Industry And Cluster | News & Insights

Few Chinese News Updates

Published: April 3, 2020

1. Services contraction slowed in March: Caixin PMI

China’s services activity contracted at a slower pace in March than the previous month as the coronavirusoutbreak eased, a Caixin-sponsored survey showed on Friday.

The Caixin China General Services Business Activity Index (PMI), which gives an independent snapshot of operating conditions in the services sector, rose to 43 in March from a record low of 26.5 in the previous month. The March reading marked the second lowest level since the survey began in 2005. A number above 50 indicates an expansion in activity, while a figure below that points to a contraction.

“Services activity remained under huge pressure and continued to shrink markedly amid restrictions to contain the coronavirus epidemic,” said Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group Ltd., a subsidiary of Caixin Insight Group.

The measure for outstanding business at services enterprises plunged into contractionary territory in March from a record high level in February due to the slump in new work. The rate of reduction in backlogs of work last month was the steepest since September 2015.


2.  AIIB and ADB to lend billions in battle against coronavirus

Asia’s leading multilateral development banks will boost their support to companies and governments stricken by the coronavirus pandemic in an effort to avert a financial crisis in the region, reported the Financial Times. 

The Beijing-based Asian Infrastructure Investment Bank plans to lend at least $5 billion to member countries to help them battle the pandemic. Jin Liqun, the AIIB’s president and chairman, told the Financial Times that he expected this amount to serve its members’ needs for 18 months when combined with existing lending programs. 

“But if the demand is much bigger, it is possible for us to increase the amount, with the approval of our board,” Jin added. “The crisis has laid bare the vulnerability of so many countries. We need to focus on building up the public health infrastructure.” 

The Asian Development Bank, which announced a $6.5 billion package in March, is also seeking to provide a further package. Of the AIIB’s 78 members, 20 have requested the bank’s assistance to fight the virus, with India expected to be among the hardest hit by the pandemic. It is expected that the AIIB board will extend $355 million to China in what would be the institution’s first loan in the healthcare sector.

3. Pigs fly in as China replenishes world’s biggest hog herd

Six planes carrying more than 4,000 high-quality French breeding pigs have arrived in China so far this year, the first of an expected dozens of plane-loads as the world’s top pork producer rebuilds its decimated hog herd, reported Reuters.

China is ramping up imports as it rushes to restock after an outbreak of African swine fever swept through the country from late 2018, killing tens of millions of pigs and reducing its sow herd by as much as 60%.

Soaring pork prices and a government drive to rebuild have prompted farmers who had halted buying to resume orders, with some doubling contracts that had been signed prior to the disease. Each charter is worth up to 1.5 million ($1.6 million). 

4. China bans export of uncertified medical supplies

China has banned the export of coronavirus test kits and other medical supplies that do not meet the country’s own standards, reported Caixin.

The decision follows controversies in several virus-stricken nations over the poor quality of some tests and medical supplies exported from China.

China’s Ministry of Commerce, General Administration of Customs, and National Medical Products Administration (NMPA) announced in a joint statement this week that from Wednesday, Chinese customs will only allow the export of medical supplies which are certified by the NMPA. 

The order includes all exported tests, masks, personal protective equipment, ventilators, and infrared thermometers. Authorities took the step to ensure the quality and safety of exported medical supplies, the statement said.

5. Luckin Coffee shares plunge 75% on internal probe into fabricated sales

Luckin Coffee has revealed that an internal investigation found hundreds of millions of dollars of sales last year were “fabricated”, wiping almost 75% from the value of the company touted as China’s rival to Starbucks, reported the Financial Times. 

The coffee chain, which listed on Wall Street less than a year ago, put investors on notice that they should no longer rely on previous financial statements that have appeared to show exceptionally rapid growth. 

The company’s chief operating officer has been suspended after a special committee was formed to investigate its accounts and the initial findings were delivered to the board. 

Early stages of the investigation indicated that the “aggregate sales amount associated with the fabricated transactions from the second quarter of 2019 to the fourth quarter of 2019 amount to around RMB 2.2 billion” ($310 million). 

6. Local governments get more firepower to support post-COVID-19 recovery

China’s local authorities will be allowed to pump up sales of special-purpose bonds (SPBs) this year to bolster the government’s firepower in supporting the economy as it struggles to recover from the coronavirusoutbreak. They are also being urged to speed up the issuance of the early quotas they have already been allocated, reported Caixin.

The announcement was made after a meeting of the State Council, the cabinet, on Tuesday to roll out more policies to support jobs and growth as the world’s second-largest economy heads for the first contraction in quarterly gross domestic product since 1992.

