New COVID Variant Sweeps China, Is North America Next?

Remarkably, the world could be facing another bout with COVID this year, and with negative COVID test requirements having been suspended for travel from China to Canada and the United States a few months ago, it seems possible that the virus could impact life in North America much more than it currently does.

On May 22, Zhong Nanshan, China’s director of National Clinical Research Center for Respiratory Disease and a respiratory disease specialist, reported at a biotech conference in Guangzhou that the number of COVID cases currently sweeping through China could peak at 65 million per week by the end of June. Most of the infections are from a COVID sub-variant called XBB. 

Cases began to surge in April, and the infection rate could reach 40 million per week by the end of this month. If Mr. Zhong’s assumptions prove correct, nearly 5% of China’s 1.4-billion population will be infected in the last week of June alone.

To put the magnitude of this infection rate into perspective, the peak weekly infection rates in the U.S. and Canada peaked at about 5.5 million and 375,000, respectively, in early 2022.

Number of new COVID cases reported in the U.S., by week from January 20, 2020 to November 11, 2022. Source: Statista.

Not surprisingly, China is rushing to develop immunizations that target the XBB sub-variant, so the effects will likely be much more muted than occurred in early 2023 when a different omicron variant swept through the country with devastating results. Of course, that situation was worsened by China’s near-simultaneous decision to drop its austere “Zero COVID” policy.

Pfizer Inc. (NYSE: PFE) / BioNTech SE (NASDAQ: BNTX)Moderna, Inc. (NASDAQ: MRNA), and Novavax, Inc. (NASDAQ: NVAX) are also developing vaccines to combat the XBB strain. The shares of each of the four stocks have gained between about 5% in the last several days, save for Novavax which has declined a similar amount.

Of course, the high baseline rate of COVID vaccinations in Canada and U.S. will mitigate the impact of XBB’s eventual arrival in North America. Approximately 83% of Canadians and 81% of Americans have received at least one COVID vaccine dose.

However, the removal of COVID-related air travel restrictions from China could offset some of the protection benefits of heavily vaccinated populations. In mid-March, both Canada and the U.S. reversed policies that required all travelers from China to provide negative COVID test results before flying. When COVID was last spreading rapidly in China in early 2023, a traveler from China to Canada or the U.S. had to show evidence of a recent negative COVID test.

Information for this briefing was found via Bloomberg and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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