China doubles down on zero COVID-19 and lockdowns

Hi, everyone, Peter Zion here coming to you from Colorado. The big news today on June 27, is that the Beijing government has announced that the zero COVID policy in China is going to persist until at least wait for it 2027. Now, a couple of things going on here. Number one, you have to keep in mind that the Chinese domestically generated vaccine really does not work. It barely worked against the original wild strain out of Wuhan. But then we have alpha, and then we have beta and delta. Now we’re in Omicron, ba two, and Omicron, VA four and five are just around the corner already in the United States. So there’s more and it’s changing faster. The bottom line is that the Chinese can’t keep up from a scientific point of view. And the soonest that they might be able to get a western style mRNA vaccine is about 2026 At current rates of build out, assuming everything goes perfect. And as we all know, in immunology, the whole idea is that things don’t go perfect. That’s why we’re in this problem. So we’ve got a population in China who does not have any sort of vaccination benefits to help them fight off the disease, and the disease is changing rapidly, so they couldn’t keep up anyway. Second, the Chinese have been broadly successful until now, it keeping the various COVID strains out of the country. So unlike most of the world, no one in China has a naturally occurring resistance. And we can have a conversation in this country about whether or not vaccines are better than natural immunity, and we will have it long and we will have it loud. And we will do it in a destructive way, because that’s just how we debate things here. But in China, they’ve got neither. So lock downs are their only option. So honestly, a five year window is kind of a preliminary stake in the ground kind of makes sense. Now, this has a lot of implications for a lot of people, but the one that is going to matter most to Americans writ large will be in manufacturing. Because the United States over the course of the globalized era has bit by bit outsourced most of its low to medium manufacturing to other countries with China being the single largest beneficiary of that policy. Well, that pretty much ends now. Shanghai has already been in blocked out for two months. And since Omicron, is the most communicable virus we have ever dealt with as a species. It is regularly punching into the Chinese system and infecting areas and lockdowns are really the only thing that they can do. And they only work temporarily. We had a scare last week that looked like Shanghai was about to go back into full lockdown already a little less than a month after opening up. And I have no doubt that we’re gonna be facing this sort of problem over and over and over and over again. So manufacturing in China, the short version is screwed. The more complicated the supply chain, the more pieces you need. And the more free transport you need to get it from place to place to place, your average passenger car has 30,000 pieces, your average cell phone has more than that. And these are complicated systems. And if you break down one piece of it, the whole thing falls apart, while the whole thing is now falling apart. So for companies who have decided this would all blow over when I say this, I’m not talking COVID I’m talking the propaganda, I’m talking the espionage, I’m talking the genocide, for people who just were willing to ignore all of that, you’re not just stupid now you’re now screwed, because now you’re going to have to rebuild everything from scratch outside of China, when all of your competitors have had a 234, even five year advantage. And you’re now doing that in an environment of labor shortages throughout the western world. And in a situation where northern Mexican labor has not been completely bought up, but as much tighter market there now than it was before. COVID. So you’re going to be driving into the wind, as it gets stiffer, and you’re gonna have very, very few friends that you can draw upon. So is this a little bit of an I told you so? Yeah, it’s a little bit of an I told you so sorry for that. But we’ve known that this was coming. We’ve always known that this relationship was going to implode. Now it’s happening because of health. Now, if I had been a betting man three years ago, that is not the reason that I would have picked it would have sent the entire global manufacturing system into a tailspin. But here we are. And there are a lot of similar factors that are only now coming to a head with say Chinese demographics, or global financial shortages, or tech slowdown. These are all happening. We’re all past the point of no return for all of them. But we’re going to have to dive into those topics on another day. So until then, take care.