i wanted to talk about what is going on in china right now now i'm sure a lot of you have heard
that there is an ongoing covet lockdown in shanghai that has been going on since april
5th so over a week now in which most shanghai residents have been unable to leave their
apartment even to get food if you have a high rise full of condos two people are allowed to go
shopping for everyone once a day for two hours so there are indications that we've got some pretty
severe problems going on with literally famine and what's supposedly a first world city uh the
the chinese are not as enamored of processed foods as americans are so they would like to
have their fish alive when they purchase them and the cold chain that is required for something like
that just does not work when there is limited retail options under a lockdown so people have
been running out of food for days now and i'm sure a lot of you have seen some of the the
twitter and the tic toc posts of people literally screaming from their windows about what's going on
and in true orwellian fashion the chinese have deployed a small army of drones to
take photos of people so that their fines can be sent to the tax bureau for disobeying
orders about leaving their windows open during lockdown uh in general a crappy situation but
i think it's worth exploring here what is going on in a deeper level now in 2020 when
we didn't have a vaccine our threshold for what would be considered successful was 50 protection
against death and the covid vaccine that the chinese ultimately engineered came in at 55
so you know called a d minus but a passing grade as bad as it was since then the chinese have
faced a number of evolutions and devolutions in their china policy there's a lot going on
here so first of all we've gone from the wuhan strain to alpha to delta to omicron to omicron b
and at each step the chinese vaccine has become less and less effective and now it's probably only
in the low teens versus omicron b for preventing deaths compare that to the fizer and mordana
models the mrna vaccines that we have in the united states they were well above 95 percent
not just preventing death but against preventing severe infection and even against perfecting
preventing infection in the first place now just like with the chinese vaccine our vaccine has
become less effective with each proceeding variant but we're still in the high 90s for preventing
death and severe disease even though the omicron bee can slip through the defenses that you get
in terms of infection so if you're vaccinated in the united states your chances of dying from covid
if you're under 70 are minuscule now the new zealand whose new zealanders who have achieved 98
vaccination with those rates have a population that's roughly similar
to hong kong which is also in a degree of lockdown and the kiwis haven't had a death in weeks
whereas in hong kong we're talking at least in the thousands so far anyway so that's kind of piece
one of all of this piece two is this a crisis of legitimacy a crisis of legitimacy going on in
the hong kong system in the chinese system in the shanghai system everywhere in the chinese system
oh sorry i've had too much coffee where was i yes legitimacy chairman xi has instituted
a cult of personality that is far more extreme than anything that any of the chinese leaders
before him have instituted and that includes the emperors of old as well as mao himself
he has executed or imprisoned or intimidated into silence or exiled
everyone within the system who has a degree of intelligence or policy creativity
and now it is just him by himself and that makes it impossible for the ship of state to turn
and so we're seeing worse and worse decisions coming out of beijing because there's no one
no longer is there anyone in the system who will tell you what's going on not that they won't tell
him bad news they won't tell him any news because they don't know how he's going to react and he has
literally shot the messenger so many times that nobody else wants the job how does that apply to
kovid well it starts with the ukraine war the ukraine war is not going well for the chinese
the infrastructure that is required to bring russian export to china was
operating at maximum capacity before the war began and the production side of things within russia
especially in eastern siberia where the terrain is much more rugged in the geology much more complex
the production there is dependent upon foreign companies being operating that includes shell
and exxon from the super majors or baker hughes and schlumberger from the oil services firms
and so the russians were already sending the chinese everything they could from the
east anything else would have to come from the west and russia's export points on the
black sea and overseas are shallow water ports so the only way that the chinese could get more
crude or other materials from the russians would be to send in a bunch of small shuttle tankers
and then sail them into deeper waters which are in sight of nato coastlines do a c2c transfer
which is risky at any day and then sail it around a couple of continents to ultimately get to china
so the chinese state companies aren't doing that the indians did it for a while we can talk about
them at a later time but the chinese are not in fact the chinese are even shrugging off
some purchase agreement they had with the russians in the far east even though there's no war
threat there because they don't want to get caught follow anything that would rob them of access to
the american market which is more important to the chinese by at least a factor of 20. so the chinese
are arguably after the ukrainians of course the biggest losers from the ukraine war so far
they're seeing their food security and their energy security weakened they're seeing their
health policy in question and if you are g and you no longer have anyone to use as a sounding
board or a cadre of smart people that you can send to in another room to come up with a backup plan
this is really bad because it means that the chinese system cannot adapt to changing
circumstances all of which have turned against the state so the only remaining
tool that china has that she has to maintain his power and his control over the population
is health and so every time we get a case outbreak in china the state has
no choice but to do a complete zero tolerance lockdown because they don't dare open remember
the chinese vaccine doesn't work very well at all and most chinese citizens have not
been exposed to the virus so they have no natural antibodies now we can have a debate in the united
states about what is more effective antibodies or the vaccine but in china they have neither
which means that if there was an outbreak like the united states had in say january with omicron
you are literally talking about millions of chinese dying in a very short period of time
because omicron b is far more communicable than the measles and has a fatality rate that is
significantly higher and for it to all break out into the open all at once lockdowns are all they
can do so shanghai arguably the most economically viable city in the country is shut down
and it looks like within the next few days not just hong kong but shinzen and guangzhou are going
to get locked down too so if you take the young c river delta and remove it from the equation and
take the pearl river delta and remove it from the equation there is not a lot left in the chinese
system from a manufacturing point of view that can either get built or shipped out those are the
two big hubs so if you're anywhere else in the world and you're dependent upon chinese imports
you've got some math to run because the chinese for internal reasons for legitimacy reasons
no longer see participating in international manufacturing supply chains as a key to their own
success it's a nice to have but they don't have to have it central control is far more important
and so if you have not started moving your stuff out of china yet it may well be too
late because it will never get better than it is right now okay that's it from me until next time
at this time passing zero seven zero four one four zero
you