Thursday, March 17, 2022

COVID in Hong Kong; Why China is vulnerable; Omicron remains highly lethal for unvaxxed people who haven't had COVID

By Whitney Tilson

I continue to follow both the pandemic and China closely (if you wish to subscribe to either or both e-mail lists, simply send a blank e-mail to: [email protected] and/or [email protected]).

I sent the below e-mail that relates to both of these subjects to both lists earlier this week...


Following up on yesterday's e-mail about China imposing harsh lockdowns to try to halt the spread of COVID, I'd like to answer the question of why China is doing this, even as the rest of the world is going in the opposite direction.

The answer is simple: China's leaders are looking at what's happening in Hong Kong right now and (rightly) fear that it could happen in China.

Right now in Hong Kong, the daily COVID death rate per capita is the highest ever recorded, as these two charts show (source and source):

As a result, after almost no COVID deaths during the first two years of the pandemic, Hong Kong's cumulative COVID deaths per capita in no time has soared past its Asian peers as well as two of the least-hit European countries, Finland and Norway:

This chart is a bit disingenuous, however, as Hong Kong's cumulative deaths per capita are still far below the hardest-hit countries, as this chart shows (source):

To see how badly Hong Kong is faring, look at this chart from this outstanding Financial Times article: Hong Kong Omicron deaths expose limits of fraying zero-COVID policy. (If you're not an FT subscriber, most of the article is captured in this Twitter thread.) It shows how five neighboring countries are suffering similarly to massively higher cases per capita than Hong Kong in this year's omicron wave, but almost no deaths, compared to Hong Kong's horrific death rate:

If you look closely, you can see that Hong Kong's case fatality rate (the percentage of those who get infected who die) is 5.2% among those over 80 years old versus 0.1-0.2% in the other five countries.

Here's another chart from the FT article showing the Hong Kong's case fatality rate (a bit over 4% overall vs. 5.2% in the chart above for those over 80 years old) is higher than the peak in the U.K.:

Why are such a shocking number of people dying of COVID in Hong Kong?

Mostly because Hong Kong failed to vaccinate the majority of its most vulnerable elderly citizens and, to a lesser extent, because it's using a less effective vaccine, as this chart shows:

This is a massive failure by Hong Kong's government to vaccinate its most vulnerable citizens.

China's leadership is right to be freaking out right now for two reasons: 1) They will (rightly) be blamed for what's happening in Hong Kong; and 2) Imagine if Hong Kong is foreshadowing what's about to happen across China?

While the country as a whole isn't as vulnerable as a small city-state like Hong Kong, it has many of the same risk factors:

  • A very low vaccination rate among the elderly, especially those age 80 and up
  • Almost nobody with immunity from prior infection
  • Less effective local vaccines
  • Many densely populated cities

Thus, China has no choice but to implement hard lockdowns right now because it, unlike Australia, New Zealand, and Singapore, which also had successful zero-COVID policies, China failed to vaccinate nearly half of its most vulnerable citizens, those over the age of 80. It didn't drop the ball as badly as Hong Kong did, but it's pretty close, as this chart from the Financial Times shows (that red bar represents 15 million unvaccinated Chinese citizens over the age of 80):

In conclusion, China needs to recognize that its zero-COVID policy will fail, so it needs to quickly pivot and focus on getting every citizen vaccinated, starting with the elderly.

I suspect it will be successful in doing so because of its authoritarian system and better ability to control the spread of vaccine misinformation.


Best regards,

Whitney

P.S. I welcome your feedback at [email protected].

P.P.S. One of the authors of the FT article, John Burn-Murdoch, makes an important point in his Twitter thread:

One thing I would hope people take away here is that this really underscores the importance of differentiating between omicron's intrinsic mildness and immunity-driven mildness.

Omicron *is intrinsically milder* than variants like Delta, but that dip in severity is far outweighed by the huge impact of ripping through an elderly population with minimal vaccination and no prior infection.

Remember my now-infamous chart of England's COVID infection fatality ratio? Take away mass vaccination of the vulnerable and prior infection, and you could easily end up with something looking more like this.

There's absolutely nothing mild about omicron here.

This is why anyone who hasn't yet had COVID and is unvaccinated needs to get vaccinated immediately – omicron is still very deadly!

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Empire Financial Research

Whitney Tilson

Empire Financial Research founder and CEO Whitney Tilson is the editor of the Empire Investment Report, a monthly investment advisory that focuses on cheap, high-quality stock ideas.

Whitney graduated with honors from Harvard University and Harvard Business School, where he earned an MBA and was named a Baker Scholar. Whitney spent nearly 20 years on Wall Street, during which time he founded and ran Kase Capital Management, growing assets under management from $1 million at inception to a peak of $200 million.

Once dubbed "The Prophet" by CNBC, Whitney predicted the dot-com crash, the housing bust, the 2009 stock bottom, and more. Now, he's sharing his secrets and strategies with followers of his latest endeavor, Empire Financial Research.

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