China is already in recession and its jobs market is in all sorts of bother:
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There is still no real end in sight for lockdowns, Sinocism:
Sun Chunlan calls for more regular testing, Shanghai rolling out a series of new restrictions, Beijing’s “lockdown-lie” is expanding
The Joint Prevention and Control Mechanism of the State Council held a teleconference on [May 9]. Member of the Political Bureau of the CPC Central Committee and Vice Premier Sun Chunlan of the State Council attended the meeting and delivered a speech. She emphasized that it is necessary to conscientiously unify thoughts and actions into the spirit of General Secretary Xi Jinping’s important speech, implement the decisions and deployments of the Party Central Committee and the State Council, adhere to “dynamic clearing” without hesitation…to create a favorable environment for the successful convening of the 20th National Congress of the Communist Party of China…
国务院副总理孙春兰出席会议并讲话。她强调， 要切实把思想和行动统一到习近平总书记重要讲话精神上来， 落实党中央、国务院决策部署，坚持“动态清零”不犹豫不动摇.. 为党的二十大胜利召开营造良好环境…
To improve the sensitivity of monitoring and early warning, big cities should set up testing sites with a 15-minute walk
It is necessary to improve the reserve standards for the construction of quarantine locations and shelter hospitals, make good preparations for site selection, infrastructure and necessary materials, and ensure that they can be put into use within 24 hours when needed…
We should continue to do a good job in vaccination focusing on the elderly, promote mutual recognition of nucleic acid test results, and minimize the impact of the epidemic on production and life.
Though Shanghai officials haven’t formally announced any new citywide measures, residential communities and grass-roots authorities have expanded the scope of people being taken into centralized quarantine while cutting off deliveries of nonessentials to swaths of the city, according to half a dozen Shanghai residents who have received notices and shared them with The Wall Street Journal.
On Sunday and Monday, many residents received written statements and messages from neighborhood committees that manage residential communities announcing a “quiet period,” effective immediately and lasting between three and seven days, depending on the neighborhood, during which most deliveries would be halted and residents would be barred from stepping outside…
Separately, Shanghai residents over the weekend began sharing their experiences of having been forced into temporary isolation facilities or hotels after their neighbors tested positive for Covid-19.
People living in the same building as confirmed virus cases now also risk being transported to government-run quarantine facilities, according to local residents and widely circulated social media posts. Previously, only people living in the same apartment or the same floor as positive cases would likely be considered close contacts and put in official quarantine.
The ramping up of curbs comes even as the city reported its fewest cases in more than six weeks, with 3,947 new infections on Sunday, down slightly from 3,975 on Saturday.
Social media posts questioning the legality of forcibly removing people from their homes and taking them to quarantine facilities, or seizing their keys to allow health workers to disinfect apartments, also appear to have been removed in some cases.
Shunyi authorities will carry out mass testing and expanded measures after the sudden discovery of a cluster of 21 COVID-19 cases in the Beijing district.
Seventeen staff at the Beijing Rural Commercial Bank data center and four of their family members tested positive, Beijing officials said at a press briefing on COVID-19 prevention and control on Monday…
Shunyi would switch to “home office mode or point-to-point closed-loop management
On Sunday, Beijing reported zero cases at the community level for the first time in the past two weeks.
“It is a very good sign that there are no new confirmed cases in the community screening outside the control area,” a Chinese CDC expert told the Global Times on condition of anonymity on Sunday. “It means that the epidemic prevention situation in the city is getting better and the spread of the epidemic will be gradually controlled.”
But the expert noted that it cannot conclude that the risk of virus transmission at the community level has been completely blocked.
Shunyi and Chaoyang are at a standstill, with public transport halted in both districts, public venues closed and residents told to stay home…
Several parks in Beijing were also closed indefinitely on Monday. Chaoyang Park, the largest within the 4th Ring Road, was closed until further notice along with the Olympic Forest and Shunyi parks.
