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Tag: COVID-19 in china

  • Several Beijing districts shut schools as China COVID cases rise

    Several Beijing districts shut schools as China COVID cases rise

    Students in schools across several Beijing districts buckled down for online classes on Monday after officials called for residents in some of its hardest-hit areas to stay home, as COVID cases in China’s capital and nationally ticked higher.

    China is fighting numerous COVID-19 flare-ups, from Zhengzhou in central Henan province to Chongqing in the southwest and for Sunday reported 26,824 new local cases, nearing the country’s pandemic peak in April. It also recorded two deaths in Beijing, up from one on Saturday, which was China’s first since late May.

    Guangzhou, a southern city of nearly 19 million people that are battling the largest of China’s recent outbreaks, ordered a five-day lockdown for its Baiyun district, it’s most populous. It also suspended dine-in services and shut night clubs and theatres in Tianhe, home to the city’s main business district.

    The latest wave is testing China’s resolve to stick to adjustments it has made to its zero-COVID policy, which calls for cities to be more targeted in their clampdown measures and steer away from catch-all lockdowns and testing that have strangled the economy and frustrated residents.

    Asian share markets and oil prices slipped on Monday as investors fretted about the economic fallout from the intensifying COVID situation in China, with the risk aversion benefiting bonds and the dollar.

    Several Chinese cities began cutting routine community COVID-19 testing last week, including the northern city of Shijiazhuang, which became the subject of fervent speculation that it could be a test bed for policy relaxation. This sparked worry among some local residents.

    But late on Sunday, Shijiazhuang announced it would conduct mass testing in six of its eight districts over the next five days after new daily local cases hit 641. It also encouraged residents to shop online and ordered some schools to suspend in-person teaching.

    “They lasted a week,” said one popular comment on Weibo on Shijiazhuang’s curbs, which was among the most viewed topics on the social media platform.

    The capital Beijing reported 962 new infections, up from 621 a day earlier. Its sprawling Chaoyang district, home to 3.5 million people, urged residents to stay home, with school going online. Some schools in Haidian, Dongcheng, and Xicheng districts also halted in-person teaching.

    The People’s Daily newspaper, the mouthpiece of the Chinese Communist Party on Monday published another article reiterating the need to catch infections early but to avoid taking a “one-size-fits-all” approach, its eighth such piece since China announced its 20 adjusted measures on Nov. 11.

    The National Health Commission on Monday published more detailed guidance on how these measures would be applied to testing, the delineation, and management of risk areas as well as home isolation practices.

    “FEELING THE STONES”

    China’s recent efforts to make its COVID-19 curbs more targeted have sparked investor hopes of a more significant easing even as China faces its first winter battling the highly transmissible Omicron variant.

    Many analysts expect such a shift to begin only in March or April, however, with the government arguing that President Xi Jinping’s signature zero-COVID policy saves lives and is necessary to prevent the healthcare system from being overwhelmed.

    Experts warn that full reopening requires a massive vaccination booster effort and a change in messaging in a country where the disease remains widely feared. Authorities say they plan to build more hospital capacity and fever clinics to screen patients and are formulating a vaccination drive.

    Oxford Economics said it only expects an exit from zero-COVID in the second half of 2023, with vaccination rates for the elderly still comparatively low.

    “From an epidemiological and political perspective, we do not think the country is ready yet to open up,” it said in a Monday report.

    Hao Hong, the chief economist at GROW Investment Group, said in a separate note a gradual and managed reopening may already be underway, with rounds of back and forth as China “crosses the river while feeling the stones”.

    “Despite the mounting challenges, it is not a question of whether China will reopen, but a question of over how long a period and how best to manage to minimize healthcare costs and potential lives lost,” he said. “We assign a probability of 4/5 to the gradual reopening scenario.”

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  • A $1 trillion headache: China’s local fiscal shortfall poses broader growth risks

    A $1 trillion headache: China’s local fiscal shortfall poses broader growth risks

    By any account, $1 trillion seems huge. That’s the scale of budget shortfalls facing Chinese provinces, reducing their fiscal firepower to fund infrastructure spending and tax cuts, and raising risks for the world’s second-biggest economy in 2023.

