Driving the Day
1. Pressure mounts on the northern border
This morning, the National Health Commission (NHC) dropped the latest numbers for domestic COVID-19 cases.
On April 13 (NHC):
- There were 89 new COVID-19 cases,of which 86 were imported.
- All three local transmissions were in Guangdong.
- There were 54 new asymptomatic cases, of which fivewere imported.
Northeastern Heilongjiang province continues to bear the brunt of the imported cases.
- 79 of 86 imported cases were in Heilongjiang.
The border city of Suifenhe is particularly badly hit (Jiemian):
- Since March 21, 2,497 people have crossed into China through Suifenhe.
- Among those, 243 confirmed cases, 102 asymptomatic cases, and eight suspected cases have been identified.
- The mayor of Suifenhe expects that15-20% of the 1,479people currently under medical observation will eventually be confirmed as carriers.
That’s going to be a huge challenge for a local medical system built for a population of 70,000.
The central government is on it:
- Speaking at a COVID-19 containment work meeting yesterday, Premier Li Keqiang pledged to send in medical teams and treatment resources to border cities to reinforce their capabilities.
Get smart: The challenge of stemming the flow of imported cases has shifted from big international cities like Beijing and Shanghai to border regions. And China’s got a heckuva lotta border.
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 部署调集专家和防疫物资增强边境地区疫情防控能力 进一步扩大检测范围做好精准防控和推动全面复工复产
2. PBoC signals more support
The March credit data – released by the central bank (PBoC) yesterday – was promising for those looking for signs that economic support will lead to a solid recovery in China’s economy.
Still, we expect credit growth to accelerate only gradually in Q2 and Q3 – rather than suddenly and aggressively (see yesterday’s Tip Sheet).
Against that backdrop, PBoC officials are unambiguously indicating that more financial support is on the way.
- Alongside the release of the March credit data, PBoC officials held a press conference that has been widely covered in Chinese financial media in recent days.
The key quotecame from Ruan Jianhong, head of the PBoC’s Statistics and Analysis Department, who said (Gov.cn):
- “A gradual increase in macro leverage should be allowed.”
- “The purpose is to expand credit support from the financial system to the real economy and effectively promote the resumption of production.”
Get smart: That’s a key change in language. Instead of emphasizing “targeted measures,” the PBoC is now acknowledging that overall debt will have to increase as lending ramps up to secure a recovery.
Get smarter: No doubt about it – policy support is being stepped up. But this still ain’t 2009 stimulus territory.
3. Employment outlook looking rough
Unemployment is typically a lagging indicator of economic contraction – and that’s not good news for China right now.
The monthly surveyed unemployment rate already hit a record high last month (SCMP):
- “The rate hit a record high of 6.2 per cent at the end of February.”
Things will likely look worse when March employment numbers are released on Friday.
Case in point:The massive home appliance maker Hisense is rumored to be laying off 10,000 employees (Caixin).
- “Executives are determined to carry out the redundancies and most departments will be affected, according to one employee in the company’s research department, who said that layoffs may affect as much as 20% of the companies[sic] staff.”
- “Company Chairman Zhou Houjian said earlier this year that Hisense had a total global workforce of 80,000.”
Some important context: Hisense denies the report.
Get smart: China’s labor markets are the next frontier in the economic fallout from COVID-19.
What to watch: As with other aspects of China’s policy response, the efficacy of employment support policies will be highly instructive for other countries.
4.Support for SMEs getting creative
Chinese regulators – alongside big tech companies – are getting more creative in their support for SMEs.
The latest:Alibaba-owned food delivery app Ele.me has announced a spate of free advertising for small companies in the food service industry (21st Century Biz).
- “Nearly 40,000 outdoor advertisements, 100,000 hotel TV advertising spaces, and 4.8 million internet TV resources – in 80 cities across the country – [have been allocated for] free to small and medium-sized catering businesses around the country to help them broadcast advertisements.”
