1. A homegrown mRNA vaccine on the horizon
China’s mass vaccination campaign hit a serious speed bump last week.
The deets (NHC):
- As of Monday, China had administered a total of 2.153 billion doses of COVID-19 vaccines – up from 2.113 billion doses a week ago.
- That’s an average of 5.53 million doses/day over the past week.
The bad news: That’s a significant slowdown compared to the past few weeks.
- The week before saw an average of 8.16 million jabs/day.
- Three weeks ago that number was 13.44 million.
The good news: China is moving closer to producing its own mRNA vaccines.
- At the China International Fair for Trade in Services last week, state-owned pharmaceutical company Sinopharm announced it has been developing its own mRNA vaccine against existing and future COVID-19 strains.
- A Sinopharm spokesperson said the homegrown mRNA vaccine is expected to hit the market “next year.”
Sinopharm’s not the only player with skin in the game:
- On Thursday, local media reported that domestic Walvax Biotechnology has built China’s first mRNA vaccine production factory, expected to become operational in October.
- The factory expects to produce up to 200 million mRNA vaccine doses annually.
- Walvax currently has a self-made mRNA vaccine in clinical trials.
Get smart: With mRNA vaccines all the rage in frontline COVID-19 fighting, Beijing is increasingly looking for a homegrown option.
Get smarter: With domestic options now under development, regulators are even more likely to slow-roll the approval of foreign mRNA vaccines – buying time for the home team to grab bigger market share.
2. Xi in Yulin
On Monday, Xi Jinping visited Yulin city in northwest China’s Shaanxi province.
Some context: Rich in natural resources, namely coal and natural gas, Yulin enjoys the aspirational nickname “Oriental Kuwait.” Relics from centuries of service as a garrison town help draw the tourists.
During his inspection tour, Xi visited (Xinhua):
- The Yulin Chemical Industry Company, under the China Energy Investment Corporation
- Gaoxigou village
- The Yangjiagou revolutionary site in Mizhi county
And…that’s about all we knowfrom the reporting so far.
But Xi got a major message out at each site, saying officials need to focus on:
- The clean and comprehensive use of coal
- Control of soil erosion and building ecological civilization
- Protection of China’s revolutionary history to “continue the red bloodline”
Get smart: These domestic trips offer a good opportunity to assess what’s on Xi’s mind.
- He doesn’t talk about the economy on every jaunt across country. But he makes sure to talk about the environment, and cultural and political legacy, almost every time.
What to watch: Xi will open the 14th National Games, China’s mini-Olympics, in Xi’an, Shaanxi’s capital, on Wednesday.
3. MIIT encourages NEV consolidation
On Monday, Xiao Yaqing, head of the industry ministry (MIIT), spoke about new energy vehicles (NEVs) at a State Council Information Office (SCIO) presser.
The big message: Xiao wants consolidation of NEV companies to create a stronger sector and waste fewer resources (SCIO):
- “There are too many small companies fragmenting the (market).”
- “Companies should merge and acquire each other to increase market concentration.”
Some context: China is the world’s biggest consumer of NEVs.
- So far this year, 1.79 million NEVs have been sold, equaling about 11% of total domestic car sales.
But there’s huge wasted potential and idle capacity (Yicai):
- Annual NEV production capacity has reached 27 million units, but only 5% of total capacity is being used.
To ensure more sustainable development, Xiao indicated future government efforts to:
- Accelerate the construction of NEV charging and battery-swapping stations
- Facilitate NEV sales in rural areas
- Achieve 100% electrification of public vehicles in select cities
Get smart: Widespread local policy support and direct government subsidies saw NEV ventures sprout throughout the country, creating a massive mismatch between production capacity and actual demand.
- Less competitive companies riding this policy dividend are destined for failure.
Get smarter: Overcapacity in the NEV sector has been an issue for years, and getting worse by the year. Policymakers may finally be ready to take their medicine, and push the smaller players out of the market.
4. Solving one problem and creating another
Upstream production cuts are about to raise prices in several upstream sectors.
Case in point: On Saturday, the Yunnan Provincial Development and Reform Commission announced production cuts in a host of industries through year-end to meet energy targets.
Some context: Yunnan – like most provinces with significant heavy industry – saw y/y H1 increases in total energy consumption and energy intensity. It was supposed to reduce both metrics in 2021, hence these major reduction requirements for H2.
And boy are these some big cuts, with aims to:
- Reduce electrolytic aluminum production by 30% through year-end
- Push back at least 30% of steel production scheduled for September, to November and December
- Cut September cement production by more than 80% from August
- Cut yellow phosphorus production by 90% through year-end
- Cut industrial silicon output by 90% through year-end
And more curbs are coming.
- Companies in the fertilizer, basic chemical material, coal processing, and ferroalloy sectors with energy intensity levels above the industrial average will also be ordered to reduce production by up to 90%.
Get smart: This move may help Yunnan meet energy targets, but will also drive up prices just as Beijing tries to keep a lid on companies’ input costs.
Get smarter: That side effect will make other provinces reluctant to impose such drastic cuts, but many will need to reduce output to some extent in order to hit their own environmental and energy targets.
Cailianshe: 双控文件全网疯传！两大行业或减产90% 商品市场上演“超级大反转”
Reuters: China’s Yunnan imposes output curbs on aluminium, steel, cement makers
agriculture & rural affairs
China is on track to harvest a record corn crop this year.
On Friday, the US Department of Agriculture (USDA) forecast that China’s domestic corn crop would hit a record 273 million tons this year.
Policy support helped nurture the bumper harvest (USDA):
- “Farmers were…encouraged…to reduce the area left fallow and to increase rotation of grain crops.”
- “Government provision of targeted incentives and subsidies to corn processors…have increased corn area.”
Some context: A few years ago, Beijing was pushing farmers to grow soybeans, as regulators struggled to offload corn from overflowing state reserves.
So what changed?
A big part of the story is African swine fever (ASF)’s impact on China’s pig herd:
- Some 75% of the domestic corn crop is fed to livestock – mostly pigs.
- ASF pushed small pig farms out of business and forced large farms to formalize their feed supply chains.
- As the pig herd has returned to normal levels, that has translated into lots more demand – and higher prices – for corn.
Get this: USDA also forecast China will lead the world in corn imports, replacing Mexico as the top importer for the second year in a row.
The bottom line: Don’t get distracted by support for domestic farmers. China’s massive demand for global grain isn’t going anywhere.