Driving the Day
1. PBSC meets on coronavirus outbreak
Yesterday, Xi Jinping chaired a meeting of the Politburo Standing Committee (PBSC).
- How to get the virus under control
- How to get the economy up and running again
Some context: This is the third time the PBSC has met to discuss the outbreak since January 21.
On containing the virus, nothing has changed.The government will continue to focus resources on Hubei.
On the economy, Xi sounds increasingly concerned (Xinhua):
- “Party committees and government at all levels…need to strive to achieve the various [economic] targets set by the Party center.”
Xi’s solution: Decentralization.
- Each county and district will be given leeway to determine their own level of risk regarding the virus.
- Risk levels will then determine the local economic policies.
Get smart: Xi has spent considerable time and effort creating a more top-down, centralized system. But some think he has gone too far. Over the past two years we have seen numerous efforts to course correct.
Xinhua:中共中央政治局常务委员会召开会议 分析新冠肺炎疫情形势研究加强防控工作 中共中央总书记习近平主持会议
2.PBoC going digital in a hurry
China’s central bank (PBoC) is getting serious about the rollout of its digital currency.
That’s according to a great scoop by the Financial Times, which highlights the more than 80 patents the PBoC has recently filed as it looks to lock down the tech behind a virtual RMB:
- “The patents… include proposals related to the issuance and supply of a central bank digital currency, a system for interbank settlements that uses the currency, and the integration of digital currency wallets into existing retail bank accounts.”
But there’s more.The patents give some indication as to how the PBoC might manage a digital version of the RMB:
- “Several of the 84 patents…indicate that China may plan to algorithmically adjust the supply of a central bank digital currency based on certain triggers, such as loan interest rates.”
- “Some outline mechanisms to allow customers to make deposits with their existing banks and then exchange that for digital currency.”
- “Other patents are focused on building digital currency chip cards or digital currency wallets that banking consumers could potentially use, which would be linked directly to their bank accounts.”
Get smart: The PBoC is miles ahead of other major central banks on this front.
3. State Council focused on getting the economy going
On Tuesday, Premier Li Keqiang did his thing – chairing the weekly State Council executive meeting.
Top of the agenda: The coronavirus epidemic.
But Li and co. focused most of their attention on getting the economy going.
They called for more efforts to:
- Help businesses resume production and operations
- Enact macroeconomic and financial policies to help private and small businesses
- Step up production, allocation, and supply of medical supplies
- Ensure stable supply and prices of essential food products
- Ensure ample provision of oil, gas, and electricity
- Maintain smooth transportation and logistics systems
- Keep employment stable
Get smart: Fighting the epidemic and getting things back to normal is the only game in town right now. It dominates the agenda for all government agencies at all levels.
Get smarter: With the epidemic starting to look under control outside of Hubei, attention is shifting towards getting the economy back on track.
4. Day of reckoning in Hubei
This morning, Hubei province, the epicenter of the coronavirus outbreak, recorded a sharp increase in the number of confirmed cases within the last 24 hours.
- The province logged a whopping 14,840 new cases – four times the previous record for daily new confirmed infections.
- The government changed the diagnosis methodology, lowering the bar for logging confirmed cases.
- Under the new rubric, clinical diagnoses without lab test confirmation now count as confirmed cases.
- Over 13,300 of the cases confirmed yesterday are of the clinical diagnosis type.
Get smart: The government is going all out to contain the virus in Hubei. The diagnostic change squares with their main priority, which is to identify, isolate, and treat all those who have been infected.
Get smarter: Correcting the underreported number of cases before the new Party boss arrives (see entry #6) will help to delineate the responsibilities between outgoing and incoming officials, and gives the new administration a (relatively) clean slate.
5.China slowly, painfully gets back to work
On Tuesday, we told you that business in China was gradually beginning to revive (see February 11 Tip Sheet).
The operative word there is “gradually.”
New statistics show that enterprises with annual revenue above RMB 20 million are taking a while to get up and running.
- By February 11 in Sichuan, 3,789 industrial enterprises above scale had restarted production — a resumption rate of 26.3%
- By February 10 in Shandong, 11,621 industrial enterprises went back to work, accounting for 41% of the total and up 19.2 percentage points from the previous day.
- By February 11 in Shanghai, 117 of the 177 member companies surveyed by the Shanghai Foreign Investment Association had gone back to work — a resumption rate of 68.42%.
Never fear! SOEs are here!
According to SASAC, the government agency overseeing state-owned enterprises (SOEs), the resumption rate of production-oriented subsidiaries of central SOEs is over 80%.
Some sub-sectors have done even better.
- Petroleum and petrochemical firms are at 96.8%.
- Power generation is at 83%.
- Mechanical equipment manufacturing enterprises (excluding automobiles) are at 88.1%.
Get smart:High resumption rates dont’s necessarily mean much. It only takes one broken link in the supply chain to keepmanufacturers hamstrung.
Get smarter: These are the resumption rates for larger companies. For SMEs, the return to normalcy will be slower.
6.Heads roll in Hubei
Officials in Hubei have been roundly criticized for their response to the coronavirus epidemic.
Now heads are starting to roll.
Following yesterday’s Politburo Standing Committee meeting (see entry #1), the Party has announced the dismissal of two top officials in Hubei.
- Jiang Chaoliang has been removed from his post as Hubei Party secretary. He has been replaced by Ying Yong, who had been serving as mayor of Shanghai.
- Ma Guoqiang has been removed from his post as Wuhan Party secretary. He has been replaced by Wang Zhonglin, who had been serving as Party Secretary of Jinan, the capital of Shandong.
Ying is thought to be a Xi Jinping guy. Like Chen Yixin (see Tuesday’s Tip Sheet), Ying 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.
Ying and Wang have something in common. Both men have spent most of their careers working on issues of law enforcement, Party discipline, and ideology.
What it means: Ying and Wang’s top priority will be cleaning up the Hubei Party apparatus.
Looking ahead: Ying was already a strong candidate for the Politburo in 2022. If he does a good job in Hubei, it will only increase his chances of Politburo membership.
7.Head rolls at the HKMAO
Officials in Hubei aren’t the only ones coming in for scrutiny these days.
The Party leadership is also displeased with the way officials have handled the Hong Kong crisis over the past year.
That dissatisfaction already led to the replacement of the head of the Hong Kong Liaison Office in early January (see January 6 Tip Sheet).
Now the Party is replacing the head of the Hong Kong and Macau Affairs Office (HKMAO) in Beijing.
- On Thursday, the Party announced that CPPCC Vice Chairman Xia Baolong will take over as head of the HKMAO.
- Former HKMAO director Zhang Xiaoming has been demoted to deputy director of the office.
A little about Xia:
- Xia, like Ying Yong is considered part of the “New Zhijiang Army” (see entry above).
- Xia served as Zhejiang Party secretary from 2012-2017.
- Xia is not part of the Party’s “Hong Kong system,” but he has touched on Hong Kong affairs at the CPPCC for the past two years.
Get smart: The Party is revamping the institutions that oversee Hong Kong.
Get smarter: It’s still not clear that there is a clear strategy to deal with unrest in the city.