Driving the Day
1. Infection slows down, efforts ramp up
The coronavirus continues to spread, but the rate of growth appears to be slowing – particularly outside of Hubei.
Caixin has the latest numbers:
- “Another 2,051 cases of Covid-19 were confirmed on Sunday with most of them (1,933 cases) in Hubei province, at the epicenter of the outbreak.”
- “New cases outside of Hubei declined for a 13th straight day, in a positive sign that may show infection rates are slowing in other parts of China.”
Meanwhile, cadres got a clear distillation of what their priorities should be over the weekend.
On Saturday, the Party’s top journal, Qiushi, published a speech by Xi Jinping given at the February 3 Politburo Standing Committee meeting.
In the speech, Xi laid out the Party’s game plan (Xinhua):
- Stop the epidemic
- Ensure social stability
- Control information and public opinion
- Support economic growth
Our thought: The Party is as concerned about controlling unrest as it is about addressing the practical problems of dealing with the epidemic and supporting the economy.
Check this: The speech also revealed that central leaders knew about the epidemic as early as January 7. That has opened Xi up to criticism that he did not do enough to combat the virus in its early days.
2.PBoC increasingly concerned about SMEs
China’s central bank (PBoC) is upping its re-lending support for small business in the face of the coronavirus outbreak.
Some context: On February 10, the PBoC announced an initial RMB 300 billion in re-lending operations to help ailing small companies (see February 10 Tip Sheet).
- But it looks like RMB 300 billion won’t be anywhere near enough.
On Friday, deputy director of the PBoC’s financial markets department, Peng Lifeng, stated at a press conference that officials have received a list of thousands of companies that need cheap financing to get through the virus-induced economic crunch.
Officials are doing their best to push the finances out the door:
- The PBoC says it’s immediately forwarding provincial lists of ailing companies to relevant banks.
- These loans have interest rates between 2% and 3.15%, which the PBoC estimates will lower average financing costs for companies by around 150 basis points.
Get smart: PBoC officials are increasingly concerned about small businesses’ liquidity needs, so they are looking to boost support. Still, officials continue to keep financial support highly targeted.
Get smarter: The longer term impact of the efforts to help small companies stay afloat will be a further deterioration in bank balance sheets.
3. No big fiscal stimulus
Over the weekend, Qiushi, the Party’s top journal, published an op-ed by Minister of Finance Liu Kun.
Liu told everyone that the government’s pockets were not infinitely deep (Qiushi).
- “The financial sector as a whole will face the pressure of reduced revenue and increased expenditure for some time to come.”
- “Fiscal operations will maintain a state of ‘tight balance.’”
That means the government will look for ways to cut unnecessary expense and put more resources into a few key areas, including:
- Epidemic control
- “The three critical battles”: poverty alleviation, pollution control, and financial de-risking.
Additionally, the MoF will continue to keep pressure on local governments to rein in their debt, by:
- “Supervisinglocal governments to develop and strictly implement plans to resolve debts”
- “Effectively curbing hidden debt growth and facilitatingcooperation in investigating corruption embedded in hidden debt risk”
Get smart: Despite the coronavirus outbreak, the direction of fiscal policy remains basically unchanged from last year.
4.Xi proposes structural fixes amid outbreak
On Friday, Xi Jinping chaired the 12th meeting of the Central Commission for Comprehensively Deepening Reform (CCCDR).
Some context:The CCCDR was established as part of the MASSIVE Party-state restructuring in March 2018. It is the most important policymaking body in the country.
Surprise, surprise: The main topic of conversation was proposed structural fixes prompted by the coronavirus outbreak.
Here are Xi’s proposals:
- Revision of laws and regulations concerning infectious disease prevention and treatment, as well as wildlife protection
- New laws on biosecurity, stressing that biosecurity is an important part of national security
- Reform of disease prevention and control systems to prevent major outbreaks, strengthening primary-level capacity, and improving a coordinated system for the analysis, evaluation, prevention, and control of major public health risks
- Improvement of the mechanism for major epidemic emergency response
- Application of digital technologies including big data, artificial intelligence and cloud computing in disease monitoring, tracing the source of viruses, epidemic prevention and treatment, and resource allocation
Get smart: Xi is looking to institutionalize some of the practices the government has deployed in controlling the outbreak.
Get smarter: Xi is right to promote systemic reform on this front, but those fixes need to be right rather than merely fast.
5.Party sets reform priorities for 2020
Attendees of Friday’s CCCDR meeting(see entry 4above) talked about more than just epidemic response measures.
The commission discussed and approved a summary report of the CCCDR’s work in 2019.
The commission also set forth its work priorities for 2020, although the terse official readout did not specify what those priorities are.
In addition, the meeting approved sevendocuments on:
- Improving the socialist market economy system in the New Era
- A national plan for reforming basic pensions for enterprise employees
- A pilot implementation plan for granting title or long-term use rights of scientific and technological achievements to researchers
- Deepening pilot reforms of public institutions
- Promoting the establishment of national high-end think tanks
- Promoting high quality infrastructure development
- Promoting the reform and opening up of the service industry
As always, the actual text of the documents was not released.
Pay attention:What the CCCDR discusses today becomes policy tomorrow. Stay tuned.
6.Legislature to postpone Two Sessions
Li Zhanshu, Chairman of the National People’s Congress Standing Committee (NPCSC), convened a meeting ofthe legislature’s leadership earlier today.
The assembled approved the agenda for the NPCSC’s meeting on February 24.
One item on the agenda caught our eyes:
- A proposal to postpone the Third Session of the 13th National People’s Congress
What it means:
- The legislature will postpone the annual Two Sessions meeting, originally scheduled to start on March 3.
Some context: The Two Sessions is an important annual political event, convened to approve the government’s work report, which signals policy priorities for the year to officials at all levels as well as the business community.
More context: This is the first time the session has been postponed since the government started setting a fixed date for the gathering in 1999.
No points for guessing why it was postponed:
- Transporting thousands of officials, delegates, and journalists to Beijing and plopping them down in the Great Hall of the People would create a significant transmission risk.
- Delegates, including all key local officials, need to focus on epidemic control at their posts.
Get smart: This will be a mild disruption to the political calendar, but the actual functioning of the Party-state should go on as usual.
7.Prevention and control, down-home style
On Saturday, the New York Times released a fascinating piece on life on the ground in China amidst the continuing coronavirus outbreak.
Editorial critique: The article is still worth reading even if the title, “To Tame Coronavirus, Mao-Style Social Control Blankets China”, is unnecessarily sensational.
The piece highlights how different provinces, cities, and even individual housing complexes have worked to contain the spread of the coronavirus.
- The result is a highly-inventive patchwork of rules, regulations, and best practices.
Epidemic control methods range from the high-tech:
- Tracking travellers’ location data (Yiwu)
- Requiring people to scan a QR code when they enter or leave public places (Yunnan)
- Requiring certain individuals to check in with Communist Party officials via WeChat (Wenzhou)
To the time-tested:
- Certain villages have denied entry to anyone who can’t speak the local dialect.
- Hangzhou has banned pharmacies from selling analgesics in hopes of forcing the unwell to seek medical treatment at a hospital.
Once decided upon, rules have been enforced with varying levels of zeal, ranging from the perfunctory to the fanatical.
Get smart: The outbreak has highlighted one of the perennial problems of Chinese governance. Namely, how to implement laws and regulations evenly across a huge and hugely diverse nation?
New York Times:To Tame Coronavirus, Mao-Style Social Control Blankets China