    The timing couldn’t be worse for policymakers in Beijing, as the economy wobbles under the weight of global recession risks, surging commodity costs, rising geopolitical tension and widespread COVID-19 lockdowns at home – spoiling the backdrop of a once-in-five-years congress of the ruling Communist Party that got underway on Sunday.

    Local governments have long been a pump-primer of China’s growth, but declining state land sales revenue in the wake of an ongoing crackdown on debt in the sector has severely eroded their financial power – a situation exacerbated this year by China’s feeble growth, weak tax income and crippling COVID restrictions. 

    Local governments must also make debt payments in coming months, portending more financial pain and limiting their ability to meet Beijing’s requests to boost spending. Already, many of them have resorted to cutting salaries, reducing headcounts, lowering subsidies and even imposing disproportionately hefty fines to meet budget shortfalls.

    In the first eight months, China’s 31 provincial-level regions reported a gap between general public revenue and expenditure totalling 6.74 trillion yuan ($948 billion). That’s the widest for the period since at least 2012, Reuters calculations from local government data in the past decade showed, with the populous provinces of Sichuan, Henan, Hunan and Guangdong suffering the largest shortfalls.

    In the same period, government land sales, counted separately, tumbled 28.5% year-on-year to 3.37 trillion yuan, adding urgency to the need to restore the financial health of indebted real estate firms. 

    “With the slower growth this year, we expect fiscal deficits for regional and local governments will remain substantial, reflecting the property slowdown and lingering effects of the coronavirus shock,” said Jennifer A. Wong, analyst at Moody’s, which expects 2022 economic growth to slow to 3.5% from 8.1% in 2021.

    In the past, shortfalls were largely offset by transfer payments from the central government and carryover funds from previous years, but analysts say cooling economic growth may limit any such help this time around.

    Policymakers will also be wary of picking up the fiscal slack with large-scale monetary stimulus as a wave of global interest rate hikes to rein in red-hot inflation has sent US bond yields soaring, widening the yield gap between U.S. and Chinese debt.

    DEBT STRESS

    Treasury bond quotas could be increased, so that some of them could be transferred to local governments to ease their fiscal stress, said Luo Zhiheng, chief macroeconomic analyst at Yuekai Securities.

    However, they face a squeeze on their already tight cash-flows as maturing local government debts peak in 2023 for the 2021-2025 period, Luo warned.

    Combined with some maturing debts of local government financing vehicles (LGFVs) – investment companies that build infrastructure projects – this year and the next will be most stressful for local governments, he said.

    Around 380 billion yuan of onshore LGFV bonds from economically weaker provinces are due for repayment in the next 12 months, according to a Moody’s report in August.

    Such fiscal constraints, together with weakening exports, doubts over a consumption revival and external uncertainties including the Ukraine war, would add pressure on policymakers to shore up the economy in 2023, said Nie Wen, a Shanghai-based economist at Hwabao Trust.

    Nie is forecasting GDP growth of 5.5% next year, assuming few or no COVID-19 disruptions, better than the broad 3.2%consensus for this year but still lagging the pre-pandemic 6.0% pace in 2019.

    ‘HEAVY BURDEN’

    Highlighting the pressure on finances, the provinces of Shandong, Shanxi, Henan, Zhejiang as well as the municipality of Tianjin said they had all shed budgeted headcounts at government agencies in recent months.

    Moreover, some grass-roots market regulators have even imposed excessively high fines on small businesses to boost revenue.

    According to financial media outlet Yicai, local governments’ revenue from fines and confiscations jumped 10.4% in January-July year-on-year.

    Additional spending on containing COVID outbreaks has also strained local government finances.

    The fiscal stress is cutting into some households’ income, a red flag for consumption and broader growth.

    “My annual income was slashed by 27% to around 80,000 yuan last year, due to the very heavy local fiscal burden,” an employee surnamed Gao at a government agency in Chongqing told Reuters.

    “Our leaders were very anxious these days as they said the current fiscal allocation is not enough at all. As there is no way out, they have had to ask the local government fiscal department for money.”

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