What’s up everybody welcome to another episode of China update where I help you guys get on top of the world number two economy my name is Tony all of you watching for the first time I work in China an executive role and part of my job requires that I follow the big macro developments coming out of the Middle Kingdom I read you put these videos together for my mates back home who are interested in following China along with me they told me you should throw the stuff up on YouTube so if you guys are interested in following China as well and you want to join we’d love to have you onboard maybe consider hitting that subscribe button clicking that belt icon and you’ll get one of these when we release it at the end of every week it’s been a bit of a crazy week I hope it one staying safe wherever you are it doesn’t seem like anywhere is particularly safe at the moment and we’re buckling in for a bit of a rough ride moving into this decade but with all that said let’s jump into this week’s China update now first up we need to talk about the economic impact of the coronavirus Worthen China and particularly the economic impact in January and February when trying to implement it large-scale quarantine policies across the country and most severely of course in Hall B which is the province that holds one the epicenter of the outbreak when it originally occurred now those of you who normally watch my videos know that on Monday I did a deep dive into the data and the statistics that were released by the National Bureau of Statistics on Monday that looked at that very economic data for those of you who are interested and want to get that deep dive I would recommend that you look at my last video from Monday to get that data here we’re going to talk a little bit more about the most important analysis of the data and what this means for the Chinese economy going forward but in a nutshell the data that came out on Monday was terrible 39 or 41 industries saw a reduction in size it looks like the economy was growing at negative 20 and you saw a reduction in both retail spending and a reduction in industrial output much lower than even the most pessimistic forecasts indicated we would see now this data also looked at the months of January and February and because a lot of the quarantine policies were not implemented and taught the 23rd of January that means we will not have a better idea of the full impact economic impact of the quarantine policies until each at least March some analysts believe that the data we saw on Monday could be even worse in March as of the filming of this this week the central government have said that up to 90% of large-scale industrial production is back online but not all of these facilities and factories they’re at full capacity this number also does not take into account small and medium businesses small businesses like restaurants for example employ a lot of Chinese and it’s primarily private sector run so highly efficient and typically employs a lot of people unemployment is going to be one of the difficulties for the party going forward last month saw the unemployment rate in urban centres rise by 1% 3 to 4 million people lose their jobs officially the unofficial number could be higher and if we look at the effect in the countryside where you have a high concentration of migrant workers who are more susceptible to being laid off in certain industries then their number could be even higher the party also this week identified college graduates as a particular area of stress in cordon central and local governments to implement policies which would get either graduates jobs or incentives to stay in school maybe do a higher degree for a year or two so then you don’t have this huge influx of recent graduates they can’t find a job most points of unemployment an excellent report which was released by the Chinese China household finance Survey Research Center who do great work indicated that 40% of households could not go more than three months without a fixed income people who watch the show would know that we reported last year on another major report that was released by another government institution which found that Chinese debt to disposable income ratios were some of the highest in the world higher than American levels before the Oh a 209 financial crisis and then the bottom 20% of households with this with disproportionately affected by high debt levels over 1000 percent in the lower 20% of households so there is a particular risk for lower-income households of losing income through unemployment and being bankrupt or facing debt issues because of this existing high leverage rate avoiding wealth disparities has been a key mission of the shooting Ping administration and the government will work hard to try and avoid any exacerbation of the wealth gap which was already quite severe in China both officially and unofficially these reports we’ve discussed in the past as well but it will be difficult to get the economic going avoid mass unemployment mass bankruptcies and avoid an exacerbation of this wealth gap so this will be a particularly difficult juggling trick now Goldman Sachs the American banking Institute called the data strikingly weak and on Tuesday said that China’s economy was likely to shrink 9% in the first quarter that reduction in the first corner would

represent the largest drop in growth and 1/4 in China since the Cultural Revolution in the 1970s the bank also lowered its full-year GDP forecast to 3% growth from an earlier estimate of 5.5% UBS estimates one point five to three percent growth this year they did say however if the Chinese government could turn the economy around and if we did see a global recession averted there could be returns to upwards of five percent growth in China from next year but those are a lot of ifs that brings us onto the issue for the Chinese economy of overseas export markets though the Chinese economy is not primarily reliant on exports it still is a major driver of growth and it does mean that the Chinese state can get those USD Zo’s u.s. dollars which they need for a lot of their trade like the commodity trading oil markets etc now exports it down 17 percent as of Monday and that could get even worse sings as the US and the EU are going to see massive reductions in demand as they now implement their own mass quarantine programs to prevent the spread of the corona virus and their jurisdictions actually shooting paint identified this for the first time this week as a major issue the idea that export markets are going to be shocked in a special meeting of the pure o of the Communist Party in Beijing you might remember from previous episodes we’ve discussed the stimulus measures that we used after the global financial crisis back in Oh 1809 the primary reason why the government had to turn to Esav stimulus was because of the shocks to international export markets now speaking of the stimulus package how is the government going to respond in terms of its