• The Economist Intelligence Unit now expects China to vaccinate 60% of its population by the third quarter of 2021, compared with mid‑2022 previously.

• The spread of the more contagious Delta variant of Covid‑19 will increase the need for booster shots, especially given the relatively low efficacy of one of the main Chinese vaccines, manufactured by Sinovac, compared with other candidates.

• We expect China to take until the third quarter of 2022 to achieve widespread coverage of booster shots, and the government will maintain mobility restrictions until then as part of its zero‑Covid strategy.

• There will be an uptick in private consumption and outbound tourism from the fourth quarter of 2022 after restrictions are eased.

Several pharmaceutical companies and governments around the world have proposed or started offering Covid‑19 vaccine booster shots, after finding that people’s immunity to the virus wanes gradually after receiving a second dose. Meanwhile there has been a surge in breakthrough infections, where people are infected despite having received two doses, because current vaccines are less effective against the new Delta variant of the coronavirus. The need for booster shots is particularly acute in China because one of the main vaccines used, manufactured by Sinovac, has relatively lower efficacy against Covid‑19 than other vaccine candidates, at 51%, according to the World Health Organisation. Clusters of Delta cases were found in several Chinese provinces in July, after the virus spread undetected for several weeks, and several cases were found among people who had already received two vaccine doses.

Delta variant increases urgency for booster shots

Chinese vaccine producers are currently investigating the ideal timeframe for people to wait before their third dose, but comments from officials at the Chinese Centre for Disease Control and Prevention in August suggest that it would be six to 12 months after receiving the second. We maintain that the Chinese government’s priority will be to first administer two doses to everyone eligible and willing (which we define as those over the age of three, without medical exceptions), which will take until the first quarter of 2022, before moving onto booster shots. Booster shots may be given earlier than this to high‑risk groups, like the elderly and those with chronic diseases. We expect that it would take until the third quarter of 2022 for 60% of China’s population to receive a third dose, if it is offered six months after people have received their second.

Covid‑19 cases will probably continue in China until greater levels of immunity are achieved with booster shots in the third quarter of 2022. Although the government has improved in tracing Covid‑19 cases using mobile phone data, which means that they can be more precise when imposing lockdowns, the Delta variant of Covid‑19 is more contagious than previous strains and therefore more difficult to eradicate using these methods. Resurgence in cases will continue to weigh on consumer and business sentiment, keeping private consumption as lagging behind GDP growth. External trade and investment will therefore remain the main drivers of economic growth in 2021, despite government efforts to reduce reliance on foreign markets and boost domestic demand.

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China’s zero‑Covid policy will require restrictions until late 2022

China’s maintenance of its zero‑Covid strategy, in which it seeks to eliminate any case of the virus within the country’s borders, will compound the negative effects of Covid‑19 outbreaks on the economy, because it necessitates strict mobility controls. Although the zero‑Covid policy is costly, the government currently believes that it outweighs the potential disruptions to long‑term social and economic stability that could be caused by the unchecked circulation of the virus in the population. There is currently no indication that officials would be willing to change this position, despite the fact that the Delta variant is more contagious than the original.

We retain our forecast that border controls (strict quarantine requirements, currently of three weeks, for people entering the country from overseas) will remain in place until the fourth quarter of 2022. This means that outbound Chinese travel will only start to recover from 2023. Outbound Chinese tourism will not return to pre‑pandemic (2019) levels until early 2024, prolonging the recovery in the tourism sectors of countries previously dependent on Chinese visitors, like Hong Kong, Macau and Thailand. The border restrictions in 2022 also mean that China is unlikely to allow foreign tourists to attend the Winter Olympic Games in 2022, permitting only official delegations and athletes, with Japan serving as a potential model.

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Stockpiles allowed for faster vaccination than expected

As at August 2nd China had administered 1.7bn doses of Covid‑19 vaccines; the National Health Commission does not publish data at the national level on how many people have been fully vaccinated. However, this information is available for some localities, with the share of people who have received a second dose ranging from 72% to 77% of the population in Beijing (the capital) and Shanghai—cities which began their vaccination programmes first—but varying from 51.5% to 67.6% in others, depending on when they started their campaigns. The share of people who have received two doses at the national level may be lower than 50%, because smaller cities and rural areas started their vaccination rollout later than big cities.

Recent outbreaks in Guangdong, Anhui and Yunnan have contributed to the pace of vaccination, which soared to a peak of 24.7m daily doses in the second quarter of 2021. Although we estimate that the total production capacity of Chinese vaccine producers is only 9.3m per day, domestic companies began manufacturing doses in 2020 before they had received regulatory approval, affording them large existing stockpiles to draw upon. The greater than expected supply of vaccines is the main reason we now predict that 60% of the population will receive two doses by the third quarter of 2021, compared with the second quarter of 2022 previously. The number of new vaccine doses averaged 17m over the past seven days from July 26th to August 1st, strengthening again after a lull caused by a Covid‑19 outbreak in southern Guangdong province. The authorities in that region suspended individual vaccine appointments that month to reduce crowds at vaccine sites and minimise transmission of the virus.

Another reason for the upgrade to our forecast is that we expect schools to organise vaccine drives for students when they start a new term in September. Some provinces like Zhejiang and Sichuan began inoculating children aged 12‑17 from July. Schools will be able to deliver vaccines to students en masse, and will be able to encourage families to vaccinate their children by using measures like banning unvaccinated children from attending classes.

Our core forecast assumes that the vaccination rate will maintain the same pace as production, or about 10m doses per day in urban areas. This will allow widespread vaccination to be achieved in the third quarter of 2021. The vaccination rate will be slower towards the end of the programme, as rural areas will be harder to reach, and there will be some challenges tackling vaccine hesitancy.

The discovery of the Delta variant in July poses a downside risk to our vaccine forecast for China. Rapid spread of the variant could prompt the public to question the efficacy of China’s vaccines, because the airport workers who were first detected to have been infected had already been fully vaccinated. This risks heightening vaccine hesitancy, despite official moves to alleviate concerns by offering booster shots. Additionally, if the Delta outbreak worsens considerably, the government might suspend vaccination appointments, as they did in Guangdong previously, to avoid cross‑transmission at vaccine sites. This would cause a slowdown in the vaccination rate in the third quarter.

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