How Is China Holding Up with COVID-19?Richard Tang, CEO, VanEck ChinaKai-yin Wei, General Manager, VanEck ChinaMarch 17, 2020
Shortly after the World Health Organization declared the coronavirus epidemic a pandemic on March 11, 2020, China announced that the peak of the current outbreak of the novel coronavirus in the country has passed.
We were able to gather thoughts from Richard Tang, China CEO, and Kai-yin Wei, General Manager of VanEck China, on how China’s been holding up with COVID-19 since the outbreak in early January 2020. Here’s their take on the impact on society, economy and financial markets in China.
1. When did you first hear of the epidemic in China, and how did you spend your Spring Festival this year? In general, how do you see the current pandemic control in China, and how has that evolved over the past two months?
Richard: I first heard about the coronavirus outbreak in Wuhan before last Christmas. I didn’t take it very seriously at the time and thought it was going to be contained soon without any impact on Shanghai or my personal life.
Then I spent the entire Chinese New Year’s in self-quarantine at home with my family, pretty much living on delivery services for water, food, other groceries and life necessities. Once or twice every week, I took a very careful walk within the residential community. I would only come out of my house if it was really necessary—for example, to sign a business contract or fetch the deliveries.
Masks were hard to get, and I was lucky, receiving favors from Hong Kong and the U.S. In late February, mask supply showed signs of coming back to normal, due in part to recovered manufacturing and logistics capacities.
I see the Chinese government and people making contributions and progressing together to contain the coronavirus. Most people stayed at home, avoiding any unnecessary meet-ups or gatherings, and this greatly helped.
Kai-yin: I first heard about it around late December/early January 2020. I spent my Spring Festival in my hometown in a southern province and then went back to Beijing. From what I experienced, warnings of the virus started on the internet, and people were already on alert before the official announcement. People around me (including myself) were putting on masks even before Wuhan closed the city.
The younger generation was the first group to react, staying home and wearing masks. The older generation reacted slowly and believed that the (local) government would have things under control. They started to wear masks only after they found out things were out of control.
The closure of Wuhan city was somewhat unexpected, and I could feel the sudden change in people’s emotions at that stage. They started to point fingers, with public news and the internet broadcasting the scandals of local Wuhan authorities’ inaction and wrongdoings.
Compared to the SARS outbreak, I believe that information on COVID-19 has been quite transparent. We can actually see the number of people infected increasing at such a rapid speed.
I believe public fear reached its climax when the central government went in and took control of everything. People were checked everywhere and asked to stay at home. Shops were closed, people were asked to work from home, no one was on the street—not even cars—and hospitals were heavily guarded. I am not a local Beijing citizen, so I was contacted by regional district and city police officers to collect my information at least twice.
With such strict and tough methods, the coronavirus got under control step by step. Now we can see more cars and people on the street. Some people started to go into the office. Over the weekend I even saw traffic jams. People are feeling much better now.
2. How are you holding up? To what extent has it affected your daily life and work plan? Are you noticing any changes to people’s various attitudes or moods towards the epidemic itself, their living conditions and the government’s actions, etc. during different stages of China’s containment of the virus? What would be the most impressive thing you’d like to share your comments on?
Richard: I’ve avoided interpersonal contact as much as I could. In the Shanghai office, we adopted work-from-home and have urged our staff to avoid unnecessary commuting.
People’s mood went from being really nervous to panic since the outbreak. You might see only a single person walking on the street every 20-30 minutes, which was a pretty haunted street view during the first month. Then people started to get out of their apartment for walks, being rationally cautious.
I was impressed by how the Chinese government took actions with great efficiency, building up some 57-story shelter in 19 days, and the novel hospitals, the Huoshenshan and Leishenshan, in 6-10 days to fight and contain the virus. Plus the people cooperated really well with the government’s announcement and advice—very self-regulated and self-disciplined in general.
Apart from that, the residential community, public administration and logistics services contributed to keeping the national self-quarantine organized and functioning. We had tents set up for non-contact distribution at the gates of residential areas, to help minimize interpersonal contact, all through collaborated efforts.
Kai-yin: I stored more than enough food and drinks in my home, so I have been alright. Luckily, the local delivery service has always been there, although slower than normal times. There’s no doubt that businesses have been impacted.
Clients have stopped discussing new investments. People just want to wait and see the reaction of the market before they move. Every time I tried to follow up on business opportunities, clients said, “Let’s talk business when the virus is over…”
Overall, I would say people are maintaining a positive attitude towards this crisis. We all believe that the virus will be gone. However, before the central government stepped in, people were panicked as local Wuhan authorities failed to manage the situation. With the central government stepping in, people started to talk about when things will be normal. People still have a lot of confidence in the central government, which has everything needed to take tough measures (including the army)—however, this can be at the expense of a small group of people, which we all feel sad about.