Quick thought: Ele.me’s timing was impeccable. Their major competitor Meituan is facing accusations from a Guangdong catering industry association of exploiting restaurants by jacking up commissions.
Meanwhile, the securities regulator (CSRC) seems to be prioritizing SME IPOs in order to help these companies raise cash.
- According to the China Securities Journal, regulators are giving priority to companies specifically involved in epidemic prevention and control.
Get smart: Time will tell if these measures are enough to keep SMEs alive as the economy gets back on its feet.
21st Century Biz: 饿了么包下80城4万块广告位 免费给中小餐厅打广告
China Securities Journal: 支持中小企业融资 IPO常态化加码服务实体经济
Bloomberg: China’s Biggest Food-Delivery Site Rejects Claims It Exploited Restaurants
5.Xi calls Latin American leaders
Xi Jinping was back at it again with calls to world leaders last week in a bid to cement China’s status as a global leader in the fight against COVID-19.
Some context: In recent weeks, Beijing has sought to bolster its international image through large donations of aid and expressions of solidarity with countries still fighting the coronavirus.
On Friday, Xi spoke to:
- Mexican president Andrés Manuel López Obrador
- Venezuelan president Nicolás Maduro
Xi had warm words for Obrador (MoFA 1):
- “Xi extended…heartfelt sympathies and firm support to the government and people of Mexico.”
- “Xi shared his belief that…the friendship between the Chinese and Mexican people will be deepened and the strategic importance of bilateral ties further elevated.”
Xi’s comments to Maduro were broadly similar, but also carried a tone of political support for the embattled Venezuelan leader (MoFA 2):
- “[Xi] expressed China’s support for the Venezuelan government and people in safeguarding national sovereignty…[and] finding a development path suited to their national conditions.”
- “China will continue to play a constructive role in promoting a political settlement of the situation in Venezuela.”
Get smart: China’s foreign policy has come a long way from the Deng-era formula of “hide your capabilities and bide your time.”
6.Wang Yang’s return
The Party’s fourth-rankedleader has a shiny new portfolio.
Yesterday, Wang Yang, chairman of China’s top political advisory body (CPPCC), chaired a meeting on poverty alleviation.
Why that matters:
- Vice Premier Hu Chunhua was originally leading on poverty alleviation.
- But this is the third time in five weeks that Wang Yang has led a high-level meeting on poverty alleviation.
What it means: To us, this is a clear sign that Wang has taken charge ofthe poverty alleviation portfolio.
Some context: Poverty alleviation was part of Wang’s portfolio when he was vice premier between 2013 and 2018.
Get smart: Poverty alleviation is a hugely important portfolio because it iscentral to Xi’s political agenda in 2020.
The bottom line: The Party doesn’t think Hu is up to the task.
CPC People: 汪洋：做好疫情加试题 确保脱贫高质量
7.An unexpected choice
Yesterday, the Ministry of Environment and Ecology (MEE) got a new Party secretary – Sun Jinlong.
What it means: Sun could soon be appointed as minister of MEE.
Some context: Sun is replacing Li Ganjie, who was appointed governor of Shandong last week (see April 10 Tip Sheet).
A little about Sun:
- He’s a mining engineer by training.
- He spent a significant chunk of his career in the Communist Youth League (CYL), working on the CYL secretariat fromOctober 1995 toApril 2003.
- Sun thenworked in provincial leadership roles in Anhui (2003-2013) and Hunan (2013-2016).
- Staring in February 2016, Sun worked as head of the Xinjiang Production and Construction Corps – a Mao-era quasi-military organization aimed at developing and stabilizing the Western region.
Sun also has some top-level connections from his time with the CYL:
- He would have worked closely with many of the organization’s former leaders, including current president of the Supreme People’s Court Zhou Qiang, Vice Premier Hu Chunhua, and Premier Li Keqiang.
Get smart: Unlike his two immediate predecessors, Sun has no experience working on issues of environmental protection.