Driving the Day
1. Wuhan watershed
This morning, the NHC dropped the latest numbers for domestic COVID-19 cases.
Between April 24 and 26 (NHC):
- There were 84 new asymptomatic cases, of which 12 were imported.
- There were 26 new COVID-19 cases, of which 18 were imported.
Harbin, the capital city of Heilongjiang province, recorded four locally transmitted cases.
Some context:Since April 9, there have been 86 case of local transmission associated with the same original carrier in Harbin.
But there’s good news out of Wuhan, the former epicenter (Xinhua 1).
- Yesterday, Wuhan announced that there were no more COVID-19 sufferers in its hospitals.
Even so, the city continues to systematically test its residents.
- In three weeks, Wuhan has quadrupled its testing capacity to more than 60,000 people per day.
And the virus continues to linger in the city:
- In recent days, authorities have identified around 20 asymptomatic cases aday.
The central government is nevertheless declaring victory (Xinhua 2).
- This morning, Xi Jinpingsigned an order recallingVice Premier Sun Chunlan’s virus reponse teamback to Beijing, ending their three-month posting.
Get smart: This marks the government’s shift from firefighting mode to containment and normalization in Wuhan, just like in every other city.
2.Threading the policy needle
On Friday, we highlighted some takeaways from Xi Jinping’s trip to Shaanxi – specifically his emphasis on supporting SOEs and upping old school investment spending (see Friday’s Tip Sheet).
- The Trivium Debate: Internally we are debating and assessing how much Xi’s trip indicates a departure from the recent policy trajectory.
One thing is clear: Officials from Xi on down are looking to ramp up policy support.
- But the question remains – what exact shape will that policy support take?
On the one hand: Targeted measures and help for SMEs have been the mantra so far.
On the other hand: Xi was all about SOEs and pretty high on traditional infrastructure spending.
Adding to the confusion, central bank governor Yi Gang counseled caution inan important article over the weekend (Bloomberg):
- “’Too aggressive macro stimulus may bring inflation risks and cause too rapid an increase in the macro leverage ratio, Yi said.”
- “China should strike a balance between stabilizing growth and preventing risks.”
Yi also underscored the risk of lending into the property market.
Get smart: Supporting SOEs and SMEs are not mutually exclusive. Nor are investments in “new infrastructure” and “old infrastructure.”
The bottom line: Macro policy is evolving. But there are still plenty of voices calling for caution.
Bloomberg: PBOC’s Yi Stresses Financial Support to Virus-Weakened Economy
3. Two-year growth target?
As the immediate policy program evolves (see previous entry), so are medium-term policy priorities.
- It looks to us like Chinese officials are trying to take the long view.
- Specifically, the focus on “new infrastructure” is an effort to boost growth now, while enhancing the economy’s long-term competitiveness.
With that in mind, we increasingly expect the soon-to-be-scheduled Two Sessions to announce, shall we say, a non-traditional growth target:
- Specifically, we are hearing rumblings that instead of the traditional GDP target for 2020, policymakers may look to set a two-year target.
- That target is likely to aim for average growth of about 5% over the 2020-2021 timeframe.
The upside: Such a target would acknowledge the reality of China’s 2020 economic situation.
The downside: Making up for essentially 0% growth this year could mean policymakers will look to achieve 9-10% growth next year – and overstimulate later in the game.
The upshot: Despite the devastation from COVID-19, officials are still looking to hit longer-term development goals.
Our worry: Official KPIs seem to proliferating – supporting SOEs, supporting SMEs, juicing growth, and containing leverage.
- Setting too many conflicting targets is when Chinese policy is at its worst.
4.Tourism springs back to life—sort of
An increasing number of Chinese holidaymakers are looking to emerge from their not-so-splendid isolation and hit the road.
According to the China Tourism Academy, the May Day holiday will see (SCMP):
- “Double the number of travellers seen during the Ching Ming Festival earlier this month, which recorded 43 million tourists and 8 billion yuan in tourism revenue.”
But with most international flights cancelled and the promise of a weeks-long quarantine upon return from abroad, much of that wanderlust is being expended domestically (The Paper).
Reports from travel service providers suggest most people will spend the holiday exploring their own neck of the woods:
- Trip.com said orders for intra-province group tours increased by 160% on a m/m basis.
- Meituan estimates that intra-province trips will account for 90% of total demand, with local trips accounting for 60% of the total.
Some context: Industry experts estimate that during the COVID-19 outbreak the tourism sector took a hit of roughly USD 1.4 billion each day.
Get smart: The uptick in tourism will be a welcome relief for the sector, but things are still far from normal.
Get smarter: Some provinces have banned students and teachers from leaving their cities, hence the spike in local tour package purchases.
5.Li talks economy with governors
As we said in entries #2 and #3 above, the economic policy debate is heating up in Beijing.
On Thursday, Premier Li Keqiang asked six provincial governors to weigh in, speaking with themby videoconference.
Provincial officials identified employment as their biggest concern (Gov.cn 1):
- “Everybody said that, at present, the difficulties for companies have multiplied with regards to production and operations.”
- “There are still many small and micro-sized enterprises that have not resumed work, and the task of stabilizing employment is very difficult.”
Li offered an oft-repeated prescription (Gov.cn 2):
- “To help enterprises, especially smaller ones, get through the present difficulties, local authorities should strengthen support through reducing or exempting taxes and fees, providing financial assistance and lowering costs.”
Li also made clear that the government will up its fiscal support.
But he doesn’t want officials to think they have a blank check:
- “Government debt is money borrowed from the future.”
- “We have to let the market play the decisive role in allocating resources.”
- “In the spirit of being responsible for history, we must spend the money wisely.”
Get smart: The government wants to simultaneously support the economy and advance structural reforms. That’s a tough balance to strike.
6.Wang Yang heads south
Wang Yang – the Party’s fourth-ranked member and chair of the political advisory body (CPPCC) – has been on the road.
From April 23-26, Wang toured Yunnan and Guizhou to check out poverty alleviation efforts.
Some context: Wang recently took charge of the poverty alleviation portfolio (see April 14 Tip Sheet).
Wang wants local officials to help those in need find employment (Xinhua):
- “To have a job is an important way to get rid of poverty, and a prominent challenge now is to overcome the impact of the epidemic on the employment of the disadvantaged, he said.”
- “As national work resumption has accelerated, the local governments should seize the opportunities to organize the disadvantaged to go out for jobs, he said.”
Get smart: Xi Jinping has made eliminating poverty by the end of 2020 one of his most prominent policy goals. He and other officials have been very clear that that goal should still be achieved, even in light of the coronavirus epidemic.
CPC People: 汪洋：聚焦难点攻坚 确保如期脱贫
Xinhua:Top political advisor stresses overcoming challenges in poverty alleviation