Commentary on Political Economy

Tuesday, 31 March 2020

Coronavirus: Xi Jinping struggles to rouse battered businesses

Xi Jinping meets the workers in Zhejiang on Sunday. Picture: AP
Xi Jinping meets the workers in Zhejiang on Sunday. Picture: AP
China is struggling with what state media is calling its “new normal”, despite attempts by President Xi Jinping to reassure its COVID-19 ravaged businesses.
Attempts to reboot the world’s second-biggest economy have been complicated by the extraordinary spread of COVID-19 through economies with which China is deeply enmeshed, from Europe to the US to Australia.
At home, fears of a second wave of infections are undermining domestic consumption.


“The lessons of history must be heeded. More people died in the second wave of the 1918 influenza pandemic. China has no room for error,” wrote the state-controlled China Daily in an editorial on Tuesday, which noted the more than 700 cases “imported” into the country, as well as concerns about the spread by “asymptomatic” cases of the coronavirus.
After a two month all-of-­society effort to quash the coronavirus, China has joined a small group of countries — which includes South Korea, Taiwan, Singapore and Japan — whose economies are more open than their peers in the developed world.
These countries — each with horrific experience of infectious disease seared in memories of their populations — are experimenting with how open they can be without allowing an outbreak of the highly infectious coronavirus, which has subsumed healthcare systems throughout the world.
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Data released by the National Bureau of Statistics on Tuesday showed the official manufacturing purchasing managers’ index was 52 in March, up from a record low of 35.7 in February. Non-manufacturing PMI — a gauge of sentiment in the services and construction sectors — also recovered to 52.3 from 29.6 in February, another record low. A reading of 50 shows growth. While factory workers have returned, examples of skittishness are everywhere. Days after 600 cinemas were reopened after a two-month closure, they were shut at the weekend with no explanation from Beijing. Also suddenly closed: Shanghai’s Oriental Pearl TV Tower, the one that looks like a mixture of a red Christmas decoration and a rocket ship, and a symbol of China’s “reform and opening-up” era.
Even officials are being unusually frank about the difficulties.
“Overseas and domestic demand are both slumping, having a significant impact on some export-oriented companies. These companies might face a struggle to survive,” said vice-minister of industry and information technology Xin Guobin in Beijing on Monday, the day after Mr Xi’s tour of Zhejiang province.
For two days, state media has been full of reports on the trip by Mr Xi to Zhejiang, home of e-commerce giant Alibaba, one of the country’s biggest ports and the source of much of a power base that has supported him as general secretary of the Chinese Communist Party. During the trip, Mr Xi — who at times was pictured without a face mask — told local officials and private business executives the central government was looking at ways to help small and medium-size businesses survive the economic damage caused by the pandemic.
“I am here to listen to your views so that our policies can be more targeted,” Mr Xi said.
Despite Beijing’s efforts, economists continue to lower their growth projections for the world’s biggest manufacturer, as the coronavirus shutters much of the world economy. “(China) faces a new problem: an impending collapse in demand for exports as its customers go into lockdowns of their own,” economics analysts at Gavekal Dragnomics said in a report.
“That shock to industry and manufacturing employment means that China will not enjoy the hoped-for V-shaped recovery in growth,” they wrote.
Last week, China’s flagship investment bank — whose alumni include Wang Qishan, one of Mr Xi’s most respecte­d advisers — cut its forecast for real GDP growth in 2020 to 2.6 per cent. That would be the lowest since 1974, the second last year of Mao Zedong’s reign.

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