own economic options now well looks like the central government is going to pump trillions of RMB into the economy however the numbers that we’re seeing at the moment is still nowhere near the numbers that we saw after the financial crisis and it looks like this crisis could be worse than that so there could be more to come this is in relative terms as a percent of GDP non absolute terms the economy is actually growing quite a lot since oh wait and oh nine local governments have also been instructed to sell more bonds and local government bond sales have increased they will be selling more this year than they were last year local government has also been trying to keep consumption up there have been high-profile leadership visits to restaurants that have been shown in local media to try and get Chinese out of their homes and spinning again this actually brings us on to one of the terrible dual policy decisions that a lot of local governments have to make the central government has said that you have to both one control the virus and prevent an outbreak and to get the economy back up and running now this is a very difficult policy balance to achieve if you want to prevent an outbreak you need social distancing and a policy in China has been typically to make people stay at home but if you want to get the economy running again then you need people out spending and working you need to have business confidence you need to have consumer confidence now there have been three cities that have pushed this message of spending even spending on tourism services in the very beautiful mountains in the relatively beautiful Nick Bohr and the not beautiful but has a lovely personality xenon in Shandong Province which is a major industrial province in East China at the end of the day what we have to remember is this economic data that we saw on Monday shows both a supply and demand side shock which means they are both deflationary and inflationary risks the government has to be very careful how it deals with us you can’t use the same tools in the toolbox to deal with this sort of crisis and you would a simple demand side issue okay guys now we need to talk about the health situation the health situation on the than China has improved a lot it seems that their policies have been relatively successful and now they’re trying to get their economy back up and running the most critical issue now for the government is to stop imported cases as of this week there are now more cases internationally than within the mainland imported coronavirus cases in China outnumbered new cases from local transmissions earlier this week and in fact China on Thursday reported no new local and fiction’s so like I said the government now has moved to a policy of trying to stop it at the gate the Ministry of Justice released a report this week saying that those who do not follow the correct rules when they arrived like the quarantine rules or not reporting symptoms or having contact with people that have these Korona symptoms face criminal prosecution or even deportation in the case of our own passport holders in fact they have made a big deal of deporting ethnically Chinese people who grew up in China but have foreign passports they’re very serious about trying to stop this thing at the gate and coming back into the country key international port cities like Beijing Shanghai and Kant on testing and quarantine all people moving

through these airports from Thursday the northern city of Beijing and the capital required that all people flying into the city and to go 14 days of self paid concentrated quarantine Beijing and Shanghai have said they will not cover the costs of any people moving from overseas to these cities if they need medical assistance and they’re actually primarily there talking to overseas Chinese they don’t want overseas Chinese or actually even Chinese within China itself moving to these cities to get the superior health care that’s available in the hospitals a lot of pressure was put on these cities early on by local residents of these cities that were concerned they’re people from Han and the white of Bay Area were escaping the province to move to those cities to get their health care thus putting the residents in these cities at risk Beijing even released a statement this week urging all Chinese students studying overseas to stay in their respective countries and to avoid coming back to China unless it’s an emergency now it’s Eddins me that earlier this week I had to write an article where I said I believe that the china-us relationship the worst place it has been since normalization in 1979 the relationship is the most toxic most aggressive and the most cold war like I think I’ve ever seen in my years of studying it and that I’ve ever read since the end of the mount era the situation is not good and it’s going to get worse those of you have been watching the show before know that I’ve discussed many times like concerns about the deterioration in the relationship well let’s look at these next two big developments and discuss what it means for the US and China and the world those of you have seen my episodes before no for the last few weeks I’ve been talking about the narrative this global public opinion debate that is going on at the moment between China some other economies in Asia the US and the wider industrialized world that there was a lot of disinformation out there and exactly how the Chinese state has sought to present a narrative overseas now this last week or so there’s been some development the Chinese state has been accused of prosecuting a disinformation campaign overseas designed to shift blame internationally and to earn support domestically there have been opinion pieces written by Chinese embassy staff from Russia to Africa in different languages with the United theme the Ambassador the Kazakhstan for example wrote a big piece in their national paper accusing the u.s. of lying trying to shift blame onto China and for wasting the time that China gave the world and its effort to fight the global pandemic now there have been two claims in particular that the Chinese side have made that I think is going to greatly exacerbate the relationship the first was a piece that was in chinese state media saying that the chinese side should use its leverage in the production of medical supplies and pharmaceutical products and drugs to push the american side to make incisions for huawei now whether this is a sensible public policy question or not is up for debate what I do think is clear is the risk of using this sort of language in the middle of a crisis particularly for the United States I think it’s going to give ammunition to those in the US who have wanted to push for a greater decoupling with China and calling for more US manufacturing to be pulled out of China back to the US I think it also gives those in politics and the government and in the media more ammo as it were to push for more computational and cold war style engagement strategy with China after this outbreak so that sort of language is quite risky and could have these negative effects on the broader bilateral relationship now the second controversial statement was made by a tweet by the Ministry of Foreign Affairs spokesperson don’t eat yen and which he accused the United States military of bringing the krona virus to China now this is a particularly controversial statement now the American condemnation of the accusation was quite Swift and the State Department and the Office of the President both made statements to the Chinese investor in Washington and to the counterparts at Beijing saying that the State Department and the White House would use the terms Chinese virus and the Hun virus until the Chinese side recanted this accusation that the virus came from the United States and took more responsibility for its involvement with the initial outbreak in HoN the Chinese side has not backed down the American side has not back down in fact the Chinese virus policy choice from the White House has become a domestic political issue within the United States itself as well some of you guys watching this may have seen it on your social media feeds or in articles I believe Stephen Colbert even did an episode we touched on this now at this point the accusation that the US military brought the corona virus to China is a unsubstantiated rumor and frankly a conspiracy theory that actually first appeared in China use social media as early as January actually this particular rumor which has had a life of its own in this week I’ve seen so many Chinese friends send me different iterations of this particular conspiracy

theory which is going through an evolution in the last few days or so was actually debunked by Chinese journalist scientists and the Beijing Municipal Government as building as January I do think this particular exchange is going to be particularly harmful and toxic and the wider china-us relationship and will probably keep coming up again after this crisis has passed as of the filming of this it is the overwhelming consensus of the international scientific community that though we cannot definitively say exactly how it started or where it started it is highly likely that the outbreak began in one and there is no strong evidence to suggest that it was introduced either accidentally or on purpose by any outside country now a more positive example of Chinese public relations and opinion management work has been in its aid programs the Chinese state is going on a big aid blitz around the world to try and improve its reputation in the münster midst of this global disaster and a lot of aid is being promised to places like Iran in Italy there are there are huge packages China is sending medical equipment and experts to developing economies like Pakistan as well as countries like Italy and Spain Jack Ma the founder of Chinese e-commerce giant Alibaba has donated 500 thousand Khurana virus test kits and 100 million masks to help America cope with the epidemic okay finally and another piece that is relevant to the china-us relationship but also globally very very relevant is Beijing’s expulsion of American journalists this week so Beijing announced that it would expel American journalists working for the New York Times The Wall Street Journal and The Washington Post it has also demanded that these outlets as well as The Voice of America and Time magazine provide the government with information about the operations now those of you have been watching this show would not be surprised because I told you this would likely happen and we’ve followed this as a another step in a tit-for-tat between the United States and Beijing / journalists operating in their respective jurisdictions this began when Beijing expelled journalists working for The Wall Street Journal for an article that Beijing found over the offensive the u.s. responded by reducing the number of employees Chinese state-run media outlets that had recently been designated as foreign missions in the US so there was a reduction of several dozen employees some of these with journalists that could not operate within these institutions within these state media outlets in the United States and so this decision from Beijing is a further escalation of their tech Ted issue with journalists that we’re seeing between the two countries now I think it’s important that I read you’ve abated what the administrative Foreign Affairs said regarding this expulsion first in response to the u.s designation of five Chinese media agencies as foreign missions China demands in a spirit of reciprocity that the China based branches of Voice of America The New York Times The Wall Street Journal the Washington Post the time to clear in written form information about their staff finance operation and real estate in China sickened in response to the u.s slashing the staff size of Chinese media outlets in the US which is expulsion and all but name China demands that journalists of US citizenship working for the New York Times The Wall Street Journal and The Washington Post whose press credentials due to expire before the end of 2020 notify the Department of Information and Ministry of Foreign Affairs within four calendar days starting from today and hand back their press cards within ten calendar days they will not be allowed to continue working as journalists and the People’s Republic of China including its Hong Kong and Macau special administrative regions now this order is controversial enough but that final line is particularly interesting because it says that these journalists cannot go to Hong Kong now now the reason this was controversial as well is because it could represent a breach of the rights that Hong Kong enjoys under the basic law its mini Constitution which allows it a degree of seeming autonomy under the eCornell one country two systems framework which is his being which have been in place since the 97 handover now this will have its own ramifications within the context of the continued unrest in Hong Kong but it could also have a secondary effect again on the us-china relationship because again people who watch my show know that last year the United States and prison Trump signed into law these so-called Hong Kong human rights and democracy Act and within that act it enabled the government to put sanctions on individuals within China were seen to undermine the autonomy of Hong Kong and this expulsion could be argued to undermine their autonomy which is required now by law in the US to be included in any Secretary

of State report so again this could further complicate the nature of the relationship okay guys I know that was a lot but I hope you enjoyed it if you have any questions or any comments criticisms or disagreements with my analysis please throw your thoughts below I’m more than happy to engage in any sort of conversation when I have regarding China or whatever please stay safe and I will see you guys next week on China update