Driving the Day
1. Back to work
As of today, the extended Spring Festival holiday is over in mostprovinces, and most employees throughout the country should be heading back to work.
The exception: Hubei is still in lockdown – and citizens are still being told to stay at home.
But back to business doesn’t necessarily equal back to normal:
- This morning, metro traffic in Shanghai clocked in at only 20% of its typical daily level.
What’s more, a lot of folks in China still haven’t traveled back to the cities where they work:
- Over the weekend, rail traffic across the country was down by over 80% compared to the days following the 2019 Chinese New Year.
The slow start is largely thanks to still cautious government policy:
- Most businesses mayrestart operations only after having passed an inspection, ensuring that they have taken sufficient precautionary measures to protect employees – including securing supplies such as masks.
- Employees who traveled during the holidays are required to undergo a 14-day “home quarantine” before being allowed to enter business compounds.
What to watch: We still look for most of the country to be up and running in the next couple of weeks. If we’re wrong, our relatively sanguine current outlook on the macro impact of the virus will be wrong.
2.PBoC steps up support for epidemic prevention industries
On Sunday, central bank vice president Liu Guoqiang announced an initial round of special lending for key industries amidst the coronavirus outbreak.
Some context: These loans are part of the central bank’s (PBoC) re-lending program. It sees the PBoC offer cheap loans to banks, which then re-lend those funds to specially designated businesses – at preferential rates.
Here’s the deets of this latest round of re-lending:
- RMB 300 billion has been earmarked for the first batch of loans.
- Loans will be made available to nine national banks and several local banks across 10 provinces and municipalities.
- The funds must be used for “key industries” related to epidemic prevention and control.
- The maximum interest rate is capped at 3.15%, some 100 basis points lower than the one-year loan prime rate, with a maturity of one year.
The funding became available to the relevant banks on Monday.
Get smart: This is a temporary, targeted, and short-term solvent to help support efforts to contain the coronavirus crisis.
Get smarter: It’s not a return to large-scale stimulus to juice the economy in the face of the outbreak, which markets are increasingly hankering for.
21 Century Biz: 央行周一发放首批专项再贷款：哪些重点企业能获得？
Bloomberg: PBOC to Offer First Batch of Special Lending Funds on Monday
China Daily:Funds to support firms vital to outbreak sent to banks
3. Regulators make adjustments in wake of outbreak
On Friday, financial regulators held a press conference detailing how they plan to contain the economic fallout of the coronavirus.
Pan Gongsheng, Vice Governor of the PBoC (China’s central bank), said the outbreak’s effect on the economy shouldbe temporary (NHC):
- “We believe that after the epidemic eases, China’s economy will quickly stabilize.”
- “China’s economy will have a compensatory recovery.”
Pan also signaled that the outbreak had lent economic growth even greater urgency in the eyes of policymakers:
- “In the context of the epidemic, and against the backdrop of downward pressure on the economy, maintaining economic growth is even more important.”
- “The PBoC will… balance the relationship between monetary policy support for economic growth and stable leverage.”
It also looks like at least one policy change is in the pipeline.
- Financial regulators are carrying out a technical assessment of whether to extend the deadline for compliance with the new asset management rules.
Some context: The rules aim to better regulate China’s USD 15 trillion asset management industry and require financial institutions to be compliant from the end of 2020 (see May 2, 2018 Tip sheet).
Get smart: Regulators had started to mull over the extension prior to the outbreak mainly due to huge banking industry push back.
4.(Non-) Data dump – trade
The customs bureau was supposed to drop monthly trade data for January on Friday – buuuuuut it didn’t happen (CNBC):
- “China’s trade data for January, that was supposed to be released at 11.00 a.m. on Friday, will be combined with February’s trade data, according to the country’s customs office.”
Quick take: The delay is almost certainly thanks to the hit to trade precipitated by the coronavirus. That, combined with the early Lunar New Year holiday, will have made both import and export growth look terrible.
Some context: Given the seasonal distortions from the holiday, most of the January economic data is released along with February data in March. While it’s very unusual for the trade data to be handled this way, the concept clearly isn’t unprecedented.
