On Friday, China reported only a single new COVID-19 infection outside the outbreak’s epicenter of Wuhan, which saw 74 new cases, with the additional exception of 24 cases found in people returning from abroad. The same day, however, a Beijing official told reporters that disease control in the city is in “its most challenging period.” The Wall Street Journal’s Stu Woo reported on Tuesday on the capital’s notable exception to the lowering emergency response levels widely seen elsewhere.

Make all-out efforts to prevent the virus from spreading within the capital, the Chinese leader said in a speech last week. “The security and stability of the capital city is directly related to the overall work of the party and the country,” he said. […] The low infection rate allowed Beijing to impose relatively few restrictions on people’s movements within the city until recently, while other regions locked down residents. On social media, some citizens complained Beijingers had freedoms unavailable to the rest of the country. […] On Sunday, the Ministry of Transport banned all taxis and ride-hailing services in Beijing from exiting the capital, and those from elsewhere from entering the city—after intercity buses had already been banned from the city in late January. On Friday, Beijing issued its latest epidemic-control guideline in which it emphasized that anyone coming into the city from elsewhere in China must be quarantined at home for 14 days and called on residential districts to strengthen supervision. Those returning from countries where the coronavirus outbreak is severe must also be quarantined for 14 days. It also said university students shouldn’t return to school. In the past two weeks, authorities have gone door to door in many neighborhoods to give entry-exit passes to residents for new checkpoints. In some neighborhoods, local officials have slapped large stickers across both the door and frame of entrances. If authorities later find a sticker broken, they can tell that people have been entering or leaving a residence. [Source]

China Daily reported on Friday that around 827,000 returnees to the capital are currently in quarantine. Foreign Policy’s James Palmer commented on the exceptional steps in place to defend Beijing in his weekly China Brief newsletter: “For Chinese officials, protecting the party leadership from infection is clearly the highest priority. Deaths in Beijing appear to matter more than deaths elsewhere, so the response there is a telling vision of what the government really believes about the virus.”

The capital’s exceptional status was also highlighted last week with the indefinite postponement of this year’s national “Two Sessions,” the annual gatherings of the legislative National People’s Congress and the advisory Chinese People’s Political Consultative Conference. As the meetings largely formalize a predetermined Party agenda, practical disruption from the delay will be limited, but it remains unprecedented, and striking in light of the energy usually expended to ensure the occasion is seen to remain firmly on track. Speculation about such an extraordinary step had been all but confirmed the previous week with official reports that it had been proposed. State media prepared the ground with emphatic explanations of its prudence. A Xinhua commentary after the postponement was confirmed argued:

Following relevant laws, rules and procedures, the moves were made responsibly. They are necessary and timely, conforming to the Constitutional principles and the current situation of epidemic control. The moves also demonstrate the concept of putting the people’s interests as the top priority. […] The political, economic and social order will be back to normal. The move to postpone the “two sessions” will become a prelude to China’s glory of rising from hardships and advancing more courageously. [Source]

Aside from allowing officials to focus on fighting the epidemic and avoiding the infection risk of a thousands-strong congregation in the heart of the capital, a further benefit was smoothing over the political awkwardness of holding a traditionally triumphalist event in the midst of an ongoing national crisis. The pageantry associated with the meetings—which can invite backlash even under normal circumstances—and the annual blanket of controls surrounding them would have risked difficult comparisons with the Wuhan and Hubei Two Sessions earlier in the year. It was these events in whose political shadow the outbreak gained traction, as Qian Gang argued forcefully at China Media Project early this month. The Wall Street Journal published an in-depth account of official missteps in the early weeks of the outbreak on Friday.

While political factors predominate in Beijing, elsewhere, the tension between establishing and maintaining disease containment and limiting its impact on the economy is playing out in other ways. The urgency of the contradiction was underlined last weekend by worse than expected economic data. From Andrew Mullen and Orange Wang at South China Morning Post:

Chinese manufacturing activity plunged to an all-time low in February, with the first official data published amid the coronavirus outbreak confirming fears over the impact on the Chinese economy. The official manufacturing purchasing managers’ index (PMI) slowed to 35.7, the National Bureau of Statistics (NBS) said on Saturday, having slipped to 50.0 in January when the full impact of the coronavirus was not yet evident. Analysts polled by Bloomberg had expected the February reading to come in at 45.0. A reading below 50 indicates a contraction in sector activity. The farther the figure is below 50, the greater the contraction in activity. China’s official manufacturing PMI dropped to 38.8 in November 2008 at the start of the global financial crisis. […] China’s non-manufacturing PMI – a gauge of sentiment in the services and construction sectors – also dropped, to 29.6 from 54.1 in January. This was also the lowest on record, below the previous low of 49.7 in November 2011, according to the NBS. Analysts polled by Bloomberg had expected the February reading to come in at 50.5. [Source]

release. Firms were asked when they expect to be back in business: 90.8% by end of March. Stats bureau spins that as a positive. But many forecasters had expected China to be at full capacity by then. The fact that a tenth of firms think they'll still be shut changes the outlook. pic.twitter.com/BQLovyt1ru — Simon Rabinovitch (@S_Rabinovitch) February 29, 2020

