China’s Covid Catastrophe: Contextual Evidence (Part 1: Demography, Economics)

  • “45 Chinese cities with a combined 373 million people in lockdown… The 45 cities account for more than one-quarter of China’s population and roughly 40% of the country’s total economic output.” – The Wall Street Journal, April 15, 2022
  • “At least 68 cities are in partial or full lockdown, according to data from the country’s National Health Commission.” – The Financial Times, Sept 6, 2022
  • “We really depend on China succeeding in this transition,” said Jörg Wuttke, president of the European Union Chamber of Commerce in China. “But frankly, it doesn’t look good.” – The Wall Street Journal, Feb 14 2022

Three years after the initial outbreak in Wuhan (which now seems to date from September or October 2019), city-wide lockdowns continue in China. The economic engine has been thrown out of gear. The 2nd quarter saw near zero growth in China’s GDP, with significant declines in industrial production, retail sales, and a rise in unemployment. The Chinese stock market has dropped by two thirds in a year and a half (a bigger decline than the U.S. stock market experienced in 2008).

The tightly-managed Yuan exchange rate has weakened sharply since the renewed lockdowns began in the Spring.

These are all signs of significant distress. Given China’s weight in the global economic system, as a producer and a consumer, everyone has a stake in the outcome of Xi Jinping’s Zero Covid program.

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The West has managed to stabilize the public health situation, through hybrid immunity and effective vaccines. A rough co-existence with the virus has been achieved, apparently, though at a price. The elderly and those with pre-existing conditions are still vulnerable. 200,000 Americans have died of Covid this year. But for most of us, the medical risk seems to be diminishing. The sense of crisis has faded. Most of us have been able to return to our more or less normal lives.

Our greater risk today is different. Western countries are exposed to the economic contagion created by China’s possibly failing public health initiative, and the damage it is doing to the world’s 2nd largest economy and all the supply chains that run through it. Zero-Covid is a huge gamble, and we are part of it.

Which poses an acute question: Does China have Covid under control? And what if it does not?

The data is not available to answer these questions directly, because China has not made it available. Several of my previous columns (listed below) have described the problems with official Chinese statistics. Beijing has withheld, concealed, deleted, or altered its Covid infection and mortality figures, creating confusion and doubt about what is really going on.

Overcoming “reasonable doubt” – the standard in the Law – does not require a confession by the accused in order to convict. If the circumstantial evidence is strong, the jury may be persuaded even without the Perry Mason moment. In this case, there are a number of factors that constitute the demographic, economic and medical context of China’s Covid experience which, taken together, can help fill in the huge blank left by Beijing’s assiduous suppression of the data.

The Covid Statistics

Let’s start with the basic statistics, and the fundamentally implausible picture they present.

The rate of Covid infections reported by China is said to be hundreds of times lower than nearby countries which have followed similarly severe lockdown and containment protocols.

China has reported less than half as many infections as the island nation of Cyprus, for example – despite having over 1100 times as many people. The only countries with fewer reported deaths per million population than China are North Korea, Western Sahara, and Vatican City.

The contrast with Hong Kong is telling. Hong Kong is a part of China, administered now by Beijing appointees. It has extensive contact with the rest of China. The city is subject to similar vaccination and containment protocols employed in China proper. Yet Hong Kong has reported more than 300 times the infection rate, and 350 times the death rate compared to the Mainland.

In 2020, New York had one of the least successful Covid control programs anywhere. Bureaucratic confusion, shortages of PPE, poor medical decisions, and political bickering between the State and New York City resulted in incoherent policies and very high mortality rates. In contrast, New Zealand had one of the most successful anti-Covid programs in the world, taking advantage of their remote geography and strong public health infrastructure, to impose extraordinarily strict countermeasures very early on. In effect, the entire population was quarantined for over a year.

  • “Throughout 2020, New Zealand was held up as one of a few countries that had successfully managed to contain COVID-19. This achievement stemmed from the government’s decision to close the country’s borders and to impose strict lockdowns. [It was] dramatically different from the response taken by most high-income countries, and became known as New Zealand’s ‘zero-COVID’ approach.”

New Zealand invented “Zero-Covid” and implemented it even before China did. As a result, New Zealand experienced a Covid death rate about 10 times lower than New York.

But New Zealand’s mortality rate is over 100 times higher than China’s official Covid death rate.

This cannot be correct, no matter how often Beijing’s propagandists repeat it. Fortunately, there are other sources of data that may shed light on the truth.

Demographic Indicators Bearing on the Covid Rates in China

There is a strange jump in the overall mortality rates officially reported by Chinese authorities, which coincides with the Covid outbreak. The crude death rate shows a gradually increasing long-term trend, as the population ages – until it suddenly jumps upward in 2019.

The annual rate of increase in the death rate spikes and remains elevated.

