The Xi-agle has landed

Driving the Day

1.Xi goes to Wuhan

This is big.

Xi Jinping is on the ground in Wuhan.

Xi arrived in the city on Tuesday morning.

Here’s what he is up to, according to official media (Xinhua):

“[Xi] will visit and express regards to medical workers, military officers and soldiers, community workers, police officers, officials and volunteers who have been fighting the epidemic on the front line, as well as patients and residents during the inspection.”

Why this is a big deal: Xi’s visit signals that officials believe that the situation is under control.

Get smart: If Xi and the Party can claim victory over the virus, it will boost their legitimacy – especially as the virus spreads in other countries.

Driving the Day, CONT’D

2.Hubei to lift lockdown

Things in Hubei have continued to improve in the last 24 hours (Reuters).

“Mainland China had 19 new cases of coronavirus infections on Monday… down from 40 cases a day earlier.”
“Of the new cases, 17 were in Wuhan, the provincial capital of Hubei…, while one was in Beijing and one other in Guangdong due to people arriving from abroad…”

That freed Hubei officials up a bit to discuss plans to lift the province-wide lockdown that has been in place for more than 40 days.

According to Hubei Party Secretary Ying Yong, people in some areas of the province will be allowed to leave their homes soon (CPC People).

“[We will] promote, at the right time, the safe and orderly flow of people in the low-risk areas of the province.”
With the exception of Wuhan, the government will help to transport people in high-risk areas directly to their work destinations.

Ying also brought glad tidings for businesses:

“[We will] fully support the resumption of the work of enterprises that have a significant impact on national or global supply chains.”

Get smart:While this is very encouraging, work resumption in Hubei will be even more difficult than in the rest of the country.

Finance Economics

3.Data dump – inflation

The National Bureau of Statistics (NBS) dropped monthly inflation numbers for February on Tuesday.

The key headline, per the NBS:

“In February, the novel coronavirus pneumonia outbreak had a complicated impact on the price trend.”

You can say that again. The details:

Consumer prices rose by 5.2% y/y – down from 5.4% in January.
That happened even as growth in pork prices hit a new high of 135% y/y – up from 116% in January.
Producer prices contracted by 0.4% y/y – down from a 0.1% rise in January.

In the understatement of the year, the NBS explained the factors behind the drop in producer prices:

“In February, affected by seasonal and epidemic factors, some industrial enterprises shut down production and demand weakened.”

Thanks for the tip.

Get smart: On the consumer side, weaker demand is being offset by still-soaring pork prices thanks to African Swine Fever (see December 18 Tip Sheet). That means overall price pressures are fairly contained – upward and downward.

Get smarter: On the producer side, the slip back into deflation is concerning, but not surprising. And given the massive drop in oil prices this week, we have further to go. But it will be a short-term dip as the economy recovers – not an entrenched deflationary cycle.

Finance Economics

4.Return-to-work indices inching up

Slowly but surely, Chinese citizens are getting back to work.

How do we know? On Monday, the map software company Gaode (aka AutoNavi) released updated stats on its work resumption indices for cities throughout China.

The company says the indicesmeasurethe cumulative active working population after February 2, as a proportion of the benchmark active working population in each city.

Unsurprisingly, major cities in China’s southeastern coastal export powerhouse provinces are ramping up the fastest:

Dongguan’s (Guangdong) work resumption index was 49.5% — the best in the country.
Ningbo (Zhejiang) and Wuxi (Jiangsu) ranked second and third at 48.82% and 48.40%, respectively.

Other cities with high workforce resumption indices included:

Qingdao (Shandong) at 46.80%
Foshan (Guangdong) at 46.20%
Shenyang (Liaoning) at 45.99%
Chengdu (Sichuan) at 45.69%
Shanghai at 45.47%
Hangzhou (Zhejiang) 44.90%
Chongqing at 42.83%
Guangzhou (Guangdong) 40.42%
Tianjin 37.39%
Beijing 37.14%

Unsurprisingly:

Wuhan’swork resumption rate stands at just 12.54%.

Get smart: At this point, most of the companies we talk to are looking to hit at least 80% capacity in March, with full normalization at some point in April. To hit those targets, lots of workers will have to get back to the grind in a hurry.

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Politics Policy

5.Li guards against outside risks

On Monday, Premier Li Keqiang chaired another meeting of the Central Leading Small Group (CLSG) for the Work to Counter the Novel Coronavirus Pneumonia Epidemic.

On the agenda: Preventing the cross-border spread of COVID-19.

Li said that the spike in COVID-19 cases outside of China poses “new challenges.”

That’sbecause the virus is slowing in China but spreading rapidly elsewhere.

According to the WHO, 29,125 cases have been confirmed outside China.

To overcome the new challenges, Li called for extra travel-related precautions including:

Share the entry and exit information of travelers with other countries
Apply inspection, quarantine, prevention, and control measures at ports of entry and exit
Conduct health checks on people bound for China before departure
Strengthen aircraft disinfection, crew protection, and in-flight prevention
Reduce the flow of international students in and out of China

The procedures should be particularly stringent for Beijing and other major international hubs.

Situational awareness: On Sunday, the Ministry of Foreign Affairs established a 24-hour emergency response center to enhance international cooperation and prevent imported COVID-19 cases.

Get smart: As COVID-19 winds down in China, the focus will increasingly shift to preventing risks from overseas.

Politics Policy

6.Wang Zhonglin’sbig gaffe

On Friday, Wuhan Party Secretary Wang Zhonglin chaired a meeting on battling the coronavirus.

At the meeting, he said (CMP 1):

“[We must] carry out gratitude education among the citizens of the whole city, so that they thank the General Secretary [Xi Jinping], thank the Chinese Communist Party, heed the Party, walk with the Party, and create strong positive energy.”

Those comments did not go down well (SCMP):

“Wang’s remarks caused an uproar.”
“Chinese internet users were furious that Wang expected the people to be grateful as they have paid a heavy price for the complete lockdown of the city.”

Then the Party freaked out (CMP 2)

“Internal directives from press control officials now suggest this has been a full-blown public opinion crisis for the Party.”
“Media have been ordered not to share the original article, publish commentaries, or otherwise address the issue at all.”

On Sunday, Hubei Party Secretary Ying Yong tried to salve the wounds during a tour around the city. He said (SCMP):

“Wuhan is a city of heroes, and the Wuhan people are heroes.”
“I hereby express my sincere gratitude to the people of Wuhan and Hubei.”

Get smart: This is just the latest in a series of incidents that have undermined Wuhan residents’ respect for the Party.

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