The impact on industry and other economic activity appeared equally dramatic through other lenses. The NASA Earth Observatory’s Kasha Patel wrote last week that the outbreak, quarantines, and associated economic slowdown appeared to have significantly deepened and extended the annual drop in air pollution around the Lunar New Year holiday:

The maps on this page show concentrations of nitrogen dioxide, a noxious gas emitted by motor vehicles, power plants, and industrial facilities. The maps above show NO2 values across China from January 1-20, 2020 (before the quarantine) and February 10-25 (during the quarantine). The data were collected by the Tropospheric Monitoring Instrument (TROPOMI) on ESA’s Sentinel-5 satellite. A related sensor, the Ozone Monitoring Instrument (OMI) on NASA’s Aura satellite, has been making similar measurements. According to NASA scientists, the reduction in NO2 pollution was first apparent near Wuhan, but eventually spread across the country. Millions of people have been quarantined in one of the largest such actions in human history. As of February 28, 2020, the virus had been detected in at least 56 countries. “This is the first time I have seen such a dramatic drop-off over such a wide area for a specific event,” said Fei Liu, an air quality researcher at NASA’s Goddard Space Flight Center. Liu recalls seeing a drop in NO2 over several countries during the economic recession that began in 2008, but the decrease was gradual. Scientists also observed a significant reduction around Beijing during the 2008 Olympics, but the effect was mostly localized around that city, and pollution levels rose again once the Olympics ended. [Source]

And it's not just NO2—this signal appears in other data. Informative thread and graphics from FT: https://t.co/DDayw9FM6P — Joshua Stevens (@jscarto) February 29, 2020

The Washington Post’s Gerry Shih reported on the economic impact earlier this week:

How severe is it? A nationwide survey led in February by Peking University found half the country’s small businesses will run out of cash within three months, and 14 percent might not survive past mid-March. Unlike large state conglomerates or multinational companies that could weather the storm, China’s small businesses say they simply do not have cash reserves to continue paying wages and rent. […] To counter the uncertainty, China’s leaders have tried to project calm. National authorities have set a late-April target for the virus to be fully contained, and a central-bank official took to international media to tout how China has rolled out no less than 30 policy measures, many of which specifically target “small and micro” businesses, to ensure a quick rebound. […] Chinese authorities’ hands are tied when it comes to asking banks to forgive late payments or issue even more risky loans to bail out faltering businesses, said Andrew Collier, a managing director at Orient Capital Research who frequently speaks to Chinese bank executives. […] China’s leaders “are trying to straddle between having an economic meltdown and crashing the banks,” Collier said. He added, “They will rather let some businesses go belly up than watch banks collapse.” [Source]

Bloomberg’s Enda Curran and Dong Lyu also examined the prospects for Beijing’s response:

While still fighting a health emergency, President Xi Jinping’s government now also has to decide how much to spend and on what, mindful of the risks long posed by a large debt burden and the declining usefulness of yet more new roads and railways. Much will also depend on whether it wants to preserve the growth target of “about 6%” it was originally expected to set within the Great Hall. […] Ben Cowling, a professor of epidemiology and biostatistics at Hong Kong University, warns of a possible second wave in China as business resume and people come back to work and mingle with one another. Large cities are also vulnerable to infections coming in from overseas through trade links. […] There’s also mistrust over China’s official statistics, which have been repeatedly revised through the course of the outbreak, including an extraordinary addition of nearly 15,000 cases of infection on Feb. 13. It’s changed the definition of what is a confirmed case of infection multiple times. […] China’s economy is in danger of being hit from both sides as the rest of the world economy wobbles too, according to David Loevinger, a former China specialist at the U.S. Treasury and now an analyst at fund manager TCW Group Inc. in Los Angeles. [Source]

The Wall Street Journal’s Lingling Wei had previously reported on the economic effects of lockdowns, noting many local officials’ fear that allowing business to resume “could risk a resurgence of infections, prolonging the outbreak and putting their jobs on the line. Many privately complain that President Xi Jinping has put them in an impossible position, demanding they keep growth on track while also ensuring the virus doesn’t spread.”