The uptick corresponds to almost 1 million excess deaths over these three years. Some kind of public health catastrophe has apparently taken place.

  • [In response to an earlier column in which this information was presented, some readers questioned the conclusion that Covid-related mortality could be the explanation. They suggested that there had simply been an increase in the number of elderly Chinese, and thus in the death rate. This is not plausible. Millions of sick elderly people do not suddenly appear on the scene, to promptly expire en masse. Overall mortality rates change slowly, unless there is an external “shock” such as a war, a famine (China’s Great Leap Forward in the 1960s), or… an epidemic.]

The same pattern appears in many other countries, including the United States. A smooth, stable trend line — that suddenly breaks upward.

Indeed, in 2020, the global crude death rate also broke trend, with the first increase in at least 75 years.

The most likely explanation is that these shifts — in the U.S., in China, and worldwide – are due to Covid. Which means that China has somehow concealed an enormous surge in Covid mortality – exactly what many independent observers have concluded (e.g., the models developed by The Economist magazine to estimate excess Covid mortality).

Macroeconomic Indicators

There are other, more indirect indicators that support this view. Consider the following structural aspects of the Chinese economy:

  • the rural/urban disparity in the quality of healthcare
  • the systemic weaknesses in Chinese healthcare in general
  • the effects of income levels and inequalities on healthcare outcomes

Rural vs Urban Differences in China

China is a deeply divided society, especially along rural/urban lines, and access to healthcare is a key marker of this inequality. The semi-captive rural population is at higher risk.

  • “Urban dwellers enjoy a range of social, economic and cultural benefits while peasants, the majority of the Chinese population, are treated like second-class citizens.
  • “At birth, every Chinese citizen is assigned one of two essentially permanent categories – either rural or urban – based on their parentage. Originally implemented in the late 1950s to control internal migration and keep urban labor costs low, the binary hukou system has created enormous inequality among the approximately 250 million rural migrants who have flooded Chinese cities in search of work. China’s urban population enjoys superior access to healthcare, education, and retirement benefits.”

Rural Chinese citizens who migrate outside the region in which they are registered often do not qualify for health care in the cities where they have come to work.

  • “Studies during 2014 and 2018 indicated that the Chinese rural-to-urban migrant workers (RUMWs)—villagers who migrate to urban areas for employment opportunities—seem to be put in a disadvantaged position. Their effective health insurance coverage is low, largely because they are geographically removed from their place of insurance registration.
  • “Even though RUMWs live in urban areas, they are still greatly marginalized by the urban health system. The percentage of RUMWs covered by health insurance in their flow-in areas has fluctuated between 18% and 20% since 2008.”

The issue has been extensively studied, and the deficits in health outcomes are striking:

  • “There are significant differential effects on rural migrants’ health that are mainly driven by the lack of access to healthcare. The effect of Hukou restriction is large and significant compared to other important determinants of health as smoking condition, evidence of previous diseases or marital status.”

Almost 300 million Chinese fall into this RUMW category, a vulnerable group nearly equal in size to the population of the U.S.

Aside from the migrant population, the quality of healthcare in rural China in general lags far behind the urban benchmarks.

  • “Large disparities still exist in both health and health service utilization within and between urban and rural residents due to the lower-income, fewer health resources, and less access to health insurance for the rural population.”

As acknowledged in an article published in 2020, “there is limited research on the rural-urban differences in health system performance in China.” But the same problem arises in many countries, including the United States, and we can gain some perspective on the problem by looking at the data available there.

Even though the U.S is a much richer country, health outcomes including Covid outcomes are much worse for rural areas in the U.S. compared to the cities. According to the Center for Infectious Disease Research and Policy at the University of Minnesota

  • “Covid infection rates are 54% higher in rural areas”
  • “rural Americans are twice as likely to die from Covid infections compared with their urban peers”
  • “unlike deaths in urban areas, the vaccine roll-out has not slowed COVID-19 fatalities in rural parts of the country due to low uptake”
  • “short-staffed hospitals and limited access to healthcare are contributing factors”

As noted, these disparities clearly exist in rural China as well, even if the Chinese data is lacking to document it thoroughly. And the scale is much greater. There are over 550 million people living in rural China, a vast reservoir of at-risk candidates for the spread of infection and illness.

The Systemic Healthcare Deficits in China

Even aside from the Urban/Rural divide, the baseline for healthcare quality in China is relatively low.

  • “China faces large shortages of doctors and other medical staff to meet surging demand.”
  • “China scores poorly on just about every healthcare metric…. Poorly paid doctors are notorious for overcharging patients for unnecessary prescriptions while even an ambulance ride to the hospital can set you back several hundred yuan. Discontent over this state of affairs has made medicine a dangerous profession in China with a surge in verbal and physical attacks, including murders, against doctors in recent years.”
  • “Per capita healthcare spending in China is increasing, but it remains low compared with other major economies largely due to underfunding by the Chinese government.”

