Driving the Day
1. Vacation’s all I ever wanted
As you no doubt noticed from the painful absence of the Tip Sheet in your inbox, May 1-5 was a public holiday in China.
Folks took advantage of the Labor Day holiday to get out and about, booking (mostly local) tours and visiting tourist sites for the first time in a long time (see April 29 Tip Sheet).
What to watch: If the increased travel led to an increase in virus cases, we would expect that to show up in the next two weeks.
At present, the virus looks under control:
- According to the National Health Commission (NHC) on May 5, China recorded just two confirmed cases, both of which were imported.
- There were also 20 new asymptomatic infections, three of which were imported.
- Those figures are down from 22 confirmed cases and 26 asymptomatic infections on April 29.
This is big: The entire country will be classified as “low-risk” beginning tomorrow.
- That includes the currently “medium-risk” areas of Harbin and Suifenhe in Heilongjiang province.
Get smart: Things are looking pretty good in China right now. Life feels(almost) back to normal in major cities.
Get smarter: The virus looks under control. But the economy looks a long way from getting back to pre-crisis levels (see next entry).
2.Labor Day holiday consumption disappoints
Before the holiday, we told you not to expect a wave of revenge traveling during the Labor Day break (see April 30 Tip Sheet).
According to figures released last night by the Ministry of Culture and Tourism, between May 1 and 5, the country saw (Jiemian):
- 115 million domestic trips
- Tourism revenue of RMB 47.6 billion
That’s an improvement compared to the three-day Tomb-Sweeping Day holiday last month (see April 7 Tip Sheet):
- “More than 43 million tourist trips took place nationwide during the three-day holiday.”
- “Tourism revenue clocked in at RMB 8.26 billion.”
But this is bad:
- The Labor Day figures still represented a 41% and 60% drop respectively from last year’s holiday.
- Those numbers are even worse if you consider that last year’s holiday was one day shorter.
Some retailers are almost back to normal (BJ News):
- 100 retailers on the Beijing municipal government’s monitoring list recorded a combined revenue of RMB 4 billion, accounting for 94.1% of the same period last year.
Get smart:It now looks like consumption may remain depressed for months to come. That means the slowdown will likely be more protracted than most businesses and economists are forecasting.
3. FSDC looks to fight fraud amid stimulus
On Monday, Vice Premier Liu He chaired a meeting of the FinancialStability and Development Committee (FSDC).
Some context: The FSDC was created in 2017 to coordinate financial and economic policy. Since the outbreak of COVID-19, the group has dramatically increased the frequency of their meetings – gathering almost weekly.
The topics of discussion were familiar – the group heard reports on (21st Century Biz):
- “The progress of supporting the economic recovery, accelerating reform and development of small and medium-sized banks, and cracking down on capital market fraud.”
Specifically, the assembled financial officials pledged to use all of their available tools more aggressively – and more effectively:
- “The meeting called on all units of the financial committee to improve the macro plan…maintain reasonable and sufficient liquidity, improve the quality of policies, and pay close attention to the implementation of policies.”
Officials were also focused on rooting out fraud:
- “The meeting stressed that it is necessary to resolutely safeguard the interests of investors and strictly enforce market discipline and ‘zero tolerance’for fraud in the capital market.”
Get smart: None of this is new. Liu and co. are simply looking to ramp up existing efforts to support the economy – while ensuring those efforts don’t lead to future weakness in capital markets.
21st Century Biz: 刘鹤主持召开国务院金融稳定发展委员会第二十八次会议
4.Yi Gang is all in on fintech
Over the weekend, Caixin reported the details of a speech by central bank (PBoC) governor Yi Gang.
- The speech took place on April 17.
- Any time Yi speaks, it’s worth listening to – even after the fact.
The topic of the forum: Fintech.
- Yi’s remarks were primarily geared toward fintech’s ability to finance SMEs.
First though, Yi claimed that all is well with the economic recovery (Caixin):
- “China’s economy is expected to rebound in the second quarter and return to near potential growth in the second half of the year.”
Then he praised the role of fintech in keeping the economy afloat:
- “Large technology companies [are increasingly significant actors] in the credit markets for small and medium-sized enterprises…[using] big data to control the non-performing rate and provide better service, which helps to promote competition and improve the service level of commercial banks.”
He also gave a nod to the recent digital currency pilots:
- “We will continue to study how to strengthen the risk management of the central bank’s digital currency.”
Get smart: For at least a year, financial authorities have been touting fintech as the panacea that will address China’s financial inefficiencies – especially when it comes to SMEs. But no one can yet articulate exactly how it will work.
5.Report to leaders says to prepare for Cold War
In case you haven’t noticed – US-China tensions are heating up.
That’s why China’s top spy agency (MSS) has told Xi Jinping to be prepared for a new Cold War.
The China Institutes of Contemporary International Relations (CICIR), which is overseen by MSS, presented a report to Xi Jinping in early April (Reuters):
- “The report… concluded that global anti-China sentiment is at its highest since the 1989 Tiananmen Square crackdown.”
- “Beijing faces a wave of anti-China sentiment led by the United States in the aftermath of the pandemic and needs to be prepared in a worst-case scenario for armed confrontation between the two global powers, according to people familiar with the report’s content.”
This could be historic:
- “One of those with knowledge of the report said it was regarded by some in the Chinese intelligence community as China’s version of the ‘Novikov Telegram’, a 1946 dispatch by the Soviet ambassador to Washington, Nikolai Novikov, that stressed the dangers of U.S. economic and military ambition in the wake of World War Two.”
- “Novikov’s missive was a response to U.S. diplomat George Kennan’s ‘Long Telegram’ from Moscow that said the Soviet Union did not see the possibility for peaceful coexistence with the West.”
- “The two documents helped set the stage for the strategic thinking that defined both sides of the Cold War.”
Get smart: It’s not clear how influential this report is. China’s leaders receive LOTS of reports all the time.
Get smarter: Nevertheless, all indications are that the hawks have the upper hand in the debate over how to deal with the US.
The bottom line: Sino-US relations, already at a low point, look likely to deteriorate further.