SinoInsight 1
March 5
Peruvian media (via Radio Free Asia) reported that Peru’s phase III clinical trials of Sinopharm’s COVID-19 vaccines that were developed by its Wuhan Institute of Biological Products lab and the Beijing Institute of Biological Products lab yielded efficacy rates of 33 percent and 11.5 percent, respectively. This means that the two Sinopharm vaccines failed to meet the 50 percent efficacy rate set by the World Health Organization and regulatory agencies in several countries. Previously, PRC officials announced that Sinopharm vaccines have an efficacy rate of nearly 80 percent.March 6
1. Sinopharm’s Wuhan lab issued a “media clarification” statement to dispel the “seriously inaccurate” reports about Peru’s clinical test trials of its vaccine.
2. Sinopharm chairman Yu Qingming talked up his company’s vaccines at the Two Sessions. According to mainland media reports, Yu claimed that senior Sinopharm executives and Party Committee members “tested the medicine on themselves” in March 2020, and found that their bodies maintain a “high immunity” to COVID-19 after a year, with no significant decline in antibody levels. Mainland reports add that Sinopharm previously said that its vaccines offer at least six months of protection against the coronavirus.
3. According to The Wall Street Journal, researchers from Brazil, the U.K., and the U.S., found that plasma from eight people vaccinated with Sinovac’s CoronaVac had “failed to efficiently neutralize” the new P.1 Amazonian coronavirus strain. Researcher William de Souza noted that while the sample size is small and more testing is required, it is a “notable phenomenon” that all eight samples produced the same result.
OUR TAKE
1. The information above affirms the concerns we expressed earlier about the quality of PRC-produced vaccines, as well as hints at the extent of the CCP coverup of the coronavirus outbreak.
2. Yu Qingming’s claim about Sinopharm testing its inactivated vaccines as early as March 2020 raises serious questions about his company’s vaccines and the CCP’s knowledge of the coronavirus outbreak.
Vaccines can be produced within 12 to 18 months under optimistic scenarios, according to medical scientists. Inactivated vaccines in particular “can have a relatively long production time,” according to the World Health Organization.
CCP propaganda, however, projected even quicker vaccine development times. A Feb. 16, 2020 Science and Technology Daily article noted that inactivated vaccines were already being developed, with clinical trials for Sinopharm vaccines expected for mid-to-late September that year. Four days later during a State Council epidemic prevention and control press conference, PRC National Health Commission deputy director Zeng Yixin said that R&D into five types of vaccines (inactivated, recombinant genetically engineered, adenovirus vector, nucleic acid, and attenuated influenza virus vaccine vector) were being carried out, with clinical test trials due to start in April or May that year at the earliest. In other words, the CCP was boasting in early 2020 that it could have vaccines ready for human trials in about six months or less.
Sinopharm went one better than CCP propaganda. According to a Jan. 26, 2021 article on the company’s website, it received government approval to produce a “2019-nCoV inactivated vaccine” on Feb. 1, 2020, and had registered a vaccine candidate for clinical trials and production by Feb. 28. On March 18, Sinopharm had produced three batches of vaccines “as required.” On March 23, 2020, Yang Xiaoming, chairman of Sinopharm subsidiary China National Biotec Group, and three others were the first volunteers to receive the Sinopharm vaccine. Per Sinopharm’s official timeline, the company had produced working, inactivated vaccines in a little over six weeks, a barely believable feat of science.
The incredibly short time frame in which Sinopharm produced its vaccines could partially explain why countries are finding problems with those vaccines now. The CCP is no stranger to vaccine scandals, and the low efficacy rate of PRC-produced COVID-19 vaccines could be due to rushed R&D work and poor quality control.
3. Things look worse for the CCP if we take Sinopharm and the PRC authorities’ at their word on the Sinopharm inactivated vaccines’ efficacy rate.
