Driving the Day
1. Authorities attempt to prevent second wave of COVID-19
New virus cases fell over the weekend.
- China reported 31 new cases on Sunday, down from 45 on Saturday and 54 on Friday.
But officials remain concerned about a second wave of infections.
National Health Commission spokesperson Mi Feng put it bluntly on Sunday (Reuters):
- “The possibility of a new round of infections remains relatively big.”
Fears of a second outbreak are causing authorities to backtrack on some measures to get the economy up and running.
Case in point:
- On Friday, the authorities ordered all cinemas in the country to close.
- This came less than a week after over 500 cinemas had reopened in line with government guidelines.
Get smart: Authorities are focused on two goals at present – preventing a new outbreak of the coronavirus and restarting the economy.
The rub: It’s not clear that both goals can be achieved simultaneously.
China defends against incoming second wave of coronavirus
紧急“叫停” 所有电影院暂停复业！影院措手不及 卖出去的票怎么办？
2.Politburo approves economic support measures
On Friday, Xi Jinping chaired a meeting of the Poltiburo.
The agenda: Dealing with the coronavirus. Duh.
The top priority remains controlling the epidemic.
- That means keeping imported cases from entering the country.
- And staying vigilant against the virus at home.
But here’s the big news:
- The meeting announced that the government will be rolling out a basket of supportive measures to help the economy.
Here’s what the official readout said (CPC People):
- “Proactive fiscal policy should be more proactive and effective.”
- “Prudent monetary policy should be more flexible and appropriate.”
- “The fiscal deficit ratioshould be raised appropriately.”
- “Special treasury bonds should be issued.”
- “The scale of local government special bondsshould be increased.”
- “The interest rate of the loan market should be guided down.”
- “Liquidity should be kept reasonable and abundant.”
Get smart: The economy is in a terrible state, so it’s no surprise that the government is stepping in with more aggressive measures.
Get smarter: Full details have not been released yet, but it still seems clear to us that officials are taking a relatively cautious approach.
What to watch: The policy response is still evolving. That’s why we are particularly keen to see this year’s Government Work Report, whichwill be revealedat the National People’s Congress annual session, which is likely to be held in around three weeks.
CPC People: 中共中央政治局召开会议 中共中央总书记习近平主持会议
3. PBoC to shore up monetary support (a bit)
On Friday night, the People’s Bank of China (PBoC) published a readout of its quarterly monetary policy committee meeting held on Thursday.
All eyes were on whether the PBoC would follow other central banks in opening the liquidity tap.
The answer: Not quite.
The PBoC did signal it would be more active in adjusting liquidity (PBoC).
- “Prudent monetary policy will be more flexible and moderate.”
But that impulse will be checked by efforts to keep inflation down.
- “[We will] strike a balance between stable growth, risk prevention and inflation control.”
Some context: Inflation control is the newest element of the PBoC’s balancing act.
The PBoC will continue to help companies in need by sticking to existing targeted measures.
- “[We will] make use of the RMB 300 billion special refinancing funds quotas, RMB 500 billion re-lending and re-discount quotas, and the RMB 350 billion special policy bankloans.”
That said, the PBoC still wants to lower interest rates.
- This morning, the PBoC lowered the 7-day reverse repo rate to 2.20% from 2.40%.
- That’s the fourth cut since last November and the lowest rate since January 7, 2003.
Get smart: China’s monetary policy loosening will be measured compared to other major economies.
Get smarter: The government’s support for the economy will lean toward fiscal policies.
4.SMEs need life support
Beijing is increasingly worried about SMEs. A recent survey attempts to quantify their distress.
- “According to a survey of 995…SMEs conducted in February by Peking and Tsinghua universities in Beijing, over 85 per cent could collapse within three months if they do not receive financial help.”
- Only 10% said they could last six months.
The survey covered:
- Technology, retail, service, and manufacturing firms, with
- 50 employees or less, that earn
- Annual revenue less than RMB 50 million
The SCMP story quoted Dong Ming, a travel agency owner, on his plight:
- “All the entrepreneur friends I know, either in the service industry or the manufacturing industry, are already in debt.”
- “Many of us, including me, have been forced to max out our credit cards or even start selling properties and cars to maintain our business operations.”
Get smart: SMEs are the biggest employer in China and are vital to supply chains. But most don’t borrow from banks, complicating regulators’ efforts to help.
5.Xi hits the road
On Sunday, Xi Jinping hit the road (SCMP):
- “The trip, to Ningbo [Zhejiang] – one of the world’s busiest ports and a trade hub for eastern China – was Xi’s first outside Beijing since he visited Wuhan, the initial epicentre of the Covid-19 outbreak, earlier in the month.”
The itinerary (Xinhua):
- “Xi visited the Chuanshan port area of the Ningbo-Zhoushan Port, one of the world’s top container ports, which handled about 1.12 billion tonnes of cargo in 2019.”
- “Xi also went to an industrial park in Ningbo, which produces high-end auto parts and molds.”
What it means (SCMP):
- “In a separate report, Xinhua said Xi’s visit sent ‘a clear message’ that China was resuming its industrial production and social activities, and described the fight against the coronavirus as the ‘new normal.’”
Get smart: There is increasing talk of “normalizing” epidemic control measures. That means that top policymakers think that they are here to stay for a while.
CPC People: 习近平在浙江考察调研
SCMP: Coronavirus: Xi Jinping’s visit to Zhejiang sends ‘clear message’ it’s time to get the economy back on its feet, state media says
Xinhua: Xi inspects work resumption in Zhejiang
6. Trials and tribulations of mask diplomacy
On Friday, Xi Jinping continued his international assurance tour with a call to King Salman of Saudi Arabia(CPC People):
- “The Chinese side will resolutely support Saudi Arabia in its efforts to combat the epidemic…and will provide assistance in supplying and securing medical supplies.”
While China’s support has been welcomed in some quarters, it has alsobeen dogged by reports of faulty medical equipment.
- On Thursday, the city government of Madrid stopped using COVID-19 rapid test kits produced by Shenzhen Bioeasy Biotechnology after tests suggested they had a sub-30% accuracy rate.
- On Monday, a regional Czech health official also reported problems with Chinese rapid-test kits, though it is not yet known what company produced them.
- Additionally, on Monday, the Netherlands recalled 600,000 Chinese-made face masks which did not fit well or had faulty respirators.
Xu Hong, China’s ambassador to the Netherlands, offered to help investigate the incident, but warned against blowing the issue out of proportion (SCMP 2):
- “It is normal if some problems arise during the cooperation. These problems can be solved in an objective manner, but should not be politicized.”
Get smart: Beijing has worked to boost the profile and reputation of Chinese products. Incidents like this don’t help, especially as it looks to win a public relations victory.
CPC People: 习近平同沙特国王萨勒曼通电话
SCMP: Spanish capital ditches ‘unreliable’ Chinese coronavirus test kits
SCMP: Coronavirus: China’s ambassador closely following Netherlands investigation into face masks