Driving the Day
1. Keeping the guard up
This morning, the National Health Commission (NHC) dropped the latest numbers for domestic COVID-19 cases.
On May 6 (NHC):
- There were only two new confirmed cases, both imported.
Some context: Since May 1, China has been reporting no more than three confirmed cases per day and has recorded no locally transmitted cases since May 3.
There were also six new asymptomatic infections, all local, marking the first time that new asymptomatic cases dropped to single digit figures since April 1.
But top leaders are not letting their guard down.
At a Politburo Standing Committee meeting yesterday, Xi Jinping warned officials and the public of the risks ahead (Xinhua 2):
- “The spread of the virus overseas has not been effectively curbed yet and cluster cases were reported in a few areas in China, posing considerable uncertainty to the epidemic control.”
Xi demanded some fixes to the system to deal with that uncertainty, calling for:
- Reforming the disease prevention and control system
- Improving epidemic monitoring and early warning capabilities
- Improving public health emergency laws and regulations
- Enhancing the response and treatment systems for major epidemics and public health emergencies
Get smart: Top leaders are underno illusionthat the battle with COVID-19 is over.
2.Business activity inches up
As China has largely gotten the epidemic under control, depressed economic activity is showing signs of gradually picking up according to the Trivium Business Activity Index.
Here are our estimates as of May 7:
- The Trivium National Business Activity Index indicates that China’s economy is operating at 86.2% of typical output, up from 78.9% on April 7.
- The Trivium National Large Enterprise Activity Index indicates that China’s large enterprises are operating at 85.3% of typical output, up from 81.8% on April 7.
- The Trivium National SME Activity Index indicates that China’s small businesses are operating at 86.7% of typical output, up from 76.6% on April 7.
In short, these numbers represent a moderate improvement from a month ago.
Get smart:The speed with which China’s economy achieves fullrecovery still depends largely on the global economic outlook.
Trivium China: Trivium Business Activity Index
3. Data dump – trade
The General Administration of Customs dropped monthly trade numbers today.
The verdict: Not horrible.
The April stats:
- Exports were up 3.5% y/y.
- Imports were down 14.2% y/y.
- The trade surpluswas USD 45.3 billion, up from USD 19.9 billion in March.
Those export numbers surprised to the upside:According to a poll conducted by Reuters, economists expected April exports to have fallen 15.7% y/y.
On the other hand, the experts were a little too sanguine in their import expectations, projecting that would have fallen by 11.2% y/y.
So what gives?
- Exports were boosted by shipments of Chinese medical goods.
- On the flip side, imports weredragged down by anemic global oil prices.
Get smart: Monthly trade numbers are volatile in the best of times, and even more so now because of the COVID-19 pandemic. So we wouldn’t read too much into these.
Gov.cn: 前4个月进出口9.07万亿元 4月份出口增长8.2%
CNBC: China says exports rose 3.5% in April, crushing expectations for a decline of 15.7%
Reuters: China April exports, imports set to plummet as virus crushes global demand: Reuters poll
4.Ultimate fighter 206– MoF vs. PBoC
Stop us if you’ve heard this one before: China’s Ministry of Finance (MoF) and central bank (PBoC) are butting heads.
The latest sticking point: MoF officials think the PBoC should be financing its special treasury bonds.
The details (SCMP):
- “Liu Shangxi, president of the Chinese Academy of Fiscal Sciences, a finance ministry-affiliated think tank…recently proposed issuing 5 trillion yuan (US$700.5 billion) in special Treasury bonds to help stabilise the economy.”
- “He called on the People’s Bank of China (PBOC) to buy them in tranches at an interest rate of zero.”
- “Such purchases of bonds are technically taboo in China as central bank law forbids it from directly bankrolling government spending.”
But Liu doesn’t care:
- “He said the PBOC needed to think outside the box as ‘neither quantitative easing nor a low interest rate [environment] has led to inflation,’ adding the old theory that the central bank should not be the cashier for the government was ‘outdated.’”
Get smart:Officials and policy advisers are trying to get their voices heard as the government putsthe final touches on its annual work report– which will be unveiled on May 22.
5.State Council promises to stay the course
The State Council did its thing on Wednesday, holding its weekly executive meeting.
Top of the agenda: Getting the economy back to normal.
Government officials listened to a report on the government’s current economic support policies, which consist of 90 various supportive measures.
Premier Li Keqiang is satisfied (Gov.cn 2):
- “The support policies introduced earlier are adequate.”
- “In other words, our policy response is appropriate in its intensity and prompt in timing.”
That said, the government did specify a few tweaks:
- Tax breaks for small businesses will be extended.
- The latest RMB 1 trillion of special project bonds (see April 28 Tip Sheet) must be issued by the end of May.
- Loan deferments for small and medium-sized business will be extended.
The bottom line: The government feels like it has done enough to support the economy. Don’t expect big new stimulus measures any time soon.
6.Ambassador to US calls for calm
In case you haven’t noticed, COVID-19 has ratcheted up already tense relations with the US.
- US officials have sought to blame the CCPfor not stopping the spread of the virus, and have been promoting a conspiracy theory that the virus leaked from a Chinese government laboratory.
- In response, Chinese officials and state media have demonized American officials and promoted their own conspiracy theory that the US military was the source of the virus.
On Wednesday, ambassador to the US Cui Tiankai tried to bring down the temperature in a Washington Post op-ed:
- “It is time to end the blame game.”
- “It is time to focus on the disease and rebuild trust between our two countries.”
- “As President Abraham Lincoln called for ‘the better angels’in his inauguration speech, I hope that the wisdom of preceding generations will guide us to choose the right side of history and work for our shared future together.”
Get smart: Cui’s call for calm will almost certainly go unheeded in both DC and Beijing. That’s because in both capitals pointing the finger at the other country plays well politically.
But hey: You can’t blame a guy for trying!
7.It’s not easy being green
Last Thursday, the general offices of the CCP Central Committee and the State Council issued a rubric for assessing provincial governments’ performance on environmental protection work.
- A CCP leading work group led by Executive Vice Premier Han Zheng will use the rubric to evaluate local officials.
Five areas will be evaluated:
- Fulfillment of environmental protection responsibilities
- Legislation and law-enforcement on environmental protection
- Fulfillment of targets for environmental standards, emissions reduction, and risk control.
- Effective useof the central government’s environmental protection funding as well as increases in local budgets for environmental protection
- Level of public satisfaction
Gets this: The assessment is only scheduled to take place during the next two years.
- The 2019 performance assessment will be done by July 2020.
- The 2020 performance assessment will be done by July 2021.
Get smart: Scheduling the KPI assessments for only two years indicates a special emphasis on environmental protection in the aftermath of the COVID-19 pandemic.
Get smarter: Policymakers in Beijing are signaling that environmental standards will not be sacrificed for the sake of post-pandemic economic recovery.
Gov.cn: 中共中央办公厅 国务院办公厅印发《省（自治区、直辖市）污染防治攻坚战成效考核措施》