driving the day
1. Wuhan completes citywide COVID-19 testing
This morning, the National Health Commission (NHC) dropped the latest COVID-19 numbers.
From May 22-24, China saw (NHC):
- 14 new confirmed cases, 13 of which were imported.
- One domestically-transmitted case in Jilin City.
The number of new asymptomatic cases increased from 28 on May 22, to 36 on May 23, to 40 on May 24.
Get smart: The asymptomatic case increase was mostly down to more people getting tested as a result of the campaign to test all residents in Wuhan that began on May 15 (see May 12 Tip Sheet).
- On May 22 and 23, Wuhan reported a total of 55 new asymptomatic cases after testing 2,617,106 people.
By May 24, Wuhan had tested more than 9 million residents during the 10-day campaign – 90% of its entire population.
- The city’s health commission is asking remaining residents to get tested before COB on May 26 at one of the city’s 231 remaining testing sites.
How did Wuhan test so many people so fast?
- Wuhan combined the samples of 5-10 people together for testing.
- A negative combined sample result clears all members of the sampled group.
- A positive combined sample result triggers individual testing of each group member.
Get smarter: Wuhan’s testing regimen is impressive. Other countries should take note.
2. Threading a needle on econ support
Over the weekend, we took sometime to digest Premier Li Keqiang’s Government Work Report.
(What else are weekends for?)
Our not-so-hot take:As we said on Friday, it’s a mixed policy bag– aiming to boost support whileavoiding overkill (see Friday’s Tip Sheet).
Make no mistake: Policy support is certainly being stepped up – with an expanded fiscal deficit, issuance of special treasury bonds, more local government bonds, and accelerated credit growth.
Fiscal policy will do the heavy lifting.
- The budget deficit target of “over 3.6% of GDP” is testament to that – especially given that 3% of GDP has long been a budgetary redline.
But, but, but: The size of both special treasury bond and local government bond issuance disappointed, while the language around monetary policy was slightly more forward leaning than expected.
None of these developments is a huge surprise. But at the margin, fiscal measures will be slightly less aggressive than we thought, while monetary policy will be somewhat more proactive.
One last thing: The fact that no GDP growth target was announced for the year is hugely positive.
The bottom line: Government officials are emphasizing employment, consumption, and business survival over gangbusters growth.
3. Xi explains lack of GDP growth target
Over the past three days, Xi Jinping has been participating in group discussions with delegates at the Two Sessions.
Xi’s spent more of his time talking through economic policy than he has in previous years.
On Friday afternoon, the big man explained why he endorsed the decision to scrap the GDP growth target (People.cn):
- “[We] would have set the economic growth target at around 6% without the pandemic.”
- “However, some things are not up to us after the epidemic happened.”
- “A global economic recession is a foregone conclusion.”
- “There are still many uncertainties about how much and how deeply we will be affected.”
Xi’s also highlighted the adjustment’s silver lining:
- “If we inflexibly set a[target], then the government would be focused on stimulating the economy to achieve the growth rate, which is not in line with the purpose of our economic and social development.”
- “In fact, the pursuit of [scientific and new development] will indirectly promote a less severe drop in GDP growth.”
Get smart: That mindset shift is a huge deal.
What to watch: Will China take this opportunity to scrap GDP targets for good?
4. Han Zheng doubles down on HK security law
On Saturday, Executive Vice Premier Han Zheng sat down with Chinese People’s Political Consultative Conference (CPPCC) delegates from Hong Kong.
Top of the agenda: The legislature’s draft resolution on “establishing and improving the legal system and implementation mechanism for the safeguarding of national security in Hong Kong” (see Friday’s Tip Sheet).
Han wanted everybody to know that Beijing did not make the decision to introduce the resolution lightly (CGTN):
- “[It] is a carefully-made decision by the central authorities based on Hong Kong’s situation.”
Han gave some background (Ta Kung Pao):
- “[In October] last year, the Central Committee decided to establish a robust legal system for national security in the Hong Kong SAR.”
- “The legislation is absolutely necessary, and we are firm in our determination to implement it.”
Meanwhile, on Sunday, State Councilor and Foreign Minister Wang Yi sought to reassure foreign investors (SCMP 1):
- “[The law will have] no impact on… the legitimate rights and interests of foreign investors in Hong Kong.”
Get smart: Beijing wants to have its cake and eat it too – tightening the screws on Hong Kong while not undermining the city’s status as a global financial center.
What to watch: Will foreign investors in Hong Kong pick up sticks?
CGTN:Vice Premier Han Zheng encourages advisers from HKSAR to fulfill duties
SCMP:Two sessions: national security law will not damage Hong Kong’s freedoms, Chinese foreign minister says
SCMP:Tear gas fired, arrests made as thousands protest against Beijing’s planned national security law for Hong Kong
5. Wang Yi leads the wolf pack
At a press conference Sunday, State Councilor and Foreign Minister Wang Yi discussed China’s “wolf warrior” diplomacy.
- The term “wolf warriors” denotes a growing cohort of aggressive and controversial Chinese diplomats (see April 2 Tip Sheet).
- Many within China’s foreign policy establishment have criticized the new approach (see May 7 Tip Sheet).
Wang defended the approach (SCMP):
- “We will strongly hit back against malicious slanders and firmly defend national honour and dignity.”
- “We will lay out the truth to counter the gratuitous smears and to firmly uphold justice and conscience.”
Get smart: Wang’s comments make it clear that the wolf warriors have the support of the top leadership.
Our take: This is a strategic mistake. Aggressive rhetoric may play well at home, but is badly undermining perceptions of China abroad.
6. The Missouri non-compromise
That wasn’t all Foreign Minister Wang Yi had to say during his press conference.
He also warned that Washington was pushing the US and China toward a “new Cold War.”
Wang put American lawmakers on blast(China Daily):
- “Some US politicians have fabricated too many lies and plotted too many conspiracies about China regardless of the most basic facts.”
- “[They] have rushed to label the virus, politicize its origin and stigmatize China.”
He also took umbrage with the recent lawsuit filed against China by the US state of Missouri:
- “The lawsuits against China over COVID-19 have zero basis in fact, law or international precedents.”
He concluded with aless than convincing call for Sino-American cooperation in the continuing fight against COVID-19.
Get smart: US-China relations are in a frightening tailspin. The risk of a new Cold War is more than just rhetoric.
The central government budget released on Friday shows how China’s preparing:
- Spending on foreign affairs is down 11.8% y/y.
- Defense spending is up 6.6% y/y.
China Daily:FM warns of efforts to provoke ‘new Cold War’