Beijing criticizes some PCR testing groups for inaccuracies
Ministry of Public Security holds and expanded Party committee meeting to convey the key messages on anti-epidemic work from the Thursday Standing Committee meeting
Goldman Sachs said in a note that regular testing could offer a way out for China as it maintains “zero-COVID” while reducing the economic impact, adding that testing costs would be only a fraction of the country’s GDP.
However, Nomura said the benefits of regular PCR testing would be limited, adding that it could cost between 0.9% and 2.3% of GDP, depending on how far the mandate was extended across China’s population.
“Much of this spending will likely crowd out fiscal spending on other key areas,” it added.
In a video shared widely on Chinese social media, police in hazmat suits argue with residents who were told they needed to be quarantined after a neighbour tested positive.
“This is so that we can thoroughly remove any positive cases,” one of the officers is heard saying. “Stop asking me why, there is no why. We have to adhere to national guidelines.”
The intermittent squirting of disinfectant by this police officer is worth the 4+ minutes alone
More than 20 university professors across China have called for Shanghai to stop “excessive pandemic prevention”, arguing that some policies implemented during the city’s lockdown contradicted the rule of law.
The academics, led by Tong Zhiwei, a professor of constitutional studies at Shanghai’s East China University of Political Science and Law, made the call in a letter published online on Sunday.
The letter circulated on social media for a number of hours before it was censored. Tong’s Weibo account, which had more than 400,000 followers, was also suspended.
Tong’s draft essay
Tong discusses the issues in an interview with Ma Guochuan. This post is still uncensored
Chaoyang district in Beijing said it will reduce or exempt six months worth of rent for small, medium and micro-sized service enterprises and individual businesses that rent state-owned properties in 2022…
Chaoyang district said landlords of non-state-owned properties are encouraged to appropriately reduce or exempt rents as well.
Some counties and cities in the regions around Shanghai have stepped up epidemic prevention and control after spillover cases from the epicenter were detected. Officials said the risk of transmission in communities still exists. These anti-epidemic measures include issuing a yellow health code to every resident and carrying out traffic controls, implementing de facto countywide lockdowns.
The trial was initially expected to end December last year but was delayed until April and now October, according to an update on ClinicalTrials.gov, a database by the National Library of Medicine in the United States that tracks clinical trials around the world.
China’s national college entrance exam for 2022, also known as Gaokao, will be held on June 7 and 8, the Ministry of Education (MOE) announced Saturday…
In 2020, the national exam was held on July 7 and 8 after being delayed by a month due to COVID-19, but it was back to schedule last year.
The Shanghai Municipal government Saturday said the city’s entrance examinations for colleges and senior high schools will be postponed for a month due to the latest resurgence of COVID-19 infections
But it is about to get worse. Pantheon:
Zero-Covid supports China’s trade balance for a little longerApril saw a sharp deceleration of Chinese export growth, but the continued flatlining of imports means that the trade balance edged higher. Restrictive zero-Covid policies have a role in the collapse of trade flows in both directions, but have taken longer to bite for exports, given the ability of exporters to fall back on inventories of raw materials and finished goods to meet orders, at least until they themselves were locked down, hence the sharp divergence last month, which is now correcting. Import compression may already be fading; imports actually rose 3.6% m/m, seasonally adjusted, in April, after dropping 9.6% in March, despite the tightening of restrictions during April. Exports fell 1.6% m/m on this basis, admittedly an improvement from the 5.8% drop in March, but further falls seem likely as disruption from zero-Covid policies spreads.Exports are also challenged by softening demand, though it is difficult to disentangle the supply and demand stories from this data alone. Exports to all major partner countries slowed significantly in both y/y terms, and m/m, seasonally adjusted. The global energy shock seems responsible for at least some of this. Exports to Japan shrank 10.0% 3m/3m SAAR, from 0% in March, and those to the E.U. fell 3.1%, after growing 0.2%. By contrast, exports to the U.S. accelerated to 43.6%, from 32.1%. In short, exports to big net energy importers are underperforming the peer group. This suggests a demand component, alongside the zero-Covid hit evident in the y/y and m/m data.Imports will likely bounce back faster than exports when China eventually reopens, and if no reopening occurs, exports seem likely to slow further, while imports have probably found something of a floor. We still expect the trade balance to come under sustained erosion this year.Our chart shows the performance of trade flows, and the overall trade balance, which shows the benefit to China’s external account of the coronavirus pandemic.
If you adjust for inflation, both import and export volumes are falling.
The PBOC is still sitting on its hands. Yawn:
China’s central bank repeated a pledge to be proactive in addressing mounting economic pressure and boosting market confidence, while signaling a more dovish stance on property policies.
The People’s Bank of China reaffirmed it will focus on supporting small businesses and also sectors and groups hit by Covid outbreaks, and vowed to use various monetary policy tools to keep overall liquidity ample, according to its first-quarter monetary policy report published Monday.
And financial conditions have not improved at all:
Assuredly, China will escape lockdown sooner or later. But when it does so will OMICRON and the countdown immediately begin for a return to lockdown. The property market is so catastrophic that nothing short of a bald-faced, kitchen sink stimulus will turn it around meaningfully, and a material trade shock is bearing down from offshore.
China is not the answer to the world’s problems in this cycle, it is the epicentre of the bust and there is a real possibility that it passes a tipping point in its currency and the adjustment turns unruly. The best case is that it is a controlled descent, TSLombard:
The rogue factor in global economic prospects is the probable slowdown in China’s growth trend and its policy consequences – including moves by the Chinese authorities to re-establish the undue competitiveness of their exports that has been lost in the post-GFC era. The two forces making up the double-whammy of our title are the prolonged effects of the Evergrande debt bust, and deglobalisation as the US authorities pursue the only non-partisan policy uniting their country: take-down of China’s apparent economic primacy. This View does not analyse in any depth China’s current difficulties with Covid-19 – except to observe that they reinforce the case against dependence on Chinese supplies that is a key feature of deglobalisation. Any economic stress in
China arising now from the ‘zero-Covid’ policy should not affect medium-term average growth rates, except by reinforcing suspicion of elaborate, cost-saving supply chains.
The real-estate credit crunch arising from the Evergrande ‘bust’ hurts the mainspring of China’s growth since 2011, since when the overvaluation of the yuan has caused China to be the major locomotive of the world economy – fast-growing but with imports in real terms rising more quickly than exports. That mainspring has been construction, as wealthy Chinese channelled savings into real estate – the stock market remaining a bit of a side-show, unlike the US, and also both lacking buoyancy as well as too volatile for comfort. Non-financial debt in China rose from the post-GFC 180% of GDP, already well up on the pre-GFC 140%, to 290% after the fiscal and monetary stimulus of 2020. Nobody knows in advance what is the crisis level, but we know now.
The effects will damage wealthy people’s consumer spending as well as real-estate capex.
While current policies are to use (often wasteful) infrastructure capex to sustain demand, this is likely to be insufficient, leading to yuan depreciation as the fallback policy to rebalance demand towards net exports. This may also be presented as retaliation against US anti-Chinese policies that are a current source of worldwide decoupling as globalisation fractures.
The chief losers as China diverts its excess savings to export-led growth could be the world’s most notable saving ‘gluttons’ – Japan and German-centred Europe (broadly, Germany x2) – both on the wrong side of the world’s saving/investment imbalance. They will be hit both by slower Chinese domestic demand growth, and by the more competitive yuan (in third markets). The Fed may welcome a falling yuan, at least initially, as it will help vindicate the Fed’s (allegedly) sluggish response to the current upsurge of inflation. But the stock market implications are less rosy:
This View ends with the danger that the lower levels of p/e ratios (notably CAPE) that characterised world markets before the end of the Cold War may return.
In any case, slower medium-term Chinese growth could permeate the world economy with damage to rosy projections of stock-market earnings growth, lean-ness of earnings growth to be reinforced as future years could see labour-income shares of GDP rise at the expense of falling profit shares.
We will have to wait and see about that. First comes the deflationary tsunami.