“To cope with the severe impact of the current domestic and foreign epidemics on our economy, we must further increase the adjustment of fiscal and monetary policies,” Premier Li Keqiang said in a statement on the government’s website after the meeting. “The series of policy adjustments we took after Spring Festival were mainly to ensure supply and help enterprises, while the aim of this round of policy adjustments is to focus more on expanding domestic demand, helping to resume production and ensuring employment.”

The State Council didn’t quantify the increase in the overall quota or specify how much more will be allocated early to provincial-level governments. The Ministry of Finance has already given the green light to the sale of RMB 1.29 trillion ($182 billion) of SPBs, the maximum allowed under the law until the National People’s Congress (NPC) approves the quota for the full year. The delay in holding the annual meeting of the legislature is complicating efforts to raise the funds, which analysts now expect could amount to as much as RMB 4 trillion for the whole year, almost double the RMB 2.15 trillion SPB quota in 2019.

7. $2 trillion loss estimated for aviation-related industries worldwide: think tank

The losses for the wider global aviation industry, excluding airlines, from the coronavirus pandemic could exceed $2 trillion this year, with millions of jobs at risk in Asia-Pacific alone, according to Zheng Lei, founder and president of the Institute for Aviation Research, an independent think tank, reported the South China Morning Post. 

Airlines are the key to the whole supply chain, if they become problematic, other parts of the supply chain will be affected, said Lei, who is also the head of aviation department at Swinburne University of Technology in Australia.

As to impact on the global aviation sector, it has already surpassed $200 billion. This is only for airlines, not including [the] impact on airports, retailers inside airports and on-the-ground workers. Its bigger impact should be more than tenfold of that on other sectors in the economy, such as to tourism, and shocks to export and import trade.

According to recent estimates by the International Air Transport Association (IATA), passenger revenue losses for airlines in the Asia-Pacific this year are expected to reach around $88 billion and $252 billion globally.

8China’s ports brace for second hit as virus spread wipes out exports

China’s ports and shipping firms are bracing for a second wave of supply chain disruptions that may be deeper and more prolonged than during the country’s coronavirus lockdown as the global spread of the virus chokes off international demand, reported Reuters.

 With Beijing reporting only sporadic domestic transmission of the coronavirus since March, workers have been allowed to return to posts, factories are restarting and ports are rushing to clear a backlog of cargoes. 

But with virus outbreaks now overwhelming healthcare systems and shutting logistics channels in other major economies, exporters and industry analysts warn that global demand for products made and shipped out of China looks set to plunge. 

“We expect the near-term impact on trade growth in coming quarters likely to be the worst ever, as economies stall and external demand faces imminent collapse on large scale quarantine measures across major economies,” said Rahul Kapoor, vice president at IHS Markit. China’s container processing volumes fell 10.6% in the first two months of 2020 compared to the year before, while exports dropped 17.2%. 

9China’s big four banks face COVID-19 profit hit

China’s largest banks are warning of a hit to profitability and asset quality this year as they comply with government orders to extend low-cost loans to companies affected by the coronavirus outbreak, reported the Financial Times. 

Since the outbreak of coronavirus in January, Beijing has ordered the country’s banks to step up their assistance to the national recovery effort by continuing to lend to troubled companies while also lowering interest rates.

“This is the market concern for the big banks: the so-called national service they have to do,” said May Yan, head of greater China financials equity research at UBS. “They are required to keep bringing down the lending rate but this is not very commercial for the shareholders.” 

The People’s Bank of China has already cut the benchmark lending rate in order to help struggling companies borrow at reduced costs, and analysts expect it to lower the rate several more times this year, further squeezing net interest margins — a key gauge of banks’ profitability.

10. China cracks down on swine fever prevention as it urges higher production

China will closely monitor swine fever prevention measures as it pushes farmers to restore hog production to achieve its full-year target, the agriculture ministry said on Wednesday, reported Reuters.

Despite improvement in China’s containment of African swine fever, it still takes time to restore pork output from hog stocks, the ministry told local governments in a video conference, adding that frequent transportation of piglets and breeding sows has raised the risk of resurgence of the disease. 

“(Each region) should speed up their under-construction projects … and replenish stocks in small-to-medium size farms,” the ministry added. 

China has reported several new cases of the disease this month, mostly from transportation of animals across provinces. The agriculture ministry has launched a 60-day investigation into illegal transportation of hogs, starting April 1, it said in another statement.

Compiled & Sourced by

Mr. Arvind Sinha

President 2018-2020

Global Textile Welfare Association

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