After defeating the domestic Covid-19 epidemic, China’s focus is now shifted to restarting its virus-battered economy.
ON Tuesday, China’s National Bureau of Statistics (NBS) released a set of heartening data for March that indicated Beijing’s efforts to restart its virus-hit economy is showing some positive results.
The Purchasing Managers’ Index (PMI), a key gauge of manufacturing activity, surprised at 52.0 in March. This was a strong rebound from 35.7 in February and a much higher figure than the 44.8 analysts expected in a Bloomberg survey.
The strong rebound in factory activity could be the first major exciting indicator on the business front after Beijing triumphed in a two-month long war against the novel coronavirus in Wuhan and other parts of the 1.4 billion-people country.
The rebound shows that the country’s arduous efforts in coordinating epidemic control and economic development have filtered through, NBS senior statistician Zhao Qinghe explains.
A total of 96.6% of China’s large and medium-sized enterprises have resumed production, up 17.7 percentage points from February, according to NBS’ survey.
In addition, China’s March composite PMI surged to 53, up 24.1 points from February.
Tuesday’s economic data also indicates a remarkable improvement in market demand, as the sub-reading for new orders stood at 52 in March, higher than 29.3 in February.
However, Zhao says the single-month rise from February’s low “does not necessarily mean the production has returned to pre-outbreak levels”.
The upturn of the economy, Zhao says, could only be conclusive when the PMI moves up for at least three consecutive months.
The Covid-19 outbreak, which started in Wuhan, forced the central government to prolong the normal week-long Lunar New Year holiday in January through February.
Businesses across China had to close temporarily as people were ordered to stay home to avoid contagion. But many resumed operations when the spread of the disease came under control.
According to Caixin Global, official data showed that only 60% of workers who returned home for the Chinese New Year holiday were back to work as of March 7. But this rose to 80% by March 19.
“Many companies in labour-intensive industries had trouble filling factory floors until early March as workers in (severely) virus-hit regions such as Hubei and Henan were barred from travelling, ” says a special report on labour by Caixin.
But due to slower demand and concerns over the risks of infection, many employers with sufficient workers for normal operation have cut operating hours, added the privately-owned economic and business news portal.
Overall working hours in February totalled 40.2 hours a week, 6.5 hours less than in the previous month, according to NBS data.
In fact, after putting the Covid-19 epidemic largely under control in early March, China’s leaders are shifting their focus to the resumption of production and business operations to ensure the mainland’s economy and important role in global supply chain could recover as soon as possible.
The visit by Chinese President Xi Jinping to Zhejiang Province in the east on Sunday to inspect port operations and industrial production shows clearly that his government is serious about getting the virus-hit economy back to its feet soon.
This was his first trip outside Beijing since his visit to the former Covid-19 epicentre Wuhan on March 10, in which he sent a message to the world that China had successfully fought the Covid-19 virus.
Zhejiang is one of China’s major international trade provinces, and businesses have restarted speedily, according to official China Daily.
Xi visited the Chuanshan port area of the Ningbo-Zhoushan Port, one of the world’s top container ports, which handled about 1.12 billion tonnes of cargo in 2019, reports China Daily.
The port of Ningbo, just south of Shanghai, is a key point linking China’s manufacturing industry with the rest of the world.
The Chinese leader also went to an industrial park in Ningbo, which produces high-end auto parts and molds, to inspect work resumption.
While in Ningbo, Xi says Beijing will take measures to protect small and medium-sized enterprises (SMEs) from being seriously hurt by the virus outbreak.
Noting that all kinds of enterprises could be affected by the Covid-19 epidemic that had caused more than 80,000 infections and claimed over 3,300 lives in China, Xi says special consideration will be given to SMEs.
SMEs are the main contributors of employment and key components to ensure the smooth operation of industry chains in China.
Xi’s pledge on Sunday to SMEs was immediately followed by concrete steps this week.
Massive financial help for SMEs
On Tuesday, China’s Cabinet rolled out another batch of robust measures aimed at helping small businesses worth hundreds of billions dollars in extra funding and hundreds of million dollars in subsidies for low-income households, reports Global Times of China.
The latest measures include granting Chinese banks one trillion yuan in extra re-lending for SMEs – the largest amount of funding announced so far amid this epidemic.
Additionally, financial institutions will extend loans totaling 300 billion yuan to small and micro firms, among other measures.
The Cabinet meeting also asked for further targeted cuts to the reserve requirement ratio to release more liquidity for SMEs. Other loan programmes will help small businesses raise as much as 800 billion yuan in capital by end-2020.
“It is safe to say that these are the most robust measures since the epidemic to help SMEs, and rightly so, ” Cao Heping, a professor of economics at Peking University, tells the Global Times.
As many major businesses have resumed operations, top officials are now focused on helping SMEs, Global Times opines.
At the meeting, the Cabinet also discussed measures to help boost consumer demand.
Auto sales, which account for a big chunk of China’s total consumption and the biggest growth driver, were singled out for subsidies and tax cuts.
Auto buyers will be given tax cuts for purchasing new-energy vehicles for another two years.
Strategies to meet economic goal
Two days before his Zhejiang visit, Xi – the general secretary of the Communist Party of China (CPC), had chaired a meeting to analyse the Covid-19 response and the economic performance of the country, according to Xinhua News Agency.
The meeting emphasised on the importance of the speedy return to normal work and life after implementing epidemic containment measures.
The CPC meeting decided that damage caused by virus must be cut to the minimum so as to achieve this year’s economic and social development goals.
China is prepared to “appropriately raise” the fiscal deficit ratio, issue special treasury bonds, increase the scale of special bonds for local governments, and guide the interest rate to decline in the loan market, according to China Daily.
However, the Cabinet – which also deliberated challenges posed by global Covid-19 pandemic that has hit about 200 nations – did not announce a new GDP growth target for this year in their statement.
Li Daokui, a former adviser to China’s central bank, tells Global Times that Beijing should set a GDP growth target for 2020 and he suggests a 4.0%-5.6% range for the nation.
Li, now a professor at Tsinghua University, says although it is very tough to set a growth target amid the coronavirus pandemic, announcing an annual growth target is still required.
“A GDP goal is supposed to give businesses and capital markets a direction to strive for. China has to create 11 million new jobs every year to maintain social stability.
To achieve this goal, GDP growth has to achieve 4% at a minimum, ” Li says.
As the country’s GDP may contract up to 7.0% in the first quarter amid the pandemic, economic pressure is huge for the rest of this year for China to achieve growth, Li says.
Before the Covid-19 virus wrecked havoc to China’s economy, Beijing had projected GDP to grow at around 6% in 2020. Last year, China’s GDP grew at 6.1%.
On March 5, the International Monetary Fund – which believes China could “return to normal by the second quarter of 2020” – slashed its 2020 growth outlook for China to below 5.6% due to the spread of Covid-19 globally.