President Xi Jinping's Trip to Wuhan Buoyed Stock Markets in China and Around the World By Zhou Xin, Jun Mai, and Orange Wang SCMP, March 11, 2020

President Xi Jinping’s trip to Wuhan on Tuesday, March 10, 2020

 

Coronavirus: China trumpets message of stability amid world turmoil as Beijing senses Covid-19 victory

President Xi Jinping’s trip to Wuhan on Tuesday buoyed stock markets in Hong Kong and Shanghai after Monday’s global free-fall China also reported its lowest daily number of new infections on Tuesday, including 17 in Wuhan and two imported cases in Beijing and Guangdong

China is now projecting itself as a source of political and economic stability in a world increasingly beset by the perfect storm of the coronavirus outbreak spreading rapidly in the United States and European Union, falling stock indices and plunging oil prices, turning the tables on the narrative of only a few weeks ago.

Buoyed by President Xi Jinping’s symbolic trip to the city of Wuhan, the virus epicentre in Hubei province, the Shanghai Composite Index gained 1.8 per cent and Hong Kong’s Hang Seng Index 1.4 per cent on Tuesday, in contrast to the free-fall in stock prices globally on Monday.

On Tuesday, shares of Wuhan-based companies, including Hubei Chutian Expressway and Yangtze Communications Industry, surged the daily limit of 10 per cent.

Xi’s trip followed just hours after global stock markets suffered their worst single-day loss since the global financial crisis in 2008 and a sharp drop in oil prices, with China’s leader attempting to send a clear signal of confidence in the battle against the outbreak. Chinese President Xi Jinping visits Wuhan for first time since start of Coronavirus outbreak

On Tuesday, the S&P 500 Index in New York opened more than 3 per cent higher, recovering some of Monday's losses, while in London, the FTSE 100 Index was up 2.6 per cent by the early afternoon.

“China is indeed a hero for now” after the crash in the United States, wrote Hao Hong, the head of research for Bocom International, the Hong Kong-based investment bank of China’s fifth-largest lender.

Hong added that China’s stock market had become “a beacon in the darkness” as the country’s quarantine measures, including restricting the movement of hundreds of millions people to control the spread of the virus, had been largely successful. At the same time, Hong noted that China’s market has already suffered a plunge as it was the first country to suffer from the coronavirus outbreak.

China reported just 19 new infections on Tuesday, including 17 in Wuhan and two imported cases in Beijing and Guangdong, which was the lowest daily number since it started providing daily reports on January 20, as well as the third consecutive day that all new domestic cases were restricted to Wuhan.

You can’t put your hope in governments that are unable to convince their people to wear masks Chinese ministry official

In contrast, the number of cases has accelerated in the likes of Italy, France, Germany and Spain, while the number of confirmed cases in the US rose sharply to 525 as of Sunday with 24 deaths, although the real size of infections could be much larger given the lack of testing.

China’s initial victory in curbing the coronavirus, despite the attempt by local authorities to silence warnings from doctors in the early days of the outbreak, has given its leaders fresh confidence that their authoritarian political model is better suited to handling emergencies than western liberal democracies.

Beijing was quick to act to impose massive controls limiting the movements of its citizens and closing at-risk businesses throughout the country, while also mobilising rapid construction of hospitals and the production of much-needed medical supplies including face masks.

An official with a Chinese ministry, who declined to be named as he is not authorised to discuss China’s political system with the media, said the coronavirus had proven that a centralised system has an advantage in overcoming human catastrophes.

“If there’s a colossal disaster that threatens the existence of human beings, the Chinese under the current system will survive the longest,” he said. “You can’t put your hope in governments that are unable to convince their people to wear masks.”

The spread of the coronavirus to over 100 countries around the world has disrupted economic supply chains and heightened risks of a global recession, with governments and central banks in major economies already implementing stimulus measures, with more likely to come.

China’s economic troubles may be worse than in 2008, but the situation in the West could be much worse than in 2008 due to political polarisation Shi Yinhong

China, with its official fiscal deficit at a mere 3 per cent of gross domestic product and a higher interest rate level than most other major economies, has a deep reserve of fiscal and monetary policy ammunition to battle a sharp economic downturn.

