Driving the Day
1. Government wants businesses to resume operations
This morning, central government officials held a press conference.
The focus: How to get businesses running again.
According to Cong Liang, secretary-general of China’s macro planner (NDRC), the government is fighting on two fronts. Namely:
- Fighting the virus
- Increasingeconomic activity
The government is monitoring how quickly businesses in key sectors are getting back to work outside of Hubei.
On February 10, 22 provinces saw a resumption of:
- 76% of their combined face mask production capacity
- 77% of hazmat suit production capacity
- 95% of grain production and processing capacity
- 58% of coal production
Next week should see a further uptick in economic activity:
- The government expects 160 million people to return from vacation by February 18.
Beijing is promising to address outbreak-related business challenges, including:
- Restrictions by local governments on re-opening businesses
- Shortages of epidemic prevention supplies like masks
- The overburdening of logistics systems
- A lack of cash
The central government has also explicitly banned local governments from requiring companies to seek official approval for reopening (see yesterday’s Tip Sheet)
Get smart: Outside Hubei, the number of daily new confirmed cases of the coronavirus has decreased every day for over a week. That’s making central officials more comfortable with the idea of getting everybody back to work.
2.Financial authorities micro-targetsupport
On Sunday, a host of macro regulators held a national teleconference to discuss and mobilize additional financial support for companies in the face of the coronavirus chaos.
The meeting was joined by officials from the:
- Ministry of Finance
- National Development and Reform Commission
- Ministry of Industry and Information Technology
- People’s Bank of China
- National Audit Office
Some context: This was a follow up meeting after the five entities issued the “Emergency Notice on Winning the Battle of Epidemic Prevention and Control and Strengthening Financial Support for Key Enterprises Engaged in Epidemic Prevention and Control” on Friday.
Minister of Finance Liu Kun said more fiscal and tax support measures will be forthcoming to help fight the epidemic.
- So far, various financial authorities have allocated RMB 72 billion to help fight the epidemic.
- RMB 17 billion of that came from central government coffers.
But make no mistake – according to Liu, this isn’t largescale stimulus (JRJ):
- “These policies are highly targeted, and the effect is gradually emerging, which provides strong support for scientific and orderly epidemic prevention and control.”
Get smart: Authorities continue to ramp up financial support in the most targeted way possible.
3. MoF drops fiscal stats
On Monday, the Ministry of Finance released its 2019 fiscal revenue numbers.
The big news: The government missed its 2019 revenuetargets.
- Total revenues clocked in at RMB 19.04 trillion – up 3.8% y/y, but missing the target for 5% growth.
- Central government revenues were up 4.5% y/y – missing the 5.1% growth target.
- Local government revenues increased by 3.2% – missing the 4.9% growth target.
Tax cuts explain a lot of the missing revenues.
- Domestic VAT increased by 1.3% in 2019 – down from 9.1% growth in 2018.
- Personal income tax revenue decreased by 25.1% – down from 16% growth in 2018.
Meanwhile, increases in expenditures greatly outpaced revenue growth:
- In 2019, total government expenditures were RMB 23.89 trillion, an increase of 8.1% y/y.
Get smart: It’s not often that the Chinese government misses its fiscal targets.
Get smarter: The government does not have a lot of fiscal juice – which is one more reason that they are hesitant to enact massive stimulus.
4.Xi tours Beijing
On Monday, Xi Jinping – wearing a mask – went out into Beijing to inspect government efforts to address the coronavirus.
He made three stops (Xinhua):
- “He first went to the Anhuali Community in Chaoyang District to learn about the epidemic prevention and control at the primary level.”
- “At Beijing Ditan Hospital, a designated institution treating the novel coronavirus pneumonia, Xi checked the treatment of hospitalized patients at the monitoring center and talked to medical staff on duty via a video link.”
- “[Then] Xi went to the center for disease control and prevention of Chaoyang District [and] presided over a meeting and listened to report on the epidemic prevention and control work of Beijing.”
Some context: While Xi has chaired a lot of meetings in recent days, he has been noticeably absent from visiting frontline efforts to address the crisis.
Monday’s outing appeared aimed at countering complaints about Xi’s aloofness.
Official media emphasized that Xi is in charge:
- “Xi is the commander of the people’s war against the epidemic.”
Get smart: L’État, c’est Xi Jinping. That means that Xi will be judged for how well the state deals with the virus.
Xinhua:Xi Focus: Xi vows to win people’s war against novel coronavirus
5.Li wants more masks
On Monday, Premier Li Keqiang convened the latest meeting of the central leading small group on novel coronavirus prevention and control.
To fight the epidemic, Li called for more efforts to:
- Increase medical materials and supplies
- Dispatch medical staff and personnel
- Enhance and expedite drug research
The group continues to identify Hubei province, particularly Wuhan, as the core of the problem.
To increase the supply of protective gear and masks for medical professionals, the group wants to:
- Implement better financial policy to aid companies producing needed medical supplies
- Expand and build new production lines
- Convert existing production lines
- Boost production of raw materials that go into the medical supplies
Some context: 20,000 medical professionals have been dispatched to Hubei to fight the coronavirus outbreak.
More context: Frontline medical workers have found themselves in dire shortage of protective gear, which has generated a lot of public outrage online.
Get smart: Producing more medical supplies is only one side of the equation. Logistics and distribution bottlenecks are posing an equally serious challenge.
6.Xi’s new man in Wuhan
Beijing has a new man on the ground in Wuhan to oversee the disease prevention and control work.
Chen Yixin, secretary-general of the Central Political and Legal Affairs Commission, was dispatched to the city on Saturday.
Chen is no stranger to Wuhan. He was the city’s Party secretary from December 2016 to March 2018.
Chen is also a Xi Jinping guy.
- Chen is considered part of the “New Zhijiang Army,” a group of officials who worked closely with Xi when Xi was Zhejiang Party secretary from 2002-2007.
- Chen has been promoted five times since Xi took over leadership of the Party in late 2012.
Upon his return, Chen sent a message to a WeChat group of Wuhan officials (The Paper):
- “I am Chen Yixin, and I am back among you.”
- “Although I have been away from Wuhan for two years due to work, I have always been concerned about Wuhan…always paying attention to developments in Wuhan, especially the struggle to combat the epidemic.”
- “The Party center has decided…that I can fight with you again.”
Get smart: Chen’s assignment, and his public outreach to local officials, has many speculating that he may take on a leadership role in the provincial Party apparatus.
The Paper: “大家好，我是陈一新。党中央决定：我担任中央指导组副组长，又能与你们一同战斗了！”
ESCN: Former Wuhan official to guide prevention and control efforts
SCMP: Xi Jinping security protégé to bolster China’s coronavirus task force