WORKING ON RETURNING TO WORK

Authorities announced on March 11 that the provincial government could allow local enterprises to resume production in batches after receiving approval, with those engaged in key industries given top priority. The Hubei provincial government has reopened some passenger air and rail services since late March and plans to resume all domestic travel to and from Hubei by April 8.　

Concerned over a resurgence of the virus - there are still more than 1,000 people receiving treatment for Covid-19 in Wuhan and the virus is spreading across Europe and the US - the government did not give a specific reopening date for all local enterprises. 　

But experts warned that the prolonged lockdown has hurt the economies of Wuhan and Hubei and would continue to affect operations in the long term. 　

“It’s evident that the economy has been heavily impacted in the first quarter,” an official at Wuhan Municipal Development and ReformCommission who refused to reveal his name told NewsChina. “Many Q1 indices have fallen to ‘zero’ ... It will be a huge challenge for the [municipal] government to pull local businesses out of their difficulties and help the economy recover,” he added. 　

At the same time, epidemic control efforts sent expenditures skyrocketing. According to China Financial and Economic News, a publication under the MoF, the municipal government of Wuhan had injected 7.1 billion yuan (US$1.1b) into epidemic controls as of March 11 to cover hospital renovation, medical treatment and quarantine efforts. In addition, the modular Huoshenshan and Leishenshan hospitals built for critical Covid-19 cases and 16 makeshift hospitals in sports arenas also strained the city’s coffers. 　

Business shared the same fate. With most Wuhan residents quarantined at home, offline consumption plunged. Forced to pay rent for closed storefronts and employee wages despite no revenue, many businesses are teetering on the verge of bankruptcy. 　

“He pays 10 million yuan (US$1.5m) in rent and 50 million yuan (US$7.4m) in wages each month,” Luo Zhi, the director of the Institute of New Private Economy under Wuhan University, said of the owner of a chain of foot massage parlors. “The two-month lockdown has caused him losses of more than 100 million yuan (US$14.7m) ... He plans to give up,” said Luo, whose team has been studying the epidemic’s economic impact on Wuhan. 　

The effects will be even deeper and longer in upstream manufacturing, a pillar industry for Hubei. 　

“As more and more enterprises outside Hubei have already resumed production while those in Hubei are still in lockdown, the market will be re-divided,” she said. “Factory orders are generally placed once a year. If an enterprise misses this year’s window, it may lose its market position the next year,” she added. 　

Given 70 percent of Hubei’s industrial chain is located within the province, Luo worried that the bankruptcy of one enterprise would have a devastating ripple effect. 　

While some larger businesses may survive, the sharp drop in sales would influence hundreds of small- and medium-sized enterprises that depend on them. This could lead to a vicious cycle: bankruptcies would increase unemployment and further reduce consumption, bringing down demand and causing more enterprises to go bankrupt.　

Based on their surveys, Luo’s team submitted three reports to both the municipal and provincial governments in early March. “Wuhan must shift parts of its focus on the economy. The government must put resuming production back on the agenda before it is too late,” warned one of the reports. 　

But the health code was not launched until March 6. The same day, Hubei saw its daily number of new Covid-19 cases drop below 100. 　

On March 9, the day before cities in Hubei except Wuhan were slated to resume production, the provincial government demanded that each city and district carry out different controls based on a State-issued guidebook that defined levels of Covid-19 risk.　

However, when NewsChina called Hubei government officials to verify two documents circulating online that read two auto manufacturers were approved to resume production, the official claimed to have no knowledge of them. 　

The situation was not made clear until March 10 when Chinese President Xi Jinping visited Wuhan and called for “differentiated” and “conditional” resumption measures. 　

On March 11, Hubei’s new confirmed cases dropped below 10. The provincial government released a statement on its website saying it would resume production selectively. Essential businesses such as public transport, agriculture and important links in the global industrial chain would have priority, the announcement read.　

“We were approved five days after submitting an application,” a head of a telecommunications company told NewsChina on condition of anonymity. Approval to resume production is handled at the district level by command centers for epidemic control and prevention.　

“We showed the command center our stock [of protective gear] and could guarantee we would carry out prevention controls during production,” he said, adding the company also provided employees with single dormitory rooms and meals to help with quarantine measures. 　