Dong Tao, a vice-chairman for Greater China at Credit Suisse Private Banking Asia-Pacific, said that while China’s political system has been more effective in controlling human flows to stem the spread of the coronavirus, the country has paid the deep price of a disruption to normal economic activities.

“The supply chain [disruption] effect is likely to deepen further, but it will take months, rather than years, to restore orders [to their pre-crisis level],” Tao said. “[In addition] a large scale fiscal expansion along with monetary easing [by China is near].”

Shi Yinhong, director of Renmin University’s Centre for American Studies and an adviser to China’s cabinet, predicted a “50 per cent” chance that China would be able to take advantage of its early exit from the crisis to accelerate its rise against the US and other Western economies.

“China’s economic troubles may be worse than in 2008, but the situation in the West could be much worse than in 2008 due to political polarisation,” Shi said. “In a comparison of power [between China and the West], the balance is, more or less, tilting towards China.”

In response to the global financial crisis over a decade earlier, China’s aggressive economic response helped pull the world out of recession, boosting the country’s global ambitions in terms of economic influence and even global governance.

Huo Jianguo, the former head of a think tank under the Ministry of Commerce and now a deputy director at the China Society for World Trade Organisation Studies, said Beijing's coronavirus control had showed “certain advantages of China’s system”.

Coronavirus containment measures spark prison protests across Italy as nation goes into lockdown

“Recognition for China’s risk management abilities is on the rise,” Huo said. “For the coronavirus, China has basically contained it while the epidemic is still spreading overseas, for the slump in oil prices, China has more gains than losses from it, and for the stock market plunge, China is far away from the storm centre.”

The coronavirus outbreak, which initially exposed China’s weakness, has offered it a chance to showcase its economic power, with 120 million face masks now produced per day, up from a total capacity of 20 million a day before the outbreak.

China came under criticism in late January when it became known that authorities in Wuhan had attempted to cover up the virus outbreak before speeches by Xi were later published that indicated he had given orders as early as the beginning of January to take steps to control the spread of the virus.

The fact that Xi’s speeches were published only later, however, invited criticism that he was partly responsible for keeping the public in the dark about the seriousness of the situation. The death of whistle-blowing doctor Li Wenliang then generated rare public calls for greater transparency and press freedom.

From that low point, however, China has been able to manage the turnaround, and after its decision to lock down the city of Wuhan on January 23, the whole country was mobilised to curb the spread of the virus. At the same time, Xi has repeatedly vowed that China will not forgo its economic and social development targets for 2020, an indication that it may still see a growth rate of around 5.6 per cent this year, needed to double the economy’s size between 2010 and 2020.

That, in turn, is a key component of the grand vision of “building up a comprehensively well-off society”, a centenary goal listed by the ruling Communist Party and a stepping stone for Xi to achieve his Chinese dream of national rejuvenation.

Xi also said on Friday that China remained committed to its goal of eradicating absolute poverty in rural areas by the end of 2020 even though the incomes of many poor migrant workers has been hit hard by the economic impact of the coronavirus.

“[The pledge to eradicate poverty] is a solemn promise made by the Communist Party to the Chinese people. We must deliver it on schedule. There’s no backtracking or flexibility,” said Xi, according to the official Xinhua News Agency.

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Zhou Xin co-leads the political economy team at the Post. He mainly covers economic stories but also writes about Chinese politics and diplomacy. He has previously worked for Reuters and Bloomberg in Beijing.

Jun Mai is an award-winning journalist covering China's political and social news. He writes about China's elite politics, general policies and social activism. He is currently based in Beijing.

Orange Wang covers the Chinese macroeconomy, and has many years of experience with China's monetary and fiscal policy moves. He also covered global market and financial news for a long time, with a particular focus on new technologies and their influences on economic growth and society. Before joining the South China Morning Post, Orange worked as a Shanghai Correspondent for ET Net, a Hong Kong financial news agency.

https://www.scmp.com/economy/china-economy/article/3074495/coronavirus-china-trumpets-message-stability-amid-world

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