driving the day
1. A quiet COVID day
After a worrying weekend, it was a quiet Monday on the COVID-19 front.
On Monday, China recorded (NHC):
- One new confirmed case, which had been imported.
This was a welcome relief after an uptick of 22 local transmissions over the weekend (see Yesterday’s Tip Sheet).
- China also reported 15 asymptomatic infections, all local.
Some context: Since May 1, the number of daily asymptomatic cases has stayed below 20.
The city governments of Wuhan and Shulan, the two new outbreak epicenters, are still working to contain the spread (The Paper).
- Yesterday, the Wuhan government ordered tests of all people in the city within ten days.
That is a big lift. Authorities will need to average close to one million tests per day to meet their goal.
The cases in Shulan remain particularly concerning (Jilin Daily via The Paper):
- The government still hasn’t identified the origin of the transmissions.
Meanwhile, normalization marches on in the rest of the country.
According to the Ministry of Education (21st Century Biz):
- Over 100 million students have gone back to school as of Monday. That’s 40% of all students.
Get smart: More local transmission cases are very likely to be reported in both Wuhan and Shulan in the coming days. But that’s unlikely to halt the broader national trend toward normalization.
- NHC: 截至5月11日24时新型冠状病毒肺炎疫情最新情况
- The paper: 武汉紧急通知：全市范围内开展全员核酸筛查“十天大会战”
- The paper: 吉林日报刊文：舒兰疫情暴露防控漏洞，给全省敲响警钟
- 21st Century Business: 全国返校学生数预计5月底将达1.5亿至2亿
finance & economics
2. The long march to resumption cont’d
China’s economy may be stalling out in its slow climb to full recovery, according to the Trivium Business Activity Index.
Here are our estimates as of May 12:
- The Trivium National Business Activity Index indicates that China’s economy is operating at 87.0% of typical output, showing no improvement from May 11.
- The Trivium National Large Enterprise Activity Index indicates that China’s large enterprises are operating at 86.4% of typical output, showing no improvement from May 11.
- The Trivium National SME Activity Index indicates that China’s small businesses are operating at 87.4% of typical output, up a smidge from 87.3% on May 11.
Some context: Our National Business Activity Index has remained stuck between 80% and 90% since April 13. That’s not good.
Get smart: This leveling off is worrying. With foreign demand still badly depressed, full recovery still looks a long way off.
- Trivium Business Activity Index: 截至5月11日24时新型冠状病毒肺炎疫情最新情况
finance & economics
3. Data dump – credit
The central bank (PBoC) dropped monthly credit data for April late on Monday.
The headline: Overall credit growth accelerated to its fastest pace since May 2018 – supported by solid bank lending and an ongoing surge in corporate bond issuance.
- Headline aggregate finance to the economy grew by 12% y/y – up from 11.5% in March and just 10.7% in each of the previous three months.
- RMB-denominated bank lending grew by 13.1% y/y – up from 12.7% in March and the fastest growth since June 2019.
- Corporate bond issuance grew by 19.4% y/y – up from 17.4% in March and the fastest pace since January 2017.
All major forms of shadow credit continued to see deep contraction.
Get smart: Exceptionally low money market rates, thanks to rate cuts and liquidity injections by the PBoC, have lowered rates on corporate bonds – making this an attractive financing option at present.
What to watch: Will overall credit growth continue to gradually accelerate from here? We have our doubts – the pace of corporate bond issuance doesn’t seem sustainable, and the restrictions on shadow banking will continue to counterbalance higher rates of traditional loan creation.
- Gov.cn: 2020年4月社会融资规模存量统计数据报告
finance & economics
4. Data dump—inflation
The National Bureau of Statistics (NBS) dropped its April inflation data on Tuesday.
The headline: Consumer price growth continued to slow and producer price growth continued to contract.
Here’s the deets (NBS):
- The consumer price index (CPI) rose 3.3% y/y in April—down from 4.3% growth in March.
- The producer price index (PPI) fell 3.1% y/y—down from a 1.5% contraction in March.
Some context: That’s the sharpest drop off in PPI since April 2016.
Food prices fell amid rising supply:
- Warm spring weather and more plentiful supplies of fresh vegetables caused their price to decrease by 8%.
- Likewise, pork prices fell by 7.6% as herds gradually recover from African Swine Fever.
What about that dismal PPI?
It was once again mainly down to plummeting oil prices.
Get smart: Despite the less-than-inspiring numbers, we believe current driving forces behind weak price growth are temporary.
Get smarter: If anything, the central bank is concerned about rising consumer inflation as the economy normalizes.
- Gov.cn: 国家统计局城市司高级统计师董莉娟解读2020年4月份CPI和PPI数据
- SCMP: Coronavirus: China’s factory prices hit four-year low as pressure continues to mount on manufacturers
politics & policy
5. Xi heads to Shanxi
Xi Jinping is so done with lockdown.
He’s on the road again, this time in Shanxi.
Some context: This marks Xi’s fourth trip in two months.
So far, there has been little reporting about the trip.
What we know so far (Xinhua):
- “On Monday afternoon, Xi visited an organic daylily farm in Yunzhou District of Datong City, and a village in the city’s Xiping Township to learn about poverty alleviation efforts.”
- “He then went to the Yungang Grottoes to learn about historical and cultural heritage protection efforts.”
Get smart: It is no coincidence that Xi’s first visit was to the countryside to discuss poverty alleviation. He has repeatedly made clear that the goal of eradicating poverty by the end of this year must be met despite the disruption of COVID-19.
What to watch: We’ll get more details on Xi’s trip in the coming days.
- Gov.cn: 习近平赴山西考察调研
- Xinhua: Xi inspects north China’s Shanxi Province
politics & policy
6. Premier Li seeks advice on Government Work Report
On Monday, Premier Li Keqiang invited leaders from the “other” political parties to weigh in on this year’s Government Work Report.
Some context: In addition to the CCP, there are eight officially sanctioned “democratic” parties, all of which acknowledge the leadership of the Communist Party.
Some more context: Premier Li will deliver the Government Work Report on May 22 at the opening of the legislature’s annual session. The report will specify major economic targets for the year.
Invited guests discussed a wide range of issues, including:
- Helping small and medium-sized enterprises
- Stabilizing employment
- Ensuring people’s livelihood
- Improving macro policies
- Improving the manufacturing industry
- Renovating old residential communities
- Improving public services
- Building the public health system
- Winning the fight against poverty
- Supporting mass entrepreneurship
- Promoting high-level opening
- Boosting domestic demand
Li was appreciative (Gov.cn 2):
- “Premier Li Keqiang urged adopting those ideas when revising the government work report in the next step.”
Get smart: The other political parties are an often overlooked component of China’s political ecosystem. They have more influence than many realize, and often drive policy in certain specific areas.
- Gov.cn: 李克强主持召开各民主党派中央全国工商联负责人和无党派人士代表座谈会 听取对政府工作报告意见建议
- Gov.cn: Premier seeks advice from non-CPC members for govt work report