Argh. A Wenzhou-based factory owner tells how district officials are telling him his closed factory (he has no workers) must turn on the machines and consume electricity or he’ll get “a visit”. Higher ups are watching the electricity numbers. The anti-Li Keqiang indicator! https://t.co/PTEBARIDW6 — 优述/You Shu (@You_Shu_China) February 28, 2020

The tug of war has been underway for several weeks. South China Morning Post’s Wang Xiangwei wrote on February 15:

The Chinese leadership’s stance seems to have shifted from the sole priority of combating the spread of the virus over the past three weeks to a two-front strategy which includes back-to-work policies. One of Beijing’s biggest worries is that any longer delay could result in a massive lay-off of mostly migrant workers from small and medium-sized enterprises, particularly those in the tourism and hospitality industries such as hotels and restaurants, and those labour-intensive firms involved in processing goods for export. […] However, media reports have indicated that the local authorities in many provinces have ignored the pleas from the central government and continued to impose tough measures by keeping residents at home and keeping outsiders from coming in, as well as using administrative measures to block businesses from resuming operations. In many areas, highway exits are sealed. Migrant workers have particularly been affected as they are prevented from returning to their rented flats and are told to quarantine themselves for 14 days. Already, some entrepreneurs have taken to social media to complain that local officials merely paid lip service to the central government’s back-to-work policies. [Source]

Ai-yi-yi..! #coronavirus epidemic could cost #China’s migrant workers a combined RMB800bln ($115bln) in lost wages, says @Gavekal research, noted by @SCMPNews. Money can’t be recouped when business returns to normal, weighs on consumer spending, a key driver of growth. 😓 — Eunice Yoon (@onlyyoontv) March 7, 2020

At The Wall Street Journal on Friday, Dexter Roberts examined the impact on migrant workers in an essay adapted from his forthcoming book, “The Myth of Chinese Capitalism“:

So is China set to resume a stable course of growth? Don’t count on it. The country could still get hit by a second wave of the virus as the quarantines end, and its all-important export sector will receive a harsh blow later this year as the global economy slows. Worse, the virus has revealed the vulnerability of a pivotal, undervalued part of China’s economy—the hundreds of millions of migrant workers and their relatives in the countryside, who together make up roughly half of the population but have gained far less of the country’s wealth. Migrants are the Achilles’ heel of the China growth story. They are still facing unprecedented virus-related disruptions in their lives and work. The majority have seen their incomes dry up, unable in most cases to return to jobs or get their farm goods to market. Industrial workers who have made it back from their villages now face two-week quarantines in factory dorms, with little or no pay, as at the facilities of Apple supplier Foxconn in Zhengzhou and Kunshan. Restaurants and other service-industry businesses, which rely on migrants but are particularly concerned about spreading the virus, have been among the slowest to reopen and rehire. […] The coronavirus may eventually fade as a threat, but it has exposed the deep inequities that divide Chinese into two classes, an urban elite and an equally large underclass from the countryside that sees its small gains stalling. That split remains the biggest obstacle to China’s development. Rather than ascending to a new urban middle class helping to power China’s growth, the country’s migrant workers—left behind, as they are—pose the biggest threat to its economic and political future. [Source]

Further complicating the situation is the shutdown’s impact on the manufacturing and distribution of urgently needed medical supplies. At The New York Times last month, Li Yuan cited a collision of these various tensions in Hubei’s Xiantao city:

In Xiantao, the city government on Feb. 3 shut down all but 10 of its protective-gear factories. A local official told the official People’s Daily newspaper last week that the city made the decision for quality control reasons. Out of 113 sizable companies in the city, the official said, only two have the certificates to sell medical protective gowns in China because the majority of Xiantao’s nonwoven fabric products are for exports only. […] The real reason is that Xiantao officials do not want to be held responsible if factory workers get infected or if quality problems emerge, said Mr. Wang and two other factory owners who requested anonymity for fear of reprisals, a contention backed by local media reports in China. They agreed that in this extraordinary time the government should set prices and scrutinize quality closely. But it can set rules and supervise them, said Mr. Wang and others, instead of shutting them down. The city allowed 73 more companies back to work by Feb. 9, the local official told the People’s Daily, after getting approval from the provincial government, giving it political cover in case anything goes wrong. But the majority of the factories remain[ed] idle, said Mr. Wang and others. [Source]

Conflicting imperatives have led to some abrupt U-turns, most prominently in Wuhan itself. Late last month, shortly after a three-day door-to-door roundup of “high-risk” individuals, who were placed in involuntary quarantine, city officials announced that healthy residents would be allowed to leave the city, ending a then month-long lockdown. The announcement was deleted hours later, and then denounced as “unauthorized.” An anonymous essay from Wuhan published at NPR this week describes another series of reversals, in which residents were ordered to stop driving, and six hours later to help drive medical personnel to work, before that call was also quickly withdrawn in the face of a public backlash.