The Economist - USA (2020-08-08)

56 Finance & economics TheEconomistAugust 8th 2020

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1

morerealisticestimateofglobalsupplyby

theendofnextyearatnearer2bn.

Asthatisnowherenearenoughtocover

theworld,it iseasytoimaginefightsbreak-

ing out once effective vaccines become

available.Theexperienceofpastpandem-

ics ishardly encouraging onthis front.

Duringtheh1n1(swineflu)pandemicin

2009-10richcountriescorneredsupplies

ofthevaccinetofight thedisease.Only

whentheyhadmorethantheyneededdid

theyoffersomeofittopoorcountries.By

then, the disease had swept across the

planetandthepandemicwasover.

Earlyinthecovid-19pandemic,too,glo-

balco-operationquicklybrokedown.By

lateApril, 80 jurisdictionshadrestricted

exports,withgovernmentsespeciallykeen

tohoardsuppliesofdisinfectants,perso-

nalprotectiveequipmentandthermom-

eters. Somecountries even seized ship-

mentspassingthroughtheirterritory.

Fearfulofa repeatofsuchmarauding,

theCoalitionforEpidemicPreparedness

Innovations,anallianceofcharitiesand

governmentsthathasfundedtheearlyde-

velopmentofsomeofthemostpromising

covid-19vaccines,hasorganisedmanufac-

turingonseveralcontinents.Sohavesome

pharmacompanies.

TheWorldHealthOrganisation(who)

isalsotryingtoavertvaccinepolitics.It has

drawnupguidelinesforhowearlysupplies

shouldbedistributedinordertosavethe

mostlives,protectfragilehealthsystems

andhastentheendofthepandemic.The

firstdoseswouldgotohealthandsocial-

careworkers,andthenextbatchtothe20%

ofpeopleineachcountry whoaremost

likelytodiefromcovid-19ifinfected.The

restwouldthengotoplaceswiththehigh-

estriskofoutbreaks.covaxhassignedup

totheseprinciples,butthereisnoindica-

tionthatcountrieswouldrespectthemin

theirbilateraldealswithdrugcompanies,

ratherthanactinnarrowself-interest.

ThereareslimhopesthatAmerica,Chi-

naorRussia,amongothers,willallowex-

portsofa vaccinemadeontheirterritory

beforeenoughisavailableforalloftheir

citizens.Butvaccinemanufacturingand

distributioninvolvesa complicatedglobal

supplychainofrawingredients,adjuvants

(chemicalscommonlyusedtoboostpoten-

cy),vialsandsoon.Intheworstcase,coun-

triesdenieda shareofthevaccinescould

banexportsofsuchinputstothehoarding

country.Everyoneloses.

Aglobalfree-for-all,then,seemsinev-

itable.Onewaytomitigatethiswouldbeto

spendmore.Someeconomistsarguethat

governmentscoulddomoretohurryalong

vaccine manufacture and distribution.

Separategroupsofresearchersreckonthat

theworldneedstoinvestaround$100bnin

ordertomakeseveralvaccinesearlyandin

sufficientquantities.Thatwouldbea ten-

foldincreaseinwhathasbeenspent.But

setagainsttheoutputlostandthe$7trnin

stimulusinjectedintotheglobaleconomy

sofar,it ispeanuts. 7

Ajamboreeofjabs

Forwardpurchasesofselectedcovid-19vaccines

ToAugust3rd2020,dosesperperson

Sources:GoldmanSachs;

TheEconomist

*Excludestheoptiontobuyan

extra500mdosesfromPfizer

2

China

Emergingmarkets

(excl.China)

Japan

EuropeanUnion

Britain

UnitedStates*

43210

Vialstatistics

Covid-19vaccines,numberofdosesordered(andpayment)*,toAugust5th 2020

Country/ Numberofdoses Company

organisation

Sources:Pressreports;TheEconomist *Selecteddeals,wheredetailshavebeendisclosed †Numberofdosesnotpubliclyavailable

1

Johnson&Johnson100m

AstraZeneca

1.2bndosesordered

Novavax110m

Pfizer/BioNTech250m

Sanofi/

GlaxoSmithKline

460m

Valneva60m

UnitedStates

710mdoses

($9.3bn)

Brazil100m(na)

Britain

250m(>$699m)

COVAX

300m($750m)

EuropeanUnion

700m(>$843m)

Japan120m(na)

Moderna†

“L

et the users decide who wins the

game, not monopoly and power.” So

said Jack Ma in 2014 when Alipay, the slick

payment service he created, came under at-

tack from China’s lumbering state-owned

banks. Six years on, the users have decided,

and Alipay and its rival, Tenpay, known

mainly for WeChat Pay, have won. There is

little question that they constitute a duo-

poly. Alipay has a 54% share and Tenpay

39% of the Chinese mobile-payments mar-

ket by value, according to Analysys, a re-

search firm. And mobile today accounts for

more than half of all non-cash retail pay-

ments in China (see chart on next page).

Not surprisingly, then, the former up-

starts now face questions about their own

power. According to Reuters, the central

bank accuses them of misusing their domi-

nance to limit competition. It reported on

July 31st that the government’s antitrust

committee is considering whether to in-

vestigate them, though has yet to make a fi-

nal decision.

Alipay and Tenpay are sure to feel ag-

grieved about such scrutiny. In their view,

their path to success was paved not with

anti-competitive behaviour but with con-

venience and performance. Alipay began

as a service for shoppers on Alibaba, Chi-

na’s biggest e-commerce platform. WeChat

Pay is an outgrowth of WeChat, the coun-

try’s main messaging app. They migrated

offline by enabling people to pay in shops

by scanning qr codes with their phones.

Seen as safe and reliable, they have

earned the trust of merchants and shop-

pers. And as with much in the world of the

internet, they have benefited from network

effects: anyone who wants to make or take

digital payments has little choice but to use

Alipay or WeChat, or typically both, be-

cause just about everyone else does.

Given this dominance, there is poten-

tial for misuse. A rough parallel exists in

rich countries, where Visa and Mastercard

are the main platforms for processing card

payments. These have faced antitrust law-

suits in America, Britain and Europe.

Alipay and Tenpay have acted in some

ways that look anti-competitive, though

typically by taking aim at each other. With-

in WeChat, for instance, it is impossible to

open hyperlinks for products on Alibaba’s

main shopping site. And on Alibaba you

cannot make payments with Tenpay.

Yet for the financial system as a whole,

Alipay and Tenpay have enhanced compe-

SHANGHAI

Do Alipay and Tenpay misuse their

dominance in mobile payments?

Chinese finance

A dynamic duopoly