Driving the Day
1. Politburo meets on COVID-19
Last Friday, the Politburo had its first meeting since the national COVID-19 outbreak.
Top of the agenda: To find that sweet spot between epidemic control and economic development.
Xi said they done good (Xinhua):
- “The spread of the epidemic has been initially contained.”
But it’s still too early to celebrate:
- “The inflection point for the development of the national epidemic has not yet arrived.”
- “The prevention and control situations in Hubei and Wuhan are still grim and complicated.”
Xi also stressed the need to get the economy back on track.
He gently reminded everyone of their KPIs this year:
- The three critical battles, i.e. poverty alleviation, pollution control, and financial de-risking
- Achievingthe annual economic targets
- Achievingthe targets set by the 13th Five-Year-Plan (2016-2020)
So like, no biggie.
Xi also promised to address disruptions to global supply chains.
- “We will give priority to ensuring that leading companies and key links that have an important influence in the global supply chain can restore production and maintain the stability of the global supply chain.”
Get smart: Top leaders are concerned that the coronavirus outbreak will do permanent damage to the economy – and to China’s place in the global supply chain.
Driving the Day, CONT’D
2.Xi talks to local officials on COVID-19
After getting senior leaders on the same page Friday (see previous entry), Xi spoke directly to over 170,000 officials across the country at a teleconference on Sunday.
The topic:Same as Friday – balancing epidemic control and economic development.
Xi had it all mapped out (Xinhua):
- Over 46% of China’s counties and districts are classified as low risk and should be going back to normal soon.
- Those facing moderaterisk need to be more cautious – resuming work onlygradually.
Xi said that top leaders are ready to employ fiscal and monetary policies, if needed:
- “Macro policies… should prevent the economy from slipping out of a reasonable range.”
For businesses, Xi was sympathetic to supply chain woes:
- He urged local governments to address supply chain congestion in and between provinces.
Xi also expressed concern about China’s role in global trade:
- “[We] need to secure the smooth operation of foreign trade supply chains and stabilize [China’s] share in the international market.”
Get smart: What the fallout will be for China on the global stage from the virus outbreak is still too early to say.
3. Not with an Anbang, but with a whimper
On Saturday, the China Banking and Insurance Regulatory Commission (CBIRC) announced the end of its receivership over the now defunct Anbang Insurance Group.
Some context: The CBIRC took control of Anbang in February 2018 after the insurance giant massively overextended itself and its chairman Wu Xiaohui was jailed for fundraising fraud.
More context: After jettisoning Anbang’s non-core assets, the CBIRC set up Dajia Insurance Group to take over the bones of its insurance business in June 2019.
The unwind has been basically an unqualified success (Bloomberg):
- “All of Anbang’s 1.5 trillion yuan ($2.1 billion) of medium- and short-term investment products have been paid back on time.”
- The company is now in the process of introducing qualified strategic investors.
Now the CBIRC says Dajia is ready to fly solo (Yahoo Finance):
- “As Dajia Insurance is now capable of operating as normal, the CBIRC now claims to end its takeover by law.”
Get smart: Anbang was a large and potentially dangerous albatross around the collective neck of Chinese regulators. Its successful offloading will be a welcome relief.
Bloomberg: China Releases Once High-Flying Anbang From State Custody
21st Century Biz: 银保监会结束对安邦接管 引战已基本锁定社会投资人 1.5万亿中短存续期全部兑付
Yahoo Finance:China’s revamped Anbang Group nears decision on introducing strategic investors – regulator
4.The long march toward resumption
On Monday, the State Council Information Office held a press conference on the latest stats on business resumption levels.
The good news: Most big companies in economically important provinces are back to work.
- In Zhejiang, the resumption rate for industrial enterprises with annual revenue above RMB 20 million exceeded 90%.
- The resumption rate exceeded 70% in Jiangsu, Shandong, Fujian, Liaoning, Guangdong, and Jiangxi.
The bad news:
- The resumption rate for small and medium-sized businesses only stands at 30%.
The bonus silver lining:
- The daily production volume of masks reached 54.77 million units – an increase of 2.8 times since February 1.
Why that matters: Companies can’t resume operations unless they have masks for employees.
Haven’t heard that before? No wonder, it’s from the new epidemic control and prevention guide for private and state-owned enterprises resuming operations, which was released by the State Council Joint Prevention and Control Mechanism on Saturday.
The presser also touched on the woes of multinationals, saying that Beijing’s immediate priorities are to:
- Ensure that industry-leading foreign companies resume production
- Coordinate efforts to solve resumption-related problems for major foreign-invested projects
Get smart: Good news aside, most back-at-work businesses are not producing at full capacity. On average, less than 60% of total output capacity has been restored.
5.Economy showing tentative signs of life
As entries 1 and 2 above make clear, top leaders are increasingly focused ongetting the economy restarted.
Local governments are responding (Bloomberg):
- “On Monday, at least six provinces lowered their emergency response levels from the highest rating.”
There are other signs of life:
- “Power demand has also started to pick up in China, with six major generators reporting that coal consumption — while still below pre-holiday levels — rose 7% on Feb. 20 from the previous day.”
Some provinces are well on their way to resuming work (see previous entry), but those numbers are misleading:
- “Most [factories] are running below capacity with many workers still missing.”
What to watch: As governments relax rules on movement and economic activity, we could see an uptick in cases of the virus. If that happens, it will severely retard any economic recovery.
Bloomberg:China Pushes Factories to Reopen, Risking Renewed Virus Spread
6.Han Zheng greases some wheels
On Friday, Vice Premier Han Zheng attended a national teleconference on promoting the resumption of normal traffic and transportation.
The meeting was a heavyweight affair: Vice Premier Liu He and Minister of Public Security Zhao Kezhi was also in attendance.
Han useddramatic language to drive home the importance of the issue:
- “Transportation is the vanguard [of society].”
- “We need to open up our main artery.”
To that end, he called for targeted measures to get traffic flow back on track.
- “In areas with low risk of the epidemic, restrictions on road traffic should be completely removed and normal traffic order restored.”
- “In areas with medium or high risk, traffic control measures should be optimized and refined in accordance with the epidemic situation.”
Han also called for efforts to:
- Minimize obstructions in freight logistics
- Ensure migrant workers safe return to work
Get smart: Getting supplies, products, and people through checkpoints across the country is arguably the no.1 challenge for all businesses these days.
Get smarter: Han’s call for locally targeted measures is only part of the fix. Tearing down roadblocks between provinces should be something the central government can play a constructive role in.