If Sinopharm executives were receiving vaccinations in March 2020 and it takes about six months (per CCP propaganda projections) to produce clinical trial-ready inactivated vaccines, then the CCP, or at least some organs in the CCP, were aware of the SARS-CoV-2 coronavirus around September 2019 at the latest. Coincidentally or otherwise, the PRC National Health Commission had organized public health emergency drills in several regions between April 2019 to December 2019, and part of those drills include dealing with the outbreak of novel coronaviruses:
- April 25, 2019: The Wuhan Provincial Health Commission and the Wuhan Military Games Medical and Health Command organized a joint public health emergency exercise. One of the goals of the exercise was dealing with an imported infectious disease outbreak at the 2019 Military World Games in Wuhan.
- July 25, 2019: The PRC National Health Commission held a nationwide public health emergency drill via teleconference from Yinchuan City in Ningxia Province. One of the emergency drill’s objectives was strengthening the prevention and control of imported acute infectious diseases.
- Aug. 19, 2019: The PRC General Administration of Customs and the Chongqing Municipal Government held a public health emergency drill at Chongqing Jiangbei International Airport. The simulation scenario was the outbreak of a disease of unknown cause at the airport and how customs authorities should handle medical chartered flights.
- Sept. 18, 2019: The executive committee of the Wuhan Military World Games held an emergency response drill at Wuhan Tianhe Airport. One of the exercises was dealing with the outbreak of a novel coronavirus at the airport.
- Dec. 19, 2019: Jiangsu’s Jiangyin City held a public health emergency drill where the authorities had to respond to the outbreak of “an unexpected, unidentified disease from a foreign ship” at Jiangyin Port.
In our special report, “Coronavirus Pushes CCP Factional Struggle to Inflection Point,” we noted that the Hong Kong-listed mainland vaccine company CanSino Biologics announced that it was jointly developing a recombinant coronavirus vaccine with the PLA Academy of Military Medical Sciences’ Institute of Biotechnology in March 2020. Between August 2019 and December 2019, CanSino Biologics’ share price had doubled. By March 2020, CanSino’s shares had quadrupled in value from August 2019.
Assuming PRC vaccine companies followed a normal time frame in developing their vaccines, the above information suggests that the CCP, or at least some actors in the CCP, knew about the existence of the SARS-CoV-2 coronavirus much earlier than when Beijing public acknowledged the spread of COVID-19. This also lends credence to the lab leak hypothesis.
SinoInsight 1
On March 10, mainland media reported that people were posting bank notification letters regarding “early recovery of personal loans” on Chinese social media. Per the notification letters, banks were asking borrowers to repay loans early due to violations of “loan purpose” regulations. The notification letters also warned borrowers that failure to repay the principal and interest on loans by a stipulated date would allow the bank to initiate legal proceedings against the borrower and seize the latter’s assets.
Two of the most widely circulated bank notification letters were issued by an unnamed Shanghai bank, and called on individual borrowers to repay 3 million yuan and 5 million yuan respectively before March 31, 2021. The loan contracts were signed on Jan. 5, 2021.
At the beginning of 2021, regulatory authorities in Shanghai, Beijing, and many other places ordered all commercial banks in their jurisdiction to carry out a comprehensive review of individual and business loans issued since the second half of 2020. The review appears to be in line with increased government regulation and derisking measures. Per PRC statistics, the PRC banking and insurance regulatory apparatus issued 3,878 fines totaling 1.542 billion yuan to banks and financial institutions in 2020. Many of the fines were for the issuance of illegal loans to the property sector. Since the start of this year, many banks have been handed fines ranging from 300,000 yuan to 1 million yuan for violations of property sector-related loans.
Centaline Property Agency chief analyst Zhang Dawei recently told mainland reporters that property prices have been rising since the coronavirus outbreak, with the sharpest increases concentrated in school districts in first and second-tier cities. Zhang added that the surge of business loans to the property market was the reason why regulators in Shenzhen carried out comprehensive loan investigations in April 2020.
OUR TAKE
1. The CCP regime is resorting to heavy-handed measures to curb the flow of funds to the property sector because it is concerned that the real estate and financial bubbles in China will rupture as global inflation risks rise.
