Driving the Day
1. Putting COVID to the test
This morning, the NHC dropped the latest numbers for domestic COVID-19 cases.
On April 22 (NHC):
- There were 27 asymptomatic cases, one of which was imported.
- There were 10 new COVID-19 cases, of which six were imported.
- Of the locally transmitted cases, three were recorded in Harbin, Heilongjiang and one was recorded in Foshan, Guangdong.
Premier Li didn’t like the local transmissions one bit.
Yesterday, at the meeting of the central leading small group on COVID-19, he urged local governments to (Gov.cn):
- “Block the channels of the spread of the virus as soon as possible.”
The meeting also decided to go nuts with testing (Xinhua).
- “The meeting called for large-scale nucleic acid and antibody tests, which should cover key groups and units and venues where people gather amid work and production resumption.”
Meanwhile, we may see China resume international arrivals with a select few countries soon.
Foreign Ministry spokesman Geng Shuang confirmed Tuesday that (MoFA):
- China and South Korea reached an agreement in principle on establishing a fast track arrangement for urgent essential travel between the two countries.
- A similar discussion took place between China and Singapore.
Get smart: Large scale testing is essential to China’s plan to get the economy back to full steam while normalizingvirus containment measures.
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 部署调整完善重点地区防控举措 着力提升检测能力尽力扩大检测范围 在常态化防控条件下推动经济社会秩序加快恢复
Foreign Ministry Spokesperson Geng Shuang’s Regular Press Conference on April 21, 2020
2.Bank shareholders beware
China’s banking regulator (CBIRC) has been cleaning house – and there’s more to come.
Speaking at a press conference on Wednesday, CBIRC vice chairman Cao Yu said that last year his agency launched a crackdown on “related party transactions between banks and their shareholders.”
To put it plainly:They’ve been going after bank shareholders that use those banks like ATMs.
According to Cao (SCIO):
- The CBIRC found 3,000 violations involving 1,400 shareholders.
- “[Since 2018,] we have ordered non-compliant shareholders to transfer 3.34 billion shares and fined 74 institutions.”
Some context: In early 2018, the CBIRC imposed rules that significantly narrowed the scope of who it would permit to invest in banks.
More context: Since then, Tomorrow Group and Anbang have been forced to divest their bank shares, most notably in Baoshang Bank and Chengdu Rural Commercial Bank, respectively.
What to watch: Cao said that the CBIRC would further tighten its review of bank shareholdings going forward – especially for smaller banks.
Get smart: The pandemic willbring new cases to light as banks feel the stress ofbad loans made to shareholders.
Get smarter: The ability of the banking system to weather the pandemic with minimum disruption will in large part be dependent on de-risking measures like these.
3. Bad loans rise – but only a little
At Wednesday’s presser (see previous entry), the banking regulator (CBIRC) also said that things were bad for banks in the first quarter – but not too bad.
According to CBIRC officials (SCIO):
- The banking sector’s nonperforming loan (NPL) ratio rose to 2.04% at the end of March, up from 1.86% at the end of 2019.
- Banks disposed of more than RMB 450 billion worth of bad loans, up RMB 81 billion from the same period last year.
- Banks deferred principle and interest payments on about RMB 880 billion worth of loans extended to small and micro enterprises.
That last bit is particularly important: Loan forbearance will be critical to keeping SMEs alive.
Get smart: China’s NPL ratio is notoriously suspect. NPL disposal data is far more reliable. Given disposals increased by more than 20% in Q1 – having already ramped up aggressively in recent years – the banks are clearly worried about what the pandemic means for asset quality.
Get smarter: According to the CBIRC, China’s banks currently have more than RMB 6 trillion in loan loss provisions set aside. That puts the banking sector in a relatively good position to deal with a surge in bad loans.
4.Xi makes the best of it
On Wednesday, Xi Jinping continued his tour of Shaanxi by checking out the provincial capital Xi’an.
Xi’s itinerary focused on getting the country back to work.
- Shaanxi Automobile Holding Group
- Xi’an Jiaotong University
- Great Tang All Day Mall
Those locations were not chosen at random. Here are the messages that Xi was attempting to convey:
- Let’s get companies up and running.
- Let’s get the kids back to school.
- Let’s get people out shopping.
This caught our eye: Xi decided to visit a state-owned enterprise (SOE) – Shaanxi Automobile – instead of a private one. That’s despite the fact that government policy has been largely focused on supporting private businesses.
Xi left no doubt that he is a big supporter of SOEs (The Paper):
- “Our state-owned enterprises are the leading troops and main force in resuming work and production.”
Xi also had some inspiring words for the country:
- “Great advances in history have come after great catastrophes.”
- “This is exactly how our nation has grown and matured – by learning from the experiences of difficulties and deprivations.”
Get smart: Xi is not one to waste a crisis. He will attempt to leverage the pandemic to strengthen the Party’s legitimacy and push through his political agenda.
The Paper: 独家视频丨习近平：国有企业是复工复产的生力军、主力军
5.Hu Chunhua tours the country
There are clearly no travel restrictions on Vice Premier Hu Chunhua.
Hu has been racking up the air miles recently, visiting:
- Xinjiang from April 18-20
- Henan and Shandong on April 21-22
In Xinjiang, Hu was inspecting poverty alleviation efforts.
Henan and Shandong were all about agriculture (Gov.cn 2):
- “Hu inspected Kaifeng city, Henan province, and Heze city and Jining city, Shandong province, to learn about the issues of summer grain production, pest control, hog production restoration and African swine fever prevention and control.”
Get smart: China is still facing a huge pork shortage after an outbreak of African Swine Fever (ASF) decimated its hog population.
What’s more:African Swine Fever is still prevalent, with the Ministry of Agriculture and Rural Affairs reporting an uptick in cases since March (Reuters).
The bigger picture: Hu’s travels – like Xi’s (see entry above) – are a signal that we have moved into a new phase of epidemic response. The goal now is to “normalize” epidemic control measures and get back to something resembling normal.
By the way: Hu’s been spending a lot of time in Henan. This was his fourth trip to the province in less than a year.
Gov.cn: Vice-premier stresses summer grain, hog production
Reuters: China detects African swine fever in another pig truck