But these high safety requirements have not only raised costs for factories, but also have made employees reluctant to return. 　

The telecom head said that only 20 percent of employees had come back to work on their first day of operation, but running at reduced capacity was better than nothing. What concerns him even more are logistics. Since transportation lines to Wuhan have not reopened completely, it takes longer to ship supplies. This will hinder production even more, despite having workers ready to go. 　

“Our stock of materials is really only enough for two weeks of production,” he told NewsChina.　

Ye Xueping, director of the Institute of Economics, Hubei Academy of Social Sciences, told NewsChina that manufacturing and service industries which depend heavily on labor and logistics would not resume production completely until the lockdowns on Hubei and Wuhan were fully lifted.　

Data from Wuhan showed that by February 28, more than 80,000 officials had been dispatched to cooperate with cities, communities and government-backed organizations to screen and investigate suspected Covid-19 cases.　

“Dispatching officials to communities indeed played a role in epidemic controls in the preliminary phase, but the government should now shift to more scientific and targeted control efforts,” Zhang Yansheng, a chief researcher at the China Center for International Economic Exchanges, told NewsChina. 　

According to Zhang, as there are few new Covid-19 cases in Hubei, control should be handed over to specialists. If information remains transparent and residents remain vigilant, most officials, Zhang said, could shift their focus to economic recovery. 　

Fighting the epidemic is still the priority. If there were a resurgence after resuming work, officials would be held responsible and punished, which might dissuade them from doing so, he said. “It is urgent that leading officials find a balance between scientific epidemic controls and orderly production resumption,” he added.　

Luo Zhi favors a selective policy over a hard return date. 　

“It’s better that we first warm up economic operations and then dynamically adjust policies according to the situation,” she said. 　

To encourage more enterprises to resume production, Luo suggested including companies equipped with employee dormitories and dining halls, as well as those with high automation and do not require intensive labor. As for the remaining enterprises, Luo said the government should work out an inspection process and allow those qualified to restart production. 　

“Even though some enterprises could not afford to build dormitories and dining halls, they could rent hotels or order takeout... there are always more solutions than difficulties,” she said. “What Wuhan needs most is to resume production in the short run and the central government’s support in the long run.” 　

Some experts are appealing for the central government to give more financial support to Hubei. Wen Laicheng, a professor at the Central University of Finance and Economics, for example, suggested increasing loan quotas for Hubei Province and encouraged some departments to cooperate with Hubei and Wuhan on public works projects, much like the reconstruction efforts following the 2008 Wenchuan earthquake. 　

Zhang Yansheng also calls for more private investment. In 2020, Wuhan proposed 230 city-level projects, of which private investment is expected to make up 52 percent. Although private investment has taken a hit during the epidemic, Zhang said that Wuhan, home to high-tech development zone Optics Valley and a State-level lab for high-tech development, could take advantage of new infrastructure to absorb investment.　

“Future infrastructure will focus on the new generation of information technology such as 5G,” he said.　

The government has taken measures. Chen Yixin, the deputy leader of the central government’s epidemic control and prevention team sent to Wuhan who also served as Wuhan’s Party secretary in 2017, held a meeting with the business community and former classmates in Hubei on February 22, encouraging them to protect Wuhan. Soon after the meeting, they started a program to support medical workers, offering over 20,000 jobs to the children of frontline medical workers. 　

On March 12, Chen held a video conference with leaders of the business community from in and outside of Hubei, such as Chen Dongsheng, president of Taikang Insurance, Lei Jun, president of Xiaomi, Sun Hongbin, president of real estate developer SUNAC, and Mao Zhenhua, president of China Chengxin International Credit Rating. At the meeting, Chen called for more enterprises to join the campaign to protect Wuhan and encouraged local businesses to play a bigger role in Wuhan’s development. 　

Although the epidemic has exposed weaknesses in Wuhan’s social and public governance, Zhang believed that it has brought the city an opportunity to develop national-level scientific development projects and pilot new reforms, such as public sanitation. 　

“Because epidemic controls have reduced city coffers, it would be very difficult for Wuhan’s government to recover economically on its own. Private investment and central government support are two leading solutions,” Zhang said.