Driving the Day
1. COVID-19 only spreading in Wuhan
The novel coronavirus outbreak looks increasingly under control.
New cases of COVID-19 continue to drop (Reuters):
- “China had 40 new confirmed cases of coronavirus infections on Sunday, the National Health Commission said on Monday, down from 44 cases a day earlier, and the lowest number since the health authority started publishing nationwide data on Jan. 20.”
- “Of the new cases on Sunday, 36 were new infections in Wuhan, the provincial capital of Hubei, while the remaining four in Gansu province were imported from Iran.”
There remains a lot of work to do in Wuhan. The vast majority of neighborhoods still have infected residents (The Paper):
- “As of March 6, there were 79 epidemic-free neighborhoods in Wuhan, accounting for 5.6% of the total.”
Chen Yixin, who is in Wuhan to coordinate the central government’s response to the outbreak, urged officials to remain vigilant at a meeting on Saturday (Reuters):
- “We must stay cautious, not be blindly optimistic and must not have war-weariness.”
- “We should not reduce the vigilance against the epidemic and the requirements of prevention and control.”
The big question: Will the spread of the virus stay under control once the government lifts restrictions on movement and gatherings?
China reports zero locally transmitted coronavirus cases outside Hubei
2.Singing the import/export blues
Another day, another discouraging economic indicator.
On Saturday, Chinese customs released import and export data for January and February.
Surprise! They were bad (Bloomberg):
- “The drop in exports was a bigger-than-expected 17.2% in dollar terms, while imports declined 4%.”
Some context: Exports and imports usually take a hit in January and February anyway due to the Chinese New Year holiday. This year, coronavirus-related disruptions have depressed trade even more.
Get smart: Weak export orders, as the rest of the global economy is hit by the COVID-19 outbreak, is yet another headwind to China’s growth in 2020 — and one policymakers can do little about.
Get smarter: The relatively mild fall in imports is the first — and pretty much only — positive sign we’ve seen from China’s economy so far this year. Don’t expect any more positive numbers from Jan-Feb.
The bottom line: It looks basically impossible for the economy to hit even 5.5% GDP growth this year.
Bloomberg: China’s Exports Slump as Coronavirus Forces Shutdowns
3. Xi demands end to poverty
As the coronavirus looks increasingly under control, Xi Jinping is keen to keep cadres focused on the Party’s larger goals.
Topping Xi’s list is his commitment to eradicate poverty by the end of this year.
Some context: China’s officialstatistics said that 5.51 million people remained in poverty at the beginning of 2020.
To focus officials’ minds, Xi held a meeting on Friday to discuss poverty eradication.
This meeting was a big deal. It was unprecedented in size and scale, with officials from all over the country joining in by videoconference.
Xi’s message (Xinhua):
- “Xi stressed that lifting all rural residents living below the current poverty line out of poverty by 2020 is a solemn promise made by the CPC Central Committee, and it must be fulfilled on time.”
Xi wants cadres to realize what is at stake:
- “The unprecedented achievements that China has made in poverty alleviation demonstrate the political advantages of…CPC leadership and the socialist system, he noted.”
Get smart: It will be relatively easy to get the remaining impoverished population out of poverty this year. The real challenge will be keeping them from falling back into poverty once the campaign is over.
CPC People: 习近平总书记在决战决胜脱贫攻坚座谈会上重要讲话引发强烈反响
Xinhua: Xi Focus: Xi stresses overcoming COVID-19 impact to win fight against poverty
4.Li calls for resumption of logistics work
Premier Li Keqiang’s push to revive China’s logisticsnetworks continued on Friday with a visit to Beijing Capital Airport as well as the airport distribution center of SF Express.
Some context: SF Express is one of China’s largest courier services and is an indispensable part of doing business for many companies in China.
During the visit (MoFA):
- “Li emphasized [the] vital importance for the orderly resumption of [logistics] work, and stressed the need for unimpeded transportation…to keep the industrial chain smooth and running.”
- He also urged greater cooperation with foreign governments and international organizations to prevent the spread of disease by air transport.
Li took the opportunity to talk with the unsung heroes of the coronavirus outbreak: delivery drivers.
- The premier asked them how the epidemic had affected their work and commended their fortitude.
- He also called for greater efforts to furnish them with necessary protective gear.
Get smart: The coronavirus ground China’s logisticsindustry to a halt. Getting it restarted is a key challenge as policymakers try to jump-start the economy.
Xinhua: 李克强考察首都国际机场和物流企业航空分拨中心时强调 加强防控国际合作防范疫情输入输出 有力畅通物流促进经济社会发展
MoFA: Premier Li Keqiang Inspects Beijing Capital International Airport And the Airport Distribution Center of a Logistics Firm
5. Companies hopefor a better Q2
Last Friday, the China Enterprise Confederation (CEC) released the results of another survey assessing the Q1 performance of299 large manufacturers (see February 25 Tip Sheet).
- Of the companies surveyed, one-third are SOEs and the rest are private Chinese companies.
The results were predictably grim:
- Over 95% of companies saw their revenues drop.
Adding insult to injury:
- Over 80% saw operational costs go up.
- 97% saw their profits drop.
These companies are on the brink:
- Over halfsaid they couldn’t survive or could just barely survive the losses they were incurring.
That’s very bad considering those companies form the backbone of the manufacturing sector.
But they haven’t abandoned hope that things will get better.
- 65% of companies are expecting improved profits in Q2.
In order, the companies’ top three business challenges are:
- Rising costs due to the outbreak
- Disruption to the supplyof components and raw materials
- Disruption to sales
So it’s no wonder that the group’s top two policy recommendations are:
- More tax and fee cuts
- Lowering financing costs
Interestingly, building a rules-based and fair business environment ranked at the lower end ofthe list.
Get smart: Businesses are focused on the short-term and are advocating for policies that can get them through the lean weeks to come.
21st Century Biz: 疫情对一季度有何影响？企业对二季度有何预期？中企联这份报告干货满满