Expect another year of supply chain issues due to China’s zero-Covid policy

Nallamala said that China is maintaining that policy for several reasons. Some are political – the upcoming Olympic Games, which they want to do well, and an October re-election. But, more importantly, he said, “China has a surprisingly weak health care system, especially when it comes to per capita ICU beds”. It is also trying to license its own vaccines instead of using mRNA vaccines.

“Their vaccines are more like flu shots. The efficacy rate has proven to be much lower than the 90-plus percent you see from mRNA vaccines,” he said. “So, if they opened up the borders and became zero-COVID got rid of, and something like Omicron comes along, there’s a very strong chance that the health system will collapse.”

While he understands why China is maintaining this policy because no one is sick or dying, he doesn’t believe it is sustainable long term as China is locking down entire cities for weeks at a time.

“It may take another year,” Nallamala said. “And, in that year, I think we will continue to have problems with supply chains around the world because China is very important to the global supply chain system, and that will likely continue to put pressure on inflationary numbers.

“Therefore, for all these reasons, we expect the current zero-COVID strategy to remain in place and we think it is important that this impacts global supply chains and potential inflation in other parts over the next six to 12 months. Will remain of Asia.”