More context: With the phase one US-China trade deal having just been signed – now’s not a great time to release an exceptionally low import number.
The added uncertainty from the lack of data weighed on most Asian stock markets on Friday – except China’s:
- “Mainland Chinese shares bucked the downward trend [among other Asian bourses] to bounce back slightly from declines earlier.”
- “The Shanghai composite rose 0.33%.”
- “The Shenzhen composite bounced 0.49%.”
Get smart: The combined Jan-Feb trade data is still likely to be very weak.
CNBC:Asia markets mostly fall as China’s trade data gets delayed
5.Data dump – inflation
Unlike the customs bureau (see previous entry), the statistics bureau did its part and dropped monthly inflation data for January on Monday.
The details (Bloomberg):
- “The consumer price index rose 5.4% last month from a year earlier, following a 4.5% gain in December.”
- “Factory prices started rising again…with the producer price index registering a 0.1% increase on year, compared with a 0.5% drop in December.”
The data release highlighted the obvious drivers behind the jump in consumer prices:
- “The rise in CPI was mainly due to the Lunar New Year and the coronavirus epidemic, and also due to a lower base last year as the holiday was in February 2019, the NBS said in a statement.”
Quick take 1: The potential for a sustained jump in consumer prices – thanks to the supply shock from widespread logistical shutdowns as part of efforts to contain the coronavirus – will be yet another headache for officials. The longer it takes for economic activity to get back to normal, the bigger the impact on prices.
Quick take 2: Having upstream industries exit deflation – for the first time in six months – is a tiny piece of good news for officials that are otherwise in firefighting mode.
Bloomberg:China Inflation Accelerates on Holiday Demand and Outbreak
6.Netizens outraged by death of “whistleblower doctor”
Early Friday morning, Dr. Li Wenliang, 34, died in Wuhan from coronavirus.
- Within hours, China’s blogosphere was on fire.
What happened: On December 30, Li grew concerned that several cases of a new virus closely resembled SARS. In a private WeChat group, he urged his medical school classmates to be on the lookout for the disease and take appropriate precautions.
- For his trouble, Li, along with seven other doctors who shared information about the outbreak, were reprimanded by local police for “spreading rumors.”
Li was hospitalized on January 12 and eventually diagnosed with coronavirus. He later shared the story of his encounter with the police on Weibo.
The news of Li’s death unleashed a firestorm of criticism of the Wuhan authorities, who were already facing popular ire for their mishandling of the outbreak.
The incident also generated some pretty bold hashtags:
- “We want freedom of speech” briefly trended on Weibo before being scrubbed by censors.
Popular anger prompted the National Supervisory Commission (NSC) to dispatch a team to Wuhan on Saturday to inspect the authorities’ handling of Li’s case.
Get smart: A lack of local government transparency was hugely detrimental to early efforts to contain the virus.
Get smarter: The episode has been a PR nightmare for the Wuhan government and the Party as a whole.
SCMP: Coronavirus: Whistle-blower Dr Li Wenliang confirmed dead of the disease at 34, after hours of chaotic messaging from hospital
BBC: Li Wenliang: Death of Wuhan doctor sparks outpouring of anger
CGTN:National Supervisory Commission’s inspection group arrives in Wuhan
7.Beijing’s new man in Hubei
Over the weekend, Beijing appointed a new official to the Hubei Provincial Party Standing Committee (PPSC) to handle the coronavirus outbreak – Wang Hesheng.
Some context: The PPSC is the top leadership body in a given province.
Wang looks like just the guy for the job:
- He spent the first 18 years of his career working for the Communist Youth League and the Party group at Tianjin Medical University.
- From May 2008 – December 2014, he was Party secretary of first the Tianjin Health Bureau and then the Tianjin Health and Family Planning Commission.
- In August 2016, he was promoted to deputy director of the National Health and Family Planning Commission.
- For the past two years, he served as the deputy director of the National Health Commission.
Before the appointment, Wang was already on the ground in Hubei to help direct the local government’s work, as a member of the steering group of the central government of Hubei.
Get smart: Beijing is killing two birds with one stone here – sending an important message to concerned citizens that things are being done AND putting a capable man on the ground in Hubei.