Shanghai slowly reopening; More Beijing tests; Economy cratering as Covid and politics in command; No rest for old cadres
Today’s Essential Eight:
Shanghai improving, Beijing outbreak still not under control - The Shanghai government has announced life should be fully back to normal in mid to late June. Beijing has not fully locked down but has launched another round of tests for much of the city.
Dynamic zero-Covid for the foreseeable future - Ma Xiaowei, head of the the National Health Commission, has an essay in the latest issue of Qiushi outlining how the government is doubling down on dynamic zero-Covid. China has withdrawn as host of of football’s 2023 Asia Cup, as it could not guarantee it could run it under a “fully open model” even next year.
Bad economic data - April economic activity was ruined by Covid and the lockdowns, May likely will be too, perhaps part of June will be close to “normal”, but so much damage has been done.
Xi’s speech to the December 2021 Central Economic Work Conference - Qiushi has published an excerpt of his speech. The speech has no real surprises from what we saw in the coverage after the CEWC. Xi leads with “The first question: correctly understand and grasp the strategic goal and practical ways to achieve common prosperity. 第一个问题：正确认识和把握实现共同富裕的战略目标和实践途径”. This is not a speech that would likely inspire confidence for private businesses. The Qiushi publication schedule is probably not subject to short-term news cycles, in the New Era most of the lead essays are excerpts of speeches Xi has given sometime in the past, so this publication may have been in the works for a while, but the timing, on the day we get such awful economic data, is unfortunate. The editorial from Qiushi to accompany this excerpt also does not read to me like it meshes with the idea that Xi has pulled back from his goals around things like common prosperity and stricter management of capital.
Low hopes for CPPCC meeting with tech firms - As I said last week, if Liu He or even someone more senior attends perhaps this meeting could be an interesting signal of better days ahead for these firms, but given Xi’s comments in his CEWC speech, reprinted today, I remain unconvinced that there will be a meaningful relaxation for these firms that would allow them to return to anything like the revenue growth and profit margins of their glory days.
No political rest for old cadres - The General Office of the Communist Party of Chin has released guidelines on strengthening Party building among retired cadres, as well as a Q&A on what they mean. The timing, in the runup to the 20th Party Congress, is interesting, as grumbling is increasing about the prospects of Xi staying on, and the Q&A makes clear that retired cadres “should be guided to deeply understand the decisive significance of the "two establishments" and “shall not say negative things about the major policies of the Party Central Committee, shall not spread negative political statements”, among other things. Their tea may be “cold” but their support for Xi must be hot.
Yang Jiechi on Xi Thought on Diplomacy - The Monday People’s Daily has an essay from Yang Jiechi on studying and implementing Xi Jinping Thought on Diplomacy. It coincides with the publication last week of a new collection of Xi's speeches on diplomatic work.
Peter Hessler and Evan Osnos talk China - Hessler discusses his experience teaching in Sichuan and the circumstances of his departure, a worthwhile 30 minutes.
Thanks for reading.
The Essential Eight
1. Shanghai improving, Beijing outbreak still not under control
The Shanghai government has announced life should be fully back to normal in mid to late June. Beijing has not fully locked down but has launched another round of tests for much of the city.
Vice Mayor Zong Ming said the city is embarking on a three-phase plan this week that will gradually lift restrictions, including a weeks-long lockdown, now that 15 of the city’s 16 districts have achieved the goal of no community spread — meaning no new cases were found among residents who weren’t already in quarantine — for the past three days.
Shanghai has “effectively” controlled its latest outbreak, as the city’s new daily cases fell below 1,000 on Sunday and no new cases were reported outside either centralized quarantine facilities or sealed-off residential areas citywide for two straight days, Zong said at a press conference...
Following the Sunday announcement, many residents went online to question the purpose of these business resumptions when many were still put under a “silent period,” a new measure imposed by local authorities to eliminate community infections, which bans them from leaving their homes and even receiving deliveries.
