipments of its premium iPhone 14 models, with Foxconn operating at significantly reduced capacity, thus affecting sales heading into the important holiday season. Retailers from Starbucks to McDonald’s and Nike have reported slumping sales, owing to store closures and softening consumer demand.
In conclusion, there is “no one size fits all” strategy — because the actual situation in each country is different, as are the expectations of its people. The value attached to the lives and livelihoods trade-off is certainly not the same for everyone.
The Global Portfolio was up 0.8% for the week ended Nov 9, better than the MSCI World Net Return Index’s 0.4% gains. Yihai International Holding (+10.1%), Guangzhou Automobile Group Co (+1.5%) and DBS Group Holdings (+0.5%) were the gainers for the week, while Alibaba Group Holding (-2.1%) and iShares 20+ Year Treasury Bond ETF (-1.8%) ended lower. We doubled up on our holdings in the latter, thus averaging down slightly on our cost. Total portfolio returns since inception now stand at 14.2%, trailing the benchmark index’s 29.7% returns over the same period.
Disclaimer: This is a personal portfolio for information purposes only and does not constitute a recommendation or solicitation or expression of views to influence readers to buy/sell stocks, including the particular stocks mentioned herein. It does not take into account an individual investor’s particular financial situation, investment objectives, investment horizon, risk profile and/ or risk preference. Our shareholders, directors and employees may have positions in or may be materially interested in any of the stocks. We may also have or have had dealings with or may provide or have provided content services to the companies mentioned in the reports.
