Rough recovery: No time to be complacent about Covid-19

It seems like social life in China is almost back to normal. Almost. Just last week, it was like any dinner out with my friend. Except while I was let in without any question by the restaurant, the waitress asked for proof of quarantine (随申码) from my Caucasian friend.

While the worst seems to be over in terms of the virus, there remains fear over imported cases. Unfortunately, this has resulted in some paranoia towards foreigners. The result? My friend has to get food delivered instead of eating out, and office buildings are likelier to stop and check a foreign face over a Chinese one – even though I’m also a foreigner.

But are expatriates going back in droves? Not at all. At a Guinness bar, a group of Brits told me that there was no way they are returning to Europe for now. It’s much safer here in Shanghai.

On the streets, the familiar thud of dribbling and the crashing of basketballs against the rims are back. Gyms too are open, while parks and malls are increasing in foot traffic again. After sitting obediently in their homes for more than a month, picnics are a literal breath of fresh air for the Shanghainese. It’s time to start “living” again.

The revving of the city’s engines is actively encouraged by the Shanghai government since the numbers seem to be under control, with few or even zero locally transmitted cases recently here. There are only about 340 locally transmitted cases and slightly more than 200 imported cases so far in the city of 24 million. (http://www.xinhuanet.com/english/2020-04/09/c_138960554.htm)

Where citizens used to question drastic quarantine and lockdown measures, they trust the authorities more now, because the results are there for all to see. In fact, the decisive handling of the crisis is stoking patriotic feelings as the Chinese see how the West is struggling.

But far from being complacent, now is the time to focus on recovery, especially for the economy.

A wheezing economy

Even as a tinge of normalcy resumes in society, it’s a very different picture on the business front, which remains mired in uncertainty as the pandemic ravages economies worldwide.

Exports have simply gone down the toilet. Just as factories here have gotten the gears in motion last month, the rest of the world is going into shutdown. Many export orders (other than medical supplies) have been cancelled this month, and as a result, many companies have either furloughed employees or closed down.

Caixin and IHS Markit noted the challenges ahead in a survey, pointing out how new exports have declined substantially in March as economies around the world grapple with containing the virus. (https://www.cnbc.com/2020/04/01/caixinihs-markit-releases-china-manufacturing-pmi-amid-coronavirus-outbreak.html)

A South China Morning Post article showed how badly hit a factory in export hub Dongguan was – orders for 80,000 pairs of shoes out of 90,000 were cancelled as clients from Europe and the US suspended orders. (https://www.scmp.com/economy/china-economy/article/3078084/coronavirus-chinas-manufacturing-hub-dongguan-faces-grim-test)

Could domestic demand be a solution? After all, 1.4 billion people are opening their wallets again as life returns to normal. Well, the truth is that many remain in “crisis mode” and won’t spend as much. Naturally, the lines at luxury stores have disappeared.

And people can’t spend as much too, with many experiencing wage reductions. There also remains a reliance on overseas markets because while population numbers are one thing, purchasing power is another. China’s GDP per capita is about a fifth of the US’ and a quarter of Europe’s.

This is why China remains an export-driven economy, as domestic demand cannot support the huge manufacturing capacity. With US$2.5 trillion worth of products exported last year, China is the world’s largest exporter.

Businesses here hope the government can step in to help. To be fair, there are already measures. For instance, one can apply to axe salaries by half if you cite lost revenues due to Covid-19. Some firms have taken the chance to also get rid of underperforming workers.

But businesses are still struggling. More can be done by the authorities here, such as more short-term loans with low interest rates for small and medium-size enterprises. This would help companies tide over short-term demand shock.

Smaller enterprises, who need the most help, also require easier access to cheap credit – after all, SMEs employ 90 per cent of the population.

Singapore is a good role model. When I look at the string of Budget packages rolled out by the Singapore government, with outright employee pay subsidies, I was deeply envious.

If the Chinese government does not do more, the country would soon see economic pain replacing health scares. And so from the depths emerges another beast.