Caixin has learned some residential communities in downtown Shanghai had been put under this type of lockdown as early as May 7, even though these were not areas subject to stay-at-home orders under a three-tier management system.
the number of people living in "closed-off management areas" has dropped to no more than 1 million, and the epidemic has been effectively brought under control, according to the press conference...
From June 1 to mid-late June, Shanghai will fully restore the normal order of production and life across the city with standard epidemic prevention and control measures, while strictly preventing any resurgence of the epidemic
An employee from one of the companies that operate Shanghai subways told the Global Times on condition of anonymity that the subway has been undergoing trial operations in recent days to prevent malfunctions of machines after long periods of disuse.
Those who live in communities without new cases for the past two weeks can go out of their compounds, on the premise that their community is safe, and their neighborhood street is also safe, which means no new cases during the period of time, a Shanghai government employee told the Global Times.
Three rounds of mass nucleic acid screening will be carried out in 12 districts in Beijing from Monday to Wednesday to control the new outbreak of the pandemic, according to the city's press conference for COVID-19 prevention and control on Sunday.
The 12 districts include Dongcheng, Xicheng, Chaoyang, Haidian, Fengtai, Shijingshan, Fangshan, Tongzhou, Shunyi, Changping, Daxing, and the Beijing Economic-Technological Development Area, said Wang Xiao'e, a senior official with the Beijing municipal health commission, at the press conference...
Beijing reported 39 locally transmitted COVID-19 cases and 15 asymptomatic cases on Sunday
Beijing on Sunday extended guidance to work from home in four districts of the Chinese capital, including the largest, Chaoyang, as the city tries to stop a COVID-19 outbreak
the latest memo said that it plans to stick to one shift for its Shanghai plant for the current week with a daily output of around 1,200 units. It also said that it would now aim to increase output to 2,600 units per day from May 23.
A group of students at a campus of China’s elite Peking University protested strict Covid-19 lockdown requirements on Sunday, arguing that the measures were poorly communicated and unfair...
The students were upset that they were unable to order food and that they were required to isolate, while teachers and their families were allowed to leave the campus freely, according to posts on a school forum and one student.
Which cities may be next?
The port city reported six confirmed cases and 18 asymptomatic infections as of Monday afternoon, while the latest outbreak in Tianjin recorded a total of 28 infections of the Omicron variant. All infected patients have been transferred to designated hospitals for treatment, local officials noted.
Lianhe Zaobao on an outbreak in Guang'an, Sichuan and the risks it cold pose to Chongqing and Chengdu and 50 million + people if it grows
2. Dynamic zero-Covid for the foreseeable future
Ma Xiaowei, head of the the National Health Commission, has an essay in the latest issue of Qiushi outlining how the government is doubling down on dynamic zero-Covid. China has withdram as host of of football’s 2023 Asia Cup, as it could not guarantee it could run it under a “fully open model” even next year.
China will throw more resources at its “dynamic zero tolerance” Covid-19 strategy, with its health chief also saying that the situation in Shanghai was improving thanks to the tough approach.
The plan includes building permanent quarantine facilities and setting up dedicated teams to carry out testing, according to Ma Xiaowei, head of the National Health Commission.
Ma made the remarks in an article in Communist Party publication Qiushi on Monday.