China spends on healthcare only about 25% as much per capita as Korea, and just 7% of the U.S. level.

In terms of the human capital, a good measure of the strength of the healthcare system is the level of investment in front-line medical staff – e.g., the nurses who provide much of the hospital care to treat Covid patients. Again, China falls short.

Corruption is another aspect of the inadequacy of the Chinese healthcare system.

  • “Budget shortfalls in China’s healthcare institutions are a major cause of widespread corruption in China’s medical system.”
  • “Corruption among China’s hospitals and doctors is a widely acknowledged problem that has contributed to a low level of public trust in the country’s healthcare system. In many cases, doctors accept illicit payments, known as hongbao, from patients in exchange for a higher quality of care. The practice of hongbao is widespread in China: in a 2013 survey of residents of Beijing, Shanghai, and Guangzhou, nearly one-third of respondents said they or a family member had given hongbao to physicians between 2000 and 2012. In addition to accepting these payments from patients, doctors and hospital officials also receive kickbacks for purchasing certain types of medical equipment or pharmaceutical products, a practice that has been described as ‘endemic’ in China. In a 2010 survey of Chinese doctors, 78 percent of respondents said healthcare companies could not compete in China without paying bribes.
  • “Corruption in China’s healthcare system is driven by persistent funding shortfalls that have created strong incentives for hospital systems and doctors to accept bribes. Low pay is a common complaint among doctors in China, and according to a 2017 white paper by the Chinese Medical Doctor Association, a national professional association of medical professionals in China, the average annual salary of junior doctors in China was approximately $8,150.

A poorly funded, bribe-driven system staffed by underpaid, poorly motivated personnel further elevates the risk of inadequate response to the pandemic outbreak.

Income Levels and Covid Morbidity

Income — that is, the lack of income, poverty – has a significant effect on Covid infection and mortality rates. A study reported in Lancet last year looked at Covid outcomes as a function of income level in Mexico, a middle-income country with a per capita income 9% higher than China. The researchers found that:

  • “After controlling for COVID-19 diagnosis, sociodemographic variables, and co-morbidities, we find that persons in the lowest income decile had a probability of dying from COVID-19 five times greater than those at the top decile.”

Hospitalization rates, a proxy for the burden on the healthcare system created by Covid, show the same relationship to income levels.

Similar though less extreme results obtain even in rich countries with high quality universal healthcare, like Belgium (“excess deaths in the bottom income decile more than twice as high as in the top income decile”) and Sweden (“individuals in the first tertile of individual net income experienced ~75% higher mortality relative to those in the top tertile”). In the United States, the death rate for Americans living in poorer counties was 2-5 times higher than for rich counties. Another report found that the poorest decile of U.S. counties experienced 2.4 times higher death rate from Covid compared to the richest decile.

Of course Chinese data on this point is not available. Nevertheless, the disadvantage experienced by lower income groups is a universal finding in all countries. There is no reason to believe that China does not exhibit the same pattern. About 200 million people live below Beijing’s official poverty line, defined as less than $5.50 income per day (~$2000/year). Based on these studies (and many others), the risk for Covid is certainly elevated for this very large group.

A related economic factor is income inequality. In the U.S., a study reported in the Journal of the American Medical Association reported “a positive correlation between Gini coefficients [the standard measure of income inequality] and county-level COVID-19 cases.” The correlation varied with the season.

  • “For each 0.05-unit higher Gini coefficient, the adjusted relative risk of COVID-19 deaths was 25% higher in March and April 2020… 46% higher in July and August 2020…”’

The Gini coefficient in China is higher than in the United States – that is, the income inequality is worse. It is substantially higher than the median Gini level reported in the JAMA study. Again, a transparent reporting of Covid data from China would certainly reflect this heightened risk factor.

The vast inadequacies of the Chinese healthcare system are well-documented. Poor access to the system for hundreds of millions of Chinese, and holes in the insurance safety net; lagging investment in healthcare; inadequate medical personnel and facilities; corruption; rural poverty, and a continuing deficit in rural healthcare in general – these are the kindling for a conflagration, so to speak. Covid is the match, and the gasoline. Zero Covid is a desperate firewall against a much worse future. It is quite likely that the system may not hold up well under a full Covid onslaught – which may explain the stubborn commitment of the regime to Zero Covid despite the large economic penalties it entails.

The mortality data indicate that China has suffered some kind of public health crisis, with severe outcomes. It is obvious that this is connected with the Covid outbreak. But there is an even more alarming scenario: the next phase of the Covid catastrophe, when the firewall fails, may be far worse than anything China has had to confront so far.

In Part 2, we’ll consider some of the aspects of the medical and public health context which shed light on this alarming prospect.

Previous columns on this topic include:

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