Guo Shuqing, China Banking and Insurance Regulatory Commission chairman, outlined the regime’s concerns in a March 2 State Council Information Office press conference:
- Guo said: “The financial market should reflect the real economy. Problems will arise if the difference is too great, and the financial market will be forced to adjust sooner or later. Therefore, we are very concerned about when the financial market, and especially foreign financial asset bubbles, will burst.”
- Guo said that the PRC is studying more effective measures to encourage cross-border capital flows and opening up while preventing too much fluctuation in domestic financial markets.
- Guo said that China’s property sector has “relative strong tendencies” towards “financialization and bubble-ization” (金融化、泡沫化). He noted that many people buy homes “not for living, but for investment and speculation,” a “very dangerous” phenomenon because “individual assets will suffer huge losses” when the markets go down. Also, “banks can’t get back their loans, principal, and interest, and economic life will be very chaotic,” he said.
2. Global inflation risks are a foregone conclusion at this point with the U.S. money supply skyrocketing as part of COVID stimulus measures and the Biden-Harris administration’s energy policies causing international crude oil prices to soar. At the same time, rising U.S. Treasury bond yields and the rapidly narrowing interest rate spread between the U.S. and China is creating a monetary policy dilemma for the CCP and threatening to puncture asset bubbles.
U.S. stimulus
On March 10, the U.S. House of Representatives passed a massive $1.9 trillion coronavirus relief bill, sending it to President Joe Biden’s desk. Together with the Trump administration’s COVID stimulus, the U.S. will spend a total of $5.2 trillion on the pandemic.
In 2020, the U.S. federal government debt increased $6 trillion to $28 trillion. Meanwhile, the Federal Reserve has printed $3.5 trillion in base currency, and its balance sheet has grown from $4 trillion to over $7.5 trillion. This has resulted in spiking asset prices, with serious inflation looming on the horizon.
U.S.-China interest rate spread
Of the $6 trillion worth of new U.S. Treasury bonds issued in 2020, the Fed purchased about 40 percent while the market was left to “digest” the remaining 60 percent. This has resulted in falling Treasury prices and rising yields. In the first two months of 2021, the yield on 10-year Treasury bonds rose from 0.95 percent to 1.6 percent, a 65 basis point jump. Meanwhile, the yield on 10-year Chinese bonds rose only four basis points from 3.22 percent to 3.26 percent.
The interest rate spread between China and the U.S. peaked at 252 basis points in October 2020. By Feb. 20, 2021, the spread had fallen below 200 basis points, and by early March 2021, the spread was below 169 basis points. The narrowing interest rate spread has placed pressure on the renminbi to devalute from 6.39 yuan to the dollar in late February to 6.52 yuan to the dollar on March 8.
Guo Shuqing said in his March 2 press conference that China’s interest rates will “also rebound and may be adjusted” this year as market interest rates are picking up. However, “interest rates will still be relatively low,” he said.
Debt and asset price risks
The CCP is currently in a bind regarding its monetary policy. On the one hand, the Chinese economy requires a constant influx of foreign capital, which in turn necessitates increased financial liberalization, a stable exchange rate, and attractive interest margins. On the other hand, foreign financial bubbles will drive inflation in China, forcing the CCP to rise interest rates, suppress asset bubbles, and further reduce interest rate differentials.
According to Institute of International Finance data, the amount of funds flowing into emerging markets (stocks and bonds) in February 2021 fell sharply to $31.2 billion from a record $107.4 billion in November 2020. In China, new bond holdings by overseas institutions fell 44.34 percent in February from a month ago to 95.694 billion yuan, according to data from China Finance Online.
The slowing influx of funds into developing countries, however, could reverse with U.S. bond yields rising even further in March. For China, capital outflows, tightening monetary policy to support the exchange rate (rising rates will impact asset prices), or not tightening monetary policy and allowing the RMB to depreciate (foreign outflows will impact asset prices), will all impact property prices and could trigger a real estate debt crisis. According to mainland media reports, the scale of maturing real estate company debt in 2021 is expected to exceed 1.2 trillion yuan. Concurrently, other forms of debt delayed due to the epidemic will mature this year, squeezing property companies.