Ma's article - "Unswervingly implement the general policy of "dynamic zero-Covid" and consolidate the major strategic achievements of epidemic prevention and control - 坚定不移贯彻“动态清零”总方针 坚决巩固疫情防控重大战略成果 - 求是网
Early prevention and control ability should be upgraded and strengthened. It is still necessary to work hard on early detection, early treatment and isolation. The epidemic detection threshold will be moved forward again, and the normalization monitoring mechanism will be improved. The provincial capitals and cities with a population of over 10 million will set up a 15-minute walking nucleic acid "sampling circle", which will be tested regularly every week, and the detection frequency will be increased for key people. To further improve nucleic acid detection capabilities, focus on mobile detection capabilities, and strengthen the construction of public testing laboratories, urban testing bases, and third-party laboratories. Try not to crowd out daily medical resources in the deployment of sampling personnel, and the detection capacity of medical institutions mainly guarantees daily disease diagnosis and treatment. The capacity for admission and isolation should be further strengthened, and designated hospitals and sub-designated hospitals, permanent makeshift hospitals, and centralized isolation points should be planned and prepared in advance, and sufficient human and material resources for prevention and control should be prepared to ensure that they can be activated quickly in the event of an outbreak. In terms of social prevention and control, continue to adhere to the input of external defense, adhere to the same defense against people, objects, and the environment, and strengthen work such as wearing masks in public places, measuring body temperature, and checking health codes.
21st Century Business Herald on how the plans for testing sites within a 15 minute walk in all major cities have sparked a surge in people trying to get certified so they can get hired. This report cites a different report that in Shanghai some testing laboratory assistants can make 1500 RMB/DAY and some "middle-level testing 'masters'" can make 2000 RMB/DAY 据报道，上海有的核酸检测机构开出了“助理新冠检测实验员日入1500元、中级新冠检测师2000元一天”的高薪。
Confirming its decision to withdraw on Saturday, China’s Asia Cup organizing committee said Covid difficulties meant it “cannot pledge at this moment to hold next year’s Asian Cup competition under a fully open model.”
Higher booster shot coverage for the elderly, better management of new cases and medical resources, more efficient and accessible testing, and home treatment for COVID-19 are some essential prerequisites for China to adjust its existing policy to control COVID, a senior infectious disease expert said.
Without these preconditions, dynamic clearance remains the most optimal and responsible strategy for China as the country cannot risk the lives of its senior population by relaxing its anti-epidemic measures prematurely, said Wang Guiqiang, head of the infectious disease department at Peking University First Hospital.
Two former directors of a hospital in Southwest China were recently sentenced to one year in prison for illegally admitting fever patients during the country’s first wave of Covid-19 outbreaks in early 2020, the latest conviction for breaching epidemic control rules under the “zero-Covid” policy.
3. Bad economic data
April economic activity was ruined by Covid and the lockdowns, May likely will be too, perhaps part of June will be close to “normal”, but so much damage has been done.
Industrial output unexpectedly fell 2.9% in April from a year ago, while retail sales contracted 11.1% in the period, weaker than a projected 6.6% drop. The unemployment rate climbed to 6.1% and the youth jobless rate hit a record...
Monday’s data suggests gross domestic product declined 0.68% in April from a year ago, the first contraction since February 2020, according to estimates from Bloomberg Economics. Growth could weaken to below 2% in the second quarter, according to UBS Group AG, while S&P Global Ratings predicted it could be as low as 0.5%. Citigroup Inc. economists downgraded their full-year growth forecast for 2022 to 4.2% from 5.1%.
The April surveyed urban unemployment rate for 16- to 24-year-olds hit the highest in available data going back to January 2018, having climbed to 18.2% from 16% the previous month.
The surveyed urban unemployment rate in 31 major cities across China reached the highest in available data going back to June 2013
As the outlook deteriorates, a number of prominent Chinese economists and scholars, speaking at a forum in Beijing on Saturday, called for a more aggressive policy response.
“We’ve reached a point where we should use policies to save the economy at all costs,” said Huang Yiping, an economics professor at Peking University and a former central-bank adviser, according to an official transcript...
“The real weakness is on the demand side, but almost all of the economic measures implemented are supply-side measures,” said Michael Pettis, a finance professor at Peking University.
Property sales by value in April slumped 46.6% from a year earlier, the biggest drop since August 2006, and sharply widening from the 26.17% fall in March, according to Reuters calculations based on data from the National Bureau of Statistics (NBS) released on Monday.
