Eye on China: Diplomatic Push – Nepal Interference – Normalcy Returning – EU Edited – Origins Fight

Eye on China is a weekly bulletin offering news and analysis related to the Middle Kingdom from an Indian interests perspective.

I. In China

China was holidaying for much of the week, and while tourism has obviously rebounded from earlier this year. It’s nowhere near normal. The Ministry of Culture and Tourism informed that during the Labor Day holiday that ran from May 1 to May 5 this year, China recorded 115 million tourist trips domestically, bringing in tourism revenue of 47.56 billion yuan ($6.79 billion). That’s a 59.58% drop from the 117.67 billion yuan recorded for last year’s Labor Day holiday, which was one day shorter, running from May 1 to May 4. Despite that, the epidemic control situation in the country is clearly getting better. The National Health Commission on Thursday classified all counties as low-risk for Covid-19. China hasn’t recorded a Covid-19 death in 22 days. While making the announcement, the NHC said that there had been no new domestic cases for four consecutive days till Wednesday. But on Friday, it reported one indigenous case in Jilin province and three suspected imported cases in Shanghai.

There were a couple of key meetings this week on epidemic control. Li Keqiang chaired the meeting of the leading small group after Xi Jinping chaired a Politburo Standing Committee meeting. The PSC heard a report from the leading group on epidemic control. Xi offered what seemed to be a strong appraisal. Xinhua reports: “Xi said that the group had spared no effort to curb the spread of the virus and worked hard to build a strong first line of defense, making important contributions to winning the people’s war against the epidemic.” He, however, added said that epidemic prevention and control measures in Hubei should not be relaxed. A liaison group will be heading to Wuhan and Hubei to examine the work.

On Thursday, then Li led the leading small group meeting. The objectives going forward are to “consolidate the results of epidemic prevention and control, resolutely prevent rebound, and promote the resumption of production and enterprises, the resumption of service industry and the resumption of business and school resumption.” Expect a greater push at opening things in the country going forward. Other signs of this is the fact that schools opened in Beijing and Shanghai in late April and now they are also resuming in Wuhan, with masks and temperature checks being mandatory. And of course, the announcement of the annual Two Sessions, which will now be held on May 22.

Li also chaired the State Council’s weekly meeting on Wednesday. The meeting took stock of the economic measures adopted by the government. So are we likely to see more support or a stimulus? Well unlikely for now. Xinhua reports that “it was agreed at the meeting that the above measures are paying off. Production is steadily returning to the usual capacity, the difficulties facing businesses are easing, and life and work are getting back to normal.” Among the many areas that still remain a matter of concern, expect focus to remain on employment and consumption.

First, on unemployment, there’s clearly a lot of problems with regard to data. Analysts from Shandong-based Zhongtai Securities had a report in late April estimating the overall unemployment rate at 20%. They said that around 70 million people lost their jobs due to the outbreak. But that report was swiftly retracted. Other estimates put the overall number of people unemployed at 80 million. Trivium China’s Friday Tip Sheet provides another interesting estimation. It looked at data from the Ministry of Human Resources and Social Security, estimating that the government was subsidising salaries of 86 million people. Second, on consumption, the holiday numbers, mentioned above, aren’t the greatest, but they are still positive. But the real winner was the auto sector. Sales reached around 2 million vehicles nationally last month, the China Association of Automobile Manufacturers said on WeChat on Thursday. That would be a roughly 1% increase from the 1.98 million vehicles sold in April 2019.

Other sectors continue to struggle. Services continue to contract. Reuters reports that Caixin/Markit services Purchasing Managers’ Index pulled up to 44.4 in April from 43 in March, but remained in a deep slump and far below historic averages. Caixin’s composite manufacturing and services PMI, also released on Thursday, picked up to 47.6 from 46.7 in March. Caixin reports that China’s goods exports unexpectedly rose in April, while imports shrank. Exports grew 3.5% year-on-year to $200.3 billion last month, reversing a 6.6% drop in March. Imports of goods plunged 14.2% year-on-year to $154.9 billion, far steeper than the 0.9% decline the previous month. Financial Times reports that the recovery was driven by stronger demand from south-east Asia where markets are gradually reopening. The region reported a 3.9 per cent increase in purchases in the first four months of this year.

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