Wall St.Journal 27Feb2020

THE WALL STREET JOURNAL. **** Thursday, February 27, 2020 |A

President Xi Jinping inspected efforts to prevent and control the coronavirus in Beijing this month.

XINHUA/REUTERS

Home sales were one-quarter

of the seasonal norm, it said,

and demand for steel was

around 50% its normal rate in

the past three years.

Using migration data from

map-and-search company Baidu

Inc., Nomura estimates that a

little more than a third of the

people who left cities such as

Beijing, Shanghai and Shenzhen

for the Chinese Lunar New Year

in late January and early Feb-

ruary have returned. By this

time last year, nearly all had.

Migrant laborers make up

about 40% of China’s workforce

and are needed for manufactur-

ers to resume production.

In some places, authorities

have shut public transporta-

tion and locked down resi-

dents. Even some cities far

from the epicenter have been

allowing residents outside

only every few days. Currently,

hundreds of millions of people

in China are on lockdowns of

varying degrees.

Some sectors are calling for

urgent help. “We almost

closed all our property sales

offices overnight, and all sales

have stopped,” reads a recent

letter to the government in Ji-

angxi province, in southeast-

ern China, from the Ji-

angxi Property Association. Its

members, many of them pri-

vate developers, “face huge fi-

nancing pressure and are find-

ing it hard to resume

business,” the group said.

China Baowu Steel Group,

the country’s largest steel pro-

ducer, has warned that first-

quarter profit would drop as

much as 3 billion yuan, or

roughly $428 million, because

of disruptions from the epi-

demic. That would mark a 14%

900 tons

300

400

500

600

700

800

Lunar New

Year day

3 weeks

after

3 weeks

before

150

0

50

100

billion yuan

Lunar New

Year day

3 weeks

after

3 weeks

before

Source: Capital Economics

Note: 1 billion yuan = $0.14 billion

EconomicFallout

Quarantine restrictions have forced slowdowns at factories and

closures at many movie theaters.

Cinemabox-officedailysales Coalconsumptionat

powerplants

2017 2018

2018 2019

decline from its profit in the

same period of last year.

“Market demand has

dropped,” said Zhang Jing-

gang, vice general manager of

thegroup,ataforumonFeb.

22. “Inventories are piling up
    faster than expected.”
    Foreign companies such as
    AppleInc.,Deere& Co. and
    auto-parts makerAmerican
    Axle & Manufacturinghave
    also warned about softening
    sales in China. A mid-February
    survey conducted by the
    American Chamber of Com-
    merce in South China shows
    that more than 76% of its 399
    respondents believe their
    2020 revenue would be hurt
    by the viral epidemic.
    Some analysts are predict-
    ing zero or even negative Chi-
    nese growth in the first quar-
    ter, a direr forecast than a

month ago, when the epidemic

started to spread quickly. The

slowdown is calling into ques-

tion the leadership’s insistence

that China can meet its eco-

nomic targets this year.

“Propaganda can’t move

mountains,” wrote Zhang

Anyuan, an economist at CFC

Financial, a Chinese securities

firm, in a Feb. 24 report. Mr.

Zhang is among the experts

who think first-quarter growth

could come in at zero or

worse. “Based on the serious-

ness of the economic losses in

the first quarter, adjusting and

downplaying growth targets

would be understandable and

acceptable to the people.”

An official in the Jiangxi

provincial government said lo-

cal state banks are trying to

help some companies through

the cash crunch.

on Monday it would begin to

ease its quarantines that day,

only to retract the notice a few

hours later. Wuhan’s govern-

ment said its earlier notice was

issued without the approval of

the city’s “key leaders.”

Other cities, including Bei-

jing, tightened restrictions on

movement in recent weeks af-

ter having taken tentative

steps to loosen their rules only

to see new infections appear.

Mr. Xi has sent mixed mes-

sages, calling on leaders to

stop at nothing to contain the

virus while urging them to en-

sure growth remains robust.

The leader needs both tasks to

succeed to quell public anger

toward the government’s han-

dling of the epidemic and rein-

force his popular appeal.

In an address to the 25-

member ruling Politburo this

month, Mr. Xi instructed party

members to wage a “people’s

war” against the epidemic.

Then, he said China must ad-

here to development targets,

which call for doubling the size

of China’s economy in the de-

cade through 2020—a goal offi-

cials say requires annual growth

of at least 5.5% this year.

Three days later, Mr. Xi told

French President Emmanuel

Macron in a call that the epi-

demic’s impact on China’s

economy would be temporary,

adding “China will still be able

to achieve” its growth targets,

the official Xinhua News

Agency reported.