Property sales in January-April by value fell 29.5% year-on-year, compared with a 22.7% decline in the first three months.
The Sunday announcement from the People’s Bank of China means that first-home buyers will be able to borrow money at an interest rate as low as 4.4%, down from 4.6% previously.
Aggregate financing, a broad measure of credit, stood at 910 billion yuan, the worst level since February 2020 when the whole country was basically locked down to control the first outbreak of Covid-19.
"The outlook is quite gloomy," said Bettina Schoen-Behanzin, the chamber's vice president. "Business confidence has really taken a severe hit due to the ongoing erratic policies of the Shanghai lockdown."
"Many companies and individuals are seriously considering their China presence."
Question: Given the brewing dynamic zero-Covid economic catastrophe building for so many individuals, wonder if PRC policymakers will decide to test direct transfer payments to citizens using the e-CNY. Would make sense on a lot of levels, but Xi seems to be against it.
David Daokui Li, a prominent Chinese economist, has called for the government to offer cash subsidies to residents affected by the pandemic as a way to prop up consumption. He made the remarks at a recent economic forum in Beijing. Meanwhile, he said the protection of the industrial chain will be critical to China’s economic potential. “At present a lot of factories have not been able to resume production.” he said. “The United States has invited many leaders from Southeast Asia to the White House in hopes of relocating China’s production lines to their countries. We cannot self destroy the Great Wall we’ve built.” “目前很多工厂不能完全复工复产，美国把东南亚的领导请到白宫，想把中国的生产线吸引到他们的国家，我们不能自毁长城。”
Industrial production in the Yangtze River Delta was down 14.1 percent in April due to the Omicron surge in Shanghai, home to the country's largest automaker SAIC Motor and the figure for the Northeastern part of the country dropped by 16.9 percent because of the outbreak in Jilin Province, a car manufacturing hub.
Tuesday People's Daily next installment in the Page 1 series to inject positive energy about the economy - "Since the beginning of this year, the rescue measures to help enterprises have been intensively introduced— To increase the confidence of market entities and stabilize their expectations(the word "stability" is in the forefront, seeking progress in a stable manner - the long-term positive fundamentals of the economy remain unchanged)".
Total power use dropped by 1.3 percent, year on year, in April to 636.2 billion kilowatt-hours (kWh), said the National Energy Administration.
Power consumed by the primary industry increased by 5.5 percent year on year, while that used by the secondary and tertiary industries shrank by 1.4 percent and 6.8 percent, respectively.
Residents' power consumption saw a year-on-year increase of 5.5 percent to 83.7 billion kWh in April, the administration said.
In the first quarter, the polled micro and small businesses had enough cash flow to operate for 2.4 months on average, down 0.3 months for the fourth quarter of 2021, according to a survey jointly conducted by Peking University and fintech giant Ant Group Co. Ltd...
Nearly 40% respondents said they could just survive one month with their cash on hand, which means a large number of small businesses would face bankruptcy if they’re caught in a Covid lockdown that lasts that long, according to the survey report published late last month. The online survey covered 16,529 businesses, with an average of 4.3 workers.
4. Xi’s speech to the December 2021 Central Economic Work Conference
Qiushi has published an excerpt of his speech. The speech has no real surprises from what we saw in the coverage after the CEWC. The speech leads with “The first question: correctly understand and grasp the strategic goal and practical ways to achieve common prosperity. 第一个问题：正确认识和把握实现共同富裕的战略目标和实践途径”. This is not a speech that would likely inspire confidence for private businesses. The Qiushi publication schedule is probably not subject to short-term news cycles, in the New Era most of the lead essays are excerpts of speeches Xi has given sometime in the past, so this publication may have been in the works for a while, but the timing, on the day we get such awful economic data, is unfortunate. The editorial from Qiushi to accompany this excerpt also does not read to me like it meshes with the idea that Xi has pulled back from his goals around things like common prosperity and stricter management of capital.