The silver lining is online activities. With well-built infrastructure, people could still interact, shop and have meetings. The tail-wind to “e-everything” is obvious. Another thing is the delivery service. Even during such dark times, delivery services/logistics are still in place. That’s one of the most important things that enabled people to stay at home.
3. In terms of China’s economy, how would you consider the pandemic’s impact on it? Any personal take on the short-term and long-term prospects for China’s economic growth? What did you notice from China’s macro-economic environment and any comments on the contingency plans to deal with China’s economic slowdown in 2020?
Richard：Despite the Chinese government trying its best to provide both fiscal and monetary policy support to keep the economy and society from the novel coronavirus hit and help tide small firms over, it’s inevitable that China’s economy would experience short-term damages. As people’s behaviors may have shifted from more offline to online patterns, we might see a short-term economic bounce due to specific sectors benefiting from such an evolution as well as more sectors continuing to suffer badly from the hit, such as retail, entertainment, airways, etc.
China’s been doing great, offering allowances, tax cuts, loan and insurance discounts to slow down the damage to the economy and keep it from falling off a cliff. However, the real recovery of the economy, as far as I’m concerned, depends on how the economic behavior evolves in the long term, which would further resonate with consumer demand, exports, imports and investments. And it’s not until we have a vaccine for the coronavirus officially on the market and readily available for people, that I would feel confident with the real, long-term economic recovery. I would consider it a challenging time until then.
Kai-yin: The short-term impact will be dramatic, as the recent Purchasing Managers Indices indicated, especially in the private sector. Over the longer term I am optimistic, as the rebuilding process will contribute to economic growth. At this time, trade war and other trade-related disputes have been put aside. The economy will slow down for sure in Q1, but I am not sure about the whole of 2020 as the government is going to keep up with their plan. We’ve already noticed some stimulus policies.
4. From a financial practitioner’s perspective, what have you noticed during different stages of the epidemic (outbreak, peak and containment), and what’s your take on that?
Richard: The People’s Bank of China took a step before the financial market had a chance to react during the outbreak, stabilizing liquidity through monetary policies. As a result, bond and equity markets reacted relatively milder than what we are now seeing in the U.S market, at least in the short-term.
Going forward, as an indicator for the real economy, I believe we will see a smooth surge with little panic, depending on the balance between the recovery capacity of the real economy as more people return to work, and control of the risk of spreading the virus. Looking at China in March 2020, risks are being contained well so far.
Kai-yin: It’s very funny. When people thought it was a China-only issue, the stock market in China crashed a few days but then recovered quickly as people believed things would be soon under control. Hence many high-tech, medical, AI, online education and other new economy stocks reached new highs.
Chinese clients delayed the talk on business or new investments only because they hadn’t started working yet. But when it became an international issue, the real stock market crisis took place, and Chinese clients stopped talking about business, because they are really worried about the future of the world, and its impact on China.
One of the famous doctors in China said he is only going to buy stock when the epidemic reaches its peak elsewhere in the world. I believe that many people in China have the same idea.
One last thing to comment on is the One Belt One Road1 project. I heard it is going on much more smoothly in Europe now, as China is lending a helping hand to European countries containing the virus.
According to media reports, China is now experiencing its lowest rate of COVID-19 infection since December. Across the nation, people are getting back to work, and President Xi Jinping has visited Wuhan for the first time since the outbreak began.
David Aikman, Chief Representative Office, China, World Economic Forum recently said, “I’m impressed to see the delicate balancing act the Chinese government is doing between getting the economy growing again and protecting public health—and I believe many countries could learn from China’s experience.”
International solidarity and cooperation are crucial in the face of the epidemic, according to a Foreign Ministry spokesperson. The international community will win the war against COVID-19 through joint efforts.
Keep calm, and carry on.
1One Belt One Road, formally known as the Belt and Road Initiative, is a global development strategy by the Chinese government involving infrastructure development and investments in countries and organizations in Asia, Europe and Africa.
Please note that Van Eck Securities Corporation (an affiliated broker-dealer of Van Eck Associates Corporation) offer investments products that invest in the asset classes or financial instruments discussed in this commentary.
This is not an offer to buy or sell, or a solicitation of any offer to buy or sell any of the securities/financial instruments mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results, are valid as of the date of this communication and subject to change without notice. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. The information herein represents the opinion of the author(s), but not necessarily those of VanEck.
All investing is subject to risk, including the possible loss of the money you invest. As with any investment strategy, there is no guarantee that investment objectives will be met and investors may lose money. Diversification does not ensure a profit or protect against a loss in a declining market. Past performance is no guarantee of future results.
Authored byRichard Tang
CEO, VanEck China
General Manager, VanEck China