Driving the Day
1. Coronavirus update
On Thursday, Premier Li Keqiang chaired yet another meeting of the Central Leading Small Group (CLSG) for the Work to Counter the Novel Coronavirus Pneumonia Epidemic.
Some context: The CLSG was created by the Politburo Standing Committee on January 25 to handle the coronavirus outbreak (see February 14 Tip Sheet).
Top of the agenda: Li echoed XiJinping’s instructions calling for strengthening the protection of frontline medical workers (see yesterday’s Tip Sheet).
- “No new infections among medics areallowed.”
Well, we’re glad that’s settled.
Li also wants to accelerate the clinical application of effective treatment drugs.
The meeting came amid an uptick in newly confirmed coronavirus cases:
- On Thursday, mainland China reported a total of 889 new cases, up from 394 cases the day before.
- Of these, 631 cases were reported in Hubei, up from 349 cases a day earlier.
- The new figure includes 220 cases confirmed in a Shandongprisonthathadn’t previously been counted.
Last but not least: Li urged the adoption of scientific control measures to speed up the orderly resumption of work and production.
Xinhua:李克强主持召开中央应对新冠肺炎疫情工作领导小组会议 部署进一步加强一线医务人员防护加快药物有效应用 要求继续做好科学防控推动有序复工复产
Gov.cn: Premier calls for more protection for medics, wider application of effective drugs
2.Property won’t come to China’s rescue
As China’s economy continues to struggle in the wake of the COVID-19 outbreak, clients are increasingly asking if authorities will use the property market to juice growth.
Our answer: It. Ain’t. Gonna. Happen.
Don’t believe us? Well then take it from the central bank (PBoC), which explicitly said in its Q4 monetary policy report that the property market will not be used as a tool to goose growth (Caijing).
Some context: Back in July 2019, the Politburo said the exact same thing. That statement was remarkable, given that officials have employed the property market to stimulate growth regularly over the past decade plus.
Our take: Property policy is a blunt tool. But as we’ve repeatedly highlighted in recent days, officials are looking to be highly targeted in their growth support – so property policy doesn’t fit the bill.
Add to that: Another risk is that the effect of relaxing property policy would come with a lag, and might supercharge growth well after the economy has normalized.
The upshot: We still expect the economy to normalize soon.The last thing policymakers want is to overheat the economy as it comes out of the virus-induced crunch.
Caixin:Successful Beijing Land Auctions Show Real Estate Still Has Some Bright Spots
3. Guangdong at half capacity
With the virus now looking (somewhat) under control, officials are now focused on getting companies back to work.
Arguably no province is more important than Guangdong, which has the largest GDP of all China’s provinces.
Fun fact: If Guangdong was its own country, it would be the 13th largest economy in the world, ahead of places like Mexico, Australia, Spain, and Indonesia.
According to information based on electricity usage, grid operator Southern Grid estimates that (Xinhua):
- 2.88 million businesses are up and running again – representing over 60% of all businesses.
But that headline number is a bit misleading:
- Industrial energy use is only at 41.4% of normal levels.
What that means: Most businesses are operating well below full capacity.
Get smart: It’s still an open question as to just how large the outbreak’s impact on the economy will be. An important determining factor will be just how quickly companies can get back to work.
4.Xi calls Khan and Moon
Xi Jinping’s international reassurance tour continued on Thursday with calls to Pakistani Prime Minister Imran Khan and South Korean President Moon Jae-In.
His message: Everything will be back to normal soon.
Xi used some pretty chummy language in his call with Khan (Xinhua):
- “China and Pakistan are true friends and good brothers that share weal and woe.”
- “China [will] take good care of its Pakistani brothers and sisters in the country like its own citizens.”
Khan reciprocated the warm words:
- “All Pakistani people will stand firmly with their Chinese brothers and sisters in all circumstances.”
Xi’s call with Moon followed a similar template.
He thanked Seoul for its support in fighting the coronavirus and expressed:
- “the hope that the two sides will lift the China-South Korea strategic cooperative partnership to higher levels.”
For his part, Moon said that:
- “South Korea stands ready to work with China to deepen cooperation in various fields and score new progress in bilateral relations.”
Get smart: Some observers have wondered whether the COVID-19 outbreak will derail China’s long-term policy objectives. These calls are Xi’s way of letting the world know that nothing has changed.
Xinhua: Xi hails China-Pakistan brotherhood in phone call with Pakistani PM on epidemic
Xinhua: Xi says China-S.Korea friendship to deepen after COVID-19 battle victory
China Daily:Nation confident of virus battle victory
5.EV subsidies may be extended
The coronavirus has hit auto sales hard (Bloomberg):
- “China car sales plunged 92% during the first two weeks of February, according to the China Passenger Car Association.”
The industry was already hurting, especially electric vehicles:
- “Sales of new energy vehicles including electric cars, plug-in hybrids and fuel-cell cars tumbled 54% in January from a year earlier.”
- “Those figures were largely before the coronavirus outbreak took hold.”
The government is considering stepping in:
- “China may extend subsidies for electric-vehicle purchases beyond this year to revive sales in the world’s biggest market, people familiar with the matter said.”
Some context: Subsidy extensions have been in discussion since before the coronavirus outbreak (see January 14 Tip Sheet).
Now the outbreak is giving more impetus to those talks.
Don’t get too excited:
- “Talks are at a preliminary stage and there is no guarantee the subsidies will be extended, the people said.”
- “As things stand, they are still set to be phased out at the end of 2020.”
Our take: We expect some sort of support to be forthcoming as subsidy advocates argue that the coronavirus constitutes a special circumstance which warrants government assistance.
Bloomberg:China Considers Extending Electric-Car Subsidies After Sales Slump
6.Authorities leverage social credit in virus fight
Guess what local authorities think could help enforce regulations to contain the spreading of the coronavirus?
That’s right:The Social Credit System (SCS)
One example: On February 17, Nanjing’s municipal government released measures stating that violations of epidemic prevention rules would be included in the offender’s social credit record.
- Failure to disclose recent travel to affected regions
- Refusing or evading medical checks
- Knowingly entering a public gathering place while contagious
- Hindering virus information reporting systems
- Fabricating or disseminating false information that disturbs social order
There are carrots, too: Positive contributions will be recorded as well, with policies promising to reward medical personnel, manufacturers and investors for outstanding participation in disease prevention activities.
Nanjing isn’t the only city to incentivize efforts to combat the virus via the local SCS. Similar policies have cropped up in Tianjin, Xiamen, and other localities.
Get smart: These policies reflect both the expanding integration of the SCS into policy enforcement in general as well as the government’s urgent desire to get the public on board with disease prevention efforts.