Driving the Day
1. No time to slack
This morning, the National Health Commission (NHC) dropped the latest numbers for domestic COVID-19 cases.
On April 8 (NHC):
- There were 63 new confirmed cases, of which 61 were imported.
- There were also 56 new confirmed asymptomatic cases, of which 28 were imported.
Certain parts of the country are worse-off than others:
- 40 of the 61 imported cases yesterday were reported in China’s northeastern Heilongjiang province.
- The southeastern province of Guangdong reported 12 local asymptomatic transmissions in the past eight days.
The State Council isn’t letting down its guard:
- On Wednesday, it required local governments to be “prudent” in allowing gatherings of people.
It also issued its first set of rules to local governments on how to contain the spread of asymptomatic cases.
- Local governments will test more people who are at risk of exposure.
- Hospitals have been ordered to report asymptomatic cases within two hours of diagnosis.
- Local branches of the Chinese Center for Disease Control and Prevention are required to conduct contact tracing within 24 hours of a diagnosis.
- Asymptomatic carriers will be centrally quarantined for 14 days and can only be released upon testing negative two consecutive times.
Get smart: Nothing will be back to normal before we have a cure.
China intensifies screening of asymptomatic COVID-19 infections
2.Flattening the wrong curve
Business activity in China continues to inch upward according to theTrivium Business Activity Index.
Here are our calculations as of April 9:
- TheTrivium National Business Activity Indexindicates that China’s economy is operating at 81.2% of typical output, up from 80.6% on April 8.
- TheTrivium National Large Enterprise Activity Indexindicates that China’s large enterprises are operating at 81.8% of typical output, the same proportion as on April 8.
- TheTrivium National SME Activity Indexindicates that China’s small businesses are operating at 80.7% of typical output, up from 79.7% on April 8.
Get smart:Increases in business activity are starting to level off – especially at big firms. That’s because pretty much all big firms – about 97% — have now resumed operations, but they aren’t seeing increases in capacity utilization.
Get smarter: This is the demand conundrum we’ve written about. Companies won’t ramp up to full capacity until they see their customers coming back to the market. This is happening gradually in China – but meanwhile global demand is tanking.
The bottom line: It looks increasingly likely that China’s business activity curve will continue to flatten, keeping business stuck at around 80-85% of normal output for a while.
Trivium China: Trivium Business Activity Index
3. Can you vouch for that?
Over the past few days, policymakers have started going HAM on getting the economy back to full strength (see next entry).
One critical element of the policy response: A growing number of city governments are handing out consumption vouchers to boost spending (see the March 26 Tip Sheet).
The big question: Is it working?
Hangzhou is the first city to give us a glimpse of the program’s efficacy (drumroll please):
- To date, RMB 200 million worth of vouchers have been redeemed, leading to RMB 2.2 billion in consumption.
That ain’t a bad multiplier.
- In fact, things worked out well enough that the Hangzhou government plans to issue RMB 500 million worth of new vouchers before May 31.
- Combined with merchant coupons, total vouchers are expected to reach RMB 1.68 billion in the city.
The real secret sauce: These vouchers are helping to get people out of the house and into stores.
Get smart: Chinese policymakers have been prioritizing consumers in their economic support measures. Other countries would do well to track the success – or failure – of this approach.
What to watch: It looks like vouchers have so far done great in Hangzhou, but will they work as well elsewhere in China?
The Paper: 浙江杭州2亿元消费券乘数效应凸显：11天撬动22亿元消费
4.FSDC gets on the “more policy support” train
Over the past ten days or so, Party and state bodies across China have been looking to gradually ramp up policy support for the economy.
In line with the State Council meeting on Tuesday, which called for (what else?!) increased support for SMEs, Vice Premier Liu He chaired a meeting of the Financial Stability and Development Committee (FSDC).
Some context: The FSDC was created in July 2017 and helps to coordinate financial and economic policy among various regulators.
To kick things off, officials:
- Reviewed their economic support efforts in the face of the COVID-19 outbreak
- Underscored the increasingly dire global economic situation
Like their counterparts across a range of agencies, FSDC officials signaled their intention to up their economic policy game:
- “We need to strengthen the implementation of macro policies, make prudent monetary policy more flexible and appropriate, and put support for the recovery and development of the real economy in a more prominent position.”
And you’ll never guess what else they committed to:
- More support for SMEs!
Get smart: By now it’s clear that policymakers are looking to level up on policy support.
Get smarter: Even as they do that, efforts will remain as targeted as possible. Don’t expect a policy bazooka.
5.Responding to external uncertainties
On Wednesday, General Secretary Xi Jinping chaired a meeting of the Politburo Standing Committee (PBSC).
Xi told the assembled that things in the rest of the world are bad. Real bad. And that’s bad for China:
- “As the pandemic continues its global spread, the world economy faces mounting downside risk.”
- “China is facing rising pressure to guard against imported COVID-19 cases. New difficulties and challenges have emerged for China’s work resumption and economic and social development.”
- “For the foreseeable future,[we should] prepare…to cope with changes to the external environment.”
That’s when Xi unveiled his two-front strategy.
- “[We will] insist on accelerating the full recovery of production and living conditions while normalizing epidemic prevention and control.”
That’s a tall order. Government officials will have to be agile to pull it off.
- Local officials are required to adjust their epidemic prevention measures in a timely manner based on local conditions and facilitate the resumption of work and production.
The meeting also agreed to actively promote consumer spending and expedite construction of infrastructure projects.
Get smart: A flexible government response means uncertainty for business. Buckle up.
Get smarter: The economic impact of the pandemic in other countries will largely dictate Chinese policymakers’ response to managing the domestic economy.
CPC People: 中共中央政治局常务委员会召开会议 中共中央总书记习近平主持会议
6.This time for Africa (and Turkey)
Regular Tip Sheet readers know that top Chinese leaders have been on a public relations kick in recent weeks, pledging moral and material support to countries still grappling with COVID-19.
On Wednesday, Xi Jinping kept the warm fuzzies rolling with calls to more world leaders.
This time, Xi phoned up:
- Turkish President Recep Tayyip Erdoğan
- South African President Cyril Ramaphosa
Xi’s calls to foreign leaders on coronavirus have more or less all followed a similar template, as exemplified by Xi’s comments to Erdoğan (Xinhua 1).
- “[The] virus knows no borders or races, Xi stressed, adding that only with joint efforts can the international community prevail over the disease.”
- “Xi added that the two countries should work together to enhance political mutual trust…deepen practical cooperation in various fields, and push bilateral relations to a new level.”
Get smart: China’s aid campaign has proved polarizing and some (especially in the West) have criticized Beijing’s “mask diplomacy” as a propaganda stunt with sinister motives (see Tuesday’s Tip Sheet).
Get smarter: Others have been genuinely grateful for Chinese assistance. Beijing may stand to win big humanitarian brownie points in countries less closely aligned with the US and Europe.