On Tuesday, Mr. Xi called

on authorities to help farmers

cross road barricades to return

to rice paddies for “an all-out

effort to secure a bumper sum-

mer grain harvest.” Analysts

say if the spring farming sea-

son is missed, China’s food se-

curity would be at risk.

Despite Mr. Xi’s displays of

confidence, the economy is

fast weakening. Factories re-

main idle and consumption

and investment have plunged.

While China has delayed the

release of official economic

data until mid-March, other

indicators point to a signifi-

cant downturn.

Average coal consumption

at major power companies was

about 40% lower from a year

earlier in the week through

Feb. 25, Goldman Sachs said.

Continued from Page One

WORLD NEWS

HONG KONG—China is try-

ing to stop the coronavirus

from being repatriated by trav-

elers arriving from abroad, as

the epidemic takes hold in more

countries around the world.

A number of Chinese munic-

ipal governments are imposing

stricter health screenings on

people entering the country

and, in some cases, even quar-

antine measures on those arriv-

ing from coronavirus-afflicted

countries. These controls come

after Beijing waged a concerted

campaign urging other govern-

ments not to impose restric-

tionsontraveltoandfrom

China, saying such measures

were out of line with World

Health Organization guidance.

China has reported a slow-

down in the domestic spread

of the Covid-19 disease, which

has killed more than 2,

people, amid rising numbers

of new cases abroad. The

trend has prompted local au-

thorities in Beijing and a num-

ber of cities across eastern

and northeastern China to

take steps this week to

“strictly prevent the import of

overseas epidemics,” in the

words of several of the cities.

Municipal leaders in Beijing

urged a new level of vigilance

against risks from overseas

outbreaks, demanding stricter

health screenings at immigra-

tion checkpoints and targeting

preventive measures for for-

eigners.

Among these steps, the cap-

ital on Wednesday said it

would impose 14-day quaran-

tines on foreigners arriving

from or with recent travel his-

tory in countries and areas se-

verely afflicted with the coro-

navirus, without specifying

which places.

“The coronavirus epidemic

is spreading overseas, and

there’s a high degree of con-

cern in society,” said Gao Xi-

aojun, a spokesman for Bei-

jing’s municipal health

commission. “Beijing munici-

pality is comprehensively

strengthening immigration

health controls to strictly

guard against risks of the epi-

demic being imported.”

Major cities in eastern

Shandong province, as well as

the northeastern provinces of

Liaoning and Jilin, have also

imposed stricter health

screenings in recent days for

travelers entering China, in-

cluding some that explicitly

target people arriving from

South Korea and Japan, where

large clusters of Covid-

cases have emerged.

The Chinese government

hasn’t signaled any plans to

limit or block international

travel to and from other epi-

demic-hit countries, such as

suspending flights or barring

entry—measures Beijing has

urged other governments not

to impose against China, citing

the WHO’s advice on epidemic

controls.

Yet dozens of countries

have taken steps to dissuade

or restrict travel to and from

China, including travel adviso-

ries, suspensions of direct

flights, as well as mandatory

quarantines or even outright

bans on visitors with Chinese

nationality or recent travel

histories in China.

Some officials and medical

experts from these countries

have justified their measures

by citing the travel curbs that

China has imposed domesti-

cally, such as the complete or

partial lockdowns of entire cit-

ies and restrictions on the

day-to-day movements of hun-

dreds of millions of people.

Over the past month or so,

Chinese diplomats have por-

trayed the epidemic as a test

of friendship, calling on for-

eign governments not to sus-

pend travel links with China or

to evacuate their citizens—

measures Beijing decries as

unnecessary, fear-inducing and

unfriendly.

Outbreaks in other coun-

tries—including nearby South

Korea—appear to have

prompted a shift in tone from

China. On Wednesday, China’s

Foreign Ministry said Beijing

is “studying the use of preven-

tive control measures that are

scientific, appropriate and tar-

geted.”

“Recently some countries

have taken some necessary

measures targeting immigra-

tion to strengthen epidemic

prevention and control,” min-

istry spokesman Zhao Lijian

told reporters when asked

about Chinese measures

against travelers from South

Korea and Japan. “As long as

these measures are scientific,

professional and appropriate,

everyone can understand.”

Local Chinese measures an-

nounced in recent days gener-

ally prescribe health screen-

ings and temperature checks

at airports and other immigra-

tion checkpoints for people ar-

riving from outside China.

Already, China quarantined

some 257 people who arrived

Tuesday on two flights from

South Korea’s Incheon airport

after some passengers were

found to have abnormal body

temperatures, state broad-

caster China Central Televi-

sion reported. Among them,

163 passengers were quaran-

tined in Weihai, while the rest

were in the central