Driving the Day
1. Travel restrictionsback in Wuhan
This morning, the National Health Commission (NHC) dropped the latest numbers for domestic COVID-19 cases.
On April 2 (NHC):
- There were 31 new confirmed cases, 29 of which were imported.
- There were also 60 new confirmed asymptomatic cases, of which seven were imported.
This is concerning (Wuhan Gov 1):
- Of the 60 new confirmed asymptomatic cases nationwide, Wuhan, the epicenter of the COVID-19 outbreak, contributed 51.
- These cases were identified after authorities tested 13,642 people in the city on Thursday.
The central government is upping its game on aymptomatic cases:
- Last night, the central government ordered an epidemiological survey of asymptomatic cases in key regions, including Wuhan.
This morning, the Wuhan government heightened travel restrictions (Wuhan Gov 2):
- “All districts will continue to strengthen compound restrictions… and guide residents no to go outdoors unless for essential needs.”
Authorities offered the following explanation:
- “There has been a significant increase in the flow of people in the city and an influx of people from outside the city.”
- “[We now have] the emergence of asymptomatic patients with COVID-19 and cases where discharged patients have tested positive again.”
Get smart: A regular back and forth of regional travel restrictions and lockdown measures will be the new normal.
Get smarter: These measures are good for containing COVID-19, but will hinder economic normalization.
李克强主持召开中央应对新冠肺炎疫情工作领导小组会议 部署加强无症状感染者管理并开展流行病学调查 做好陆地边境防范疫情跨境输入工作 优化防控措施有力有序积极推进复工复产 王沪宁出席
2.Work resumption update
On Friday, work resumption in China continued to inch higher, according to the Trivium Business Activity Index.
Here are our latest calculations as of April 3:
- TheTrivium National Business Activity Indexindicates that China’s economy is operating at 79.0% of typical output, up from 78.3% on April 2.
- TheTrivium National Large Enterprise Activity Indexindicates that China’s large enterprises are operating at 80.7% of typical output, up from 80.6% on April 2.
- TheTrivium National SME Activity Indexindicates that China’s small businesses are operating at 77.8% of typical output, up from 76.8% on April 2.
Get smart:China’s economy is plateauing at around 80% of typical output. If this state of affairs persist through Q2, China will almost certainly record negative growth in 2020.
Trivium: Trivium Business Activity Index
3. Meet China’s newest SOE
We proudly introduce China’s newest central SOE!
The entity is called China Rongtong Asset Management Group, and the state-owned assets administrator (SASAC) announced its formation on Tuesday.
Caixin has the details:
- “The new company’s public WeChat account describes it as a manager of centrally-owned assets in a wide range of areas.”
- “Those include real estate, agriculture, tourism and hotels, as well as services for industries from recycling, technology and health care to security and finance.”
Hold up: We thought policymakers were trying to reduce the number of centrally SOEs.
That’s true, but the creation of an asset manager is in line with the recent push to improve returns on state-owned capital.
And they have found just the man for the job:
- “Ma Zhengwu, 57, comes from a background at the top of another SASAC-owned asset management company that has played an important role in overhauling big centrally-owned SOEs.”
- “Ma worked for 18 years at China Chengtong Group, most recently as its chairman.”
- “In 2005, Chengtong became part of a pilot program as a manager for centrally owned assets under SASAC, and later became a platform for reorganizing some of those assets.”
Our take: We’re not holding our breath for market-based SOE reform. But this new development certainly piques our interest.
Caixin: Top State-Firm Supervisor Launches New Asset Manager
4.Strong dollar continues to whack the CNY
Keep an eye on this space. The economic and markets fallout from the global COVID-19 outbreak are causing massive demand for US dollars – and that is putting pressure on emerging market currencies.
China is far from immune, and while the central bank has been helping to ease the pressure, the currency hit a fresh low on Thursday (Bloomberg):
- “The currency fell as much as 0.41% on Thursday to depreciate past 7.125 per dollar for the first time since October, before paring losses.”
- “Analysts cited demand for greenbacks and concern over the country’s export outlook as reasons for the declines.”
One reason depreciation pressure is building:
- “Sentiment is turning more bearish in China as the central bank limits stimulus.”
Our take: More CNY weakness is yet to come. Authorities will continue to manage the depreciation, but they won’t seek to stop it outright.
Get smart: CNY weakness is more about a strong dollar and global risk aversion than it is a statement about investors’ overall view on China.
Bloomberg: Yuan Weakens Past Key Support Level as Depreciation Quickens
5.Unity is strength
Another day, another round of calls to foreign leaders.
Some context: In the last few weeks, Xi Jinping and Premier Li Keqiang have unleashed a tsunami ofgoodwill on the world, sending medical aid to and expressing solidarity with countries grappling with COVID-19.
Xi and Li kept the momentum going on Thursday:
- Xi called Indonesian President Joko Widodo and King Philippe of Belgium.
- Li called Vietnamese Prime Minister Nguyễn Xuân Phúc.
China’s consistent refrain will be familiar to regular Tip Sheet readers. It was summed up in Xi’s comments to Widodo (Xinhua 1):
- “The epidemic is a common challenge for all mankind, and only by fostering strong synergy can the international community defeat the enemy.”
- “China will…share its experience and provide as much support as it can for the global battle against COVID-19, and work with other countries to promote the development of global public health.”
Get smart: Having gotten the virus under control sooner than other countries, China is well positioned to play a leading role in the global response at a time when global leadership is in short supply.
Get smarter: Playing the role of benevolent big brother ain’t a bad public relations strategy, either.