driving the day
1. Rate of asymptomatic detectiondrops
This morning, the National Health Commission (NHC) dropped the latest COVID-19 numbers.
On May 18, China reported (NHC):
- Three new domestically transmitted cases – two in Jilin Province, and one in Hubei
- Three new imported cases, all in Inner Mongolia
- 17 new asymptomatic cases, all of which were domestically transmitted
Some context: On average, the government has discovered 13.9 asymptomatic cases per day over the past two weeks.
This is good: The government has massively ramped up testing.
Take Hubei for example (Xinhua):
- The province had 11 institutions capable of conducting nucleic acid tests at the beginning of February.
- Now there are216 such institutions.
This is even better: As tests have been ramped up, the ratio of people testing positive has dropped dramatically.
- Between April 1 and April 7, Hubei conducted nucleic acid tests on 272,317 people and found that8.5 ofevery 10,000 people were asymptomatic carriers of the virus.
- Thatratio dropped to 1.7 for every 10,000 people tested between April 8 and May 17.
- In the past week, Hubei conducted nucleic acid tests on 1,530,000 people, and found only 0.46asymptomatic cases for every 10,000 people tested.
Get smart: You would expect positive rates to decrease as testing becomes more widespread. Nonetheless, this is a welcome indication that there are not scads ofasymptomatic cases lurking in the general population.
2. Party releases major economic policy document
On Monday, the CCP Central Committee and the State Council jointly released a document on overhauling the country’s economic management system.
Some context: The document was approved by China’s most important policymaking body, the Central Committee for Comprehensively Deepening Reform (CCCDR) back in February (see February 17 Tip Sheet).
More context: Xi’s top economic advisor, Liu He, looks to be the driving force behind this document.
The big message: We need to give markets a bigger role.
Here’s what the leadership hopes to achieve (Gov.cn):
- “[E]ffective incentives for property rights, the free flow of production factors, flexible prices that respond [to the market], fair and orderly competition, and the survival of the fittest enterprises.”
This means a reduced role for government (Gov.cn 2):
- “The guideline stressed minimizing the government’s direct allocation of market resources and direct intervention in microeconomic activities.”
But don’t get too excited – it’s not like the CCP has gone all laissez-faire.
- The state-owned sector is called on to play an increased role in technology, national defense, and security.
- And the government will continue to pour resources into science and technology.
Get smart: It’s hard to overstate how important this document is. It sets the parameters for the next five-year plan (which will be released next year) and beyond.
3. Party releases major economic policy document (cont’d)
Did you think we were done talking about the policy document from the previous entry?
- You must be new here.
The document is HUGE and wide-ranging in terms of the “what,” but pretty vague on the “how.”
- That’s par for the course in high-level docs like this.
Here are a few things thatcaught our eye.
We could be moving towards a more flexible labor market:
- Residents from a given city cluster can change their household registration (hukou) freely within the cluster.
- Cities will get public service resources based on their population instead of their administrative rank.
And the doc gives some serious time to creating a better business environment. It promotes:
- A regular review mechanism for market access policies
- A review mechanism to weed out policies that impede fair competition
- A class action system to protect consumer rights
- A national evaluation of local business environments
But foreign companies should beware. Foreign investments will be subject to:
- A national security review
- Anti-monopoly review
- Technology security management review
- An unreliable entity list
Certain state-owned enterprises are in for some changes. The following industries will be subject to more competition:
- Oil and gas
- Postal services
Get smart: These initiatives are still in the planning stages. They will be translated into policy over the coming months.
4. Data dump – government revenues
On Monday, the Ministry of Finance dropped fiscal data for Jan-Apr.
- Total government outlays for Jan-Apr were RMB 6.21 trillion – down 14.5% y/y.
- Total fiscal revenues for Jan-Apr were RMB 5.31 trillion – down 16.7% y/y.
- Total value-added tax revenues for Jan-Apr were RMB 1.99 trillion – down 24.4% y/y.
- Total corporate tax revenues for Jan-Apr were RMB 1.29 trillion – down 13.7% y/y.
Get smart: The government’s fiscal position is not great. That’s part of the reason that they have avoided the type of large-scale stimulus that we saw in 2008-09.
What to watch: Beijing’s fiscal deficit target will be unveiled at the Two Sessions on Friday (see May 15 Tip Sheet).
5. Xi addresses the WHA
Yesterday was a big day for Xi Jinping.
He addressed the opening of the 73rd World Health Assembly via video.
Why this matters: As Tip Sheet readers know, Xi has tried to position China as a responsible global leader in the wake of COVID-19– with mixed success.
Xi doubled down on his message of cooperation (Xinhua):
- “The virus does not respect borders. Nor is race or nationality relevant in the face of the disease.”
- “Around the world, people have looked out for each other and pulled together as one.”
- “China takes it as its responsibility to ensure…global public health.”
Xi also mounted a gentle defense of China’s handling of the outbreak.
- “[China has] provided information to WHO and relevant countries in a most timely fashion.”
- “We have shared control and treatment experience with the world without reservation.”
Get smart: Xi wants the world to see China as the global leader in the fight against COVID-19 and an upholder of multilateralism.
Get smarter: Xi’s message will find little welcome in the West, where anti-China sentiment is high and rising.
6. Xi addresses the WHA (cont.)
Xi had lots more to say in his speech to the World Health Assembly (see previous entry).
He made six proposals for defeating the coronavirus (Xinhua):
- Step up COVID-19 prevention and control measures
- Follow the lead of the World Health Organization (WHO)
- Provide greater support for Africa
- Strengthen global governance in the area of public health
- Restart the world economy
- Strengthen international cooperation
Xi promised the following:
- Commiting USD 2 billion over the next two years to help with global COVID-19 prevention and response
- Establishing a cooperation mechanisms between 30 pairs of Chinese and African hospitals
- Deploying globally any future COVID-19 vaccine originating in China
- Along with other G20 countries, implementing the debt service suspension initiative
Xi also agreed (in principle) to an investigation into the global COVID-19 response:
- “China supports the idea of a comprehensive review of the global response to COVID-19 after it is brought under control.”
Get smart: WhileXi’s message may not resonate much in the West, itwill be much more favorably received in developing countries.
7. Beijing contemplates new approach to Hong Kong
ICYMI: Premier Li Keqiang will deliver the annual Government Work Report on Friday morning.
One thing to watch: How the report treats Hong Kong.
Some context: Beijing has been frustrated by its inability to calm the city, which has been wracked by protests for a year.
Li may lay out a new approach (SCMP):
- “Sources said Premier Li Keqiang was expected to take a tougher stance on Hong Kong in his work report to the National People’s Congress.”
What else to watch: Beijing’s approach to national security legislation.
- Beijing has been pushing Hong Kong to pass national security legislation for two decades.
- But Hong Kong has resisted, due to widespread concern that such legislation would undermine the city’s autonomy.
Beijing could take matters into its own hands:
- “A hard way to do this is [for the National People’s Congress] to pass the national security law and add it to Annex III of the Basic Law.”
- “Another less damaging option is for the NPC Standing Committee, the country’s top legislative body, to reinterpret some colonial ordinances and turn them into a de facto national security law.”
Get smart: There is no easy solution to Beijing’s “Hong Kong problem.”