Driving the Day
1. China tries to keep the virus out
China seems to have stopped the coronavirus within its borders (Reuters):
- “For a second day in a row, China found no domestically transmitted cases of the virus.”
But that doesn’t mean there are no new cases:
- “Mainland China had 39 new confirmed cases on Thursday, the National Health Commission said, all of them imported.”
The focus for officials now is on keeping the virus out:
- “To limit the possibility of asymptomatic patients returning to spread the disease, authorities in a growing number of Chinese regions are making travellers coming back from any of 24 countries badly hit by outbreaks spend 14 days in isolation, either at home or at [a] designated venue.”
Get smart: This is a global pandemic. That means that China will not go back to normal until the rest of the world contains the virus.
Get smarter: Just like its virus protection efforts, China’s economy also depends on the rest of the world. China’s economy will not fully recover until the global economy recovers. And that looks a long way off.
China reports record number of imported coronavirus cases
2.Economic activity steadily picking up
According to the Trivium Business Activity Index, economic activity continues to pick up.
Here are our estimates as of March 20:
- TheTrivium National Business Activity Indexindicates that China’s economy is operating at 73.6% of typical output. That’s up from 72.6% on March 19.
- TheTrivium National Large Enterprise Activity Indexindicates that China’s large enterprises are operating at 75.0% of typical output. That’s up from 74.9% on March 19.
- TheTrivium National SME Activity Indexindicates that China’s small businesses are operating at 72.7% of typical output. That’s up from 71.0% on March 19.
Get smart: In relatively short order,China has gotten three-fourths of the economy up and running from a virtual standstill. But getting all the way back to normal will be difficult.
Trivium: Trivium Business Activity Index
3.LPR remains unchanged
On Friday, the PBoC announced that the loan prime rate (LPR) hasnot changed(SCMP):
- “The one-year loan prime rate (LPR) was left unchanged at 4.05 per cent from the previous monthly fixing, while the five-year LPR remained at 4.75 per cent.”
Some context: In August 2019, the central bank established a new loan pricing mechanism, replacing the old benchmark lending rates with two national LPRs. The LPRs are set monthly by 18 banks and meant to make loans to businesses more reflective of actual market dynamics (see August 19, 2019 Tip Sheet).
What to watch: As the need to push through an economic recovery in Q2 becomes ever more pressing, the PBoC may put pressure on the 18 banks to lower their rates.
4.Eastern promises (for medical aid)
Yesterday, we told you that China has found one heck of a silver lining in the COVID-19 pandemic.
- Chinese leaders have been on a public relations blitz aimed at cementing relationships with other countries by providing badly needed medical aid (see yesterday’s Tip Sheet).
On Thursday, President Xi Jinping kept the momentum going with a call to Russian President Vladimir Putin (Xinhua):
- “[Xi said] that China is willing to make concerted efforts with Russia and all other countries to tackle common threats and challenges and safeguard global public health security.”
Putin reciprocated Xi’s warm words:
- “Russia highly appreciates…China’s efforts, he said, adding that China has set a good example for the international community by lending a helping hand to other epidemic-hit countries.”
On the same day, Premier Li Keqiang got on the horn to Bulgarian Prime Minister Boyko Borissov:
- Li called for greater cooperation and pledged to aid Bulgaria in its fight against the virus.
- Borissov thanked China for its epidemic prevention and control efforts and called for a deepening of bilateral relations.
Get smart: As COVID-19 spreads panic globally, the world is looking for leadership. China is champing at the bit to take up that mantle and score some diplomatic victories in the process.
Xinhua: Xi, Putin discuss strengthening cooperation on fighting COVID-19 by phone
5.Shanghai gets a new mayor
On Thursday, it was announced that Shandong Governor Gong Zheng will be taking over as deputy Party secretary in Shanghai.
What that means: Gong will soon be appointed mayor of Shanghai.
Some context: Shanghai has been without a mayor since Ying Yong was appointed Party secretary of Hubei on February 13 (see February 13 Tip Sheet).
A little about Gong (SCMP):
- “A native of Jiangsu province, Gong, 60, has a PhD in economics and spent more than 20 years working for China’s customs agency, rising to deputy chief of the General Administration of Customs in 2003.”
- “In 2008, he was made a vice-governor of east China’s Zhejiang province, and five years later was given the top party job in the provincial capital Hangzhou. He was named governor of Shandong in 2017.”.
- “A Hangzhou official described Gong as an ‘open-minded’ leader.”
Get smart: Traditionally the mayor of Shanghai is an official with a long history in the city. Gong is the first “outsider” appointed to the role since Zhu Rongji in 1987.
Get smarter: Gong is now a top contender to accede to the Politburo at the 2022 Party Congress.
SCMP: Shanghai set to endorse Gong Zheng as its new mayor
6.Dr. Li Wenliang: Party member
More than a month after launching an investigation into local authorities’ handling of the case of Li Wenliang, a whistleblower doctor in Wuhan (see February 11 Tip Sheet), the National Supervisory Commission (NSC) reported their findings last night.
Some context: Dr. Li was reprimanded by local police for “spreading rumors” after urging people close to him to be on the lookout for the coronavirus before authorities officially sounded the alarm.
More context: Li died of COVID-19 on February 7, provoking a nationwide wave of grief and anger.
Some amends were made:
- The local police department revoked the reprimand issued to Dr. Li.
- The Wuhan Public Security Bureau also apologized to Li’s family and disciplined two police officers who oversaw Li’s case.
The NSC also acknowledged the good that Li had done:
- “[Li’s action] helped to push for the strengthening of virus prevention and control.”
But the NSC also tried to justify what happened:
- The commission concluded that the mishandling of Li’s case was fundamentally procedural in nature, noting that the true cause of the virus had not been verified when Li sounded the alarm.
The NSC also tried to get ahead for anyone hoping to use Li’s story to attack the regime.
- Li Wenliang was a Party member, not a so-called “opposition figure”.
Get smart: The Party refuses to open a Pandora’s box by suggesting that people can spread sensitive information freely.
Get smarter:This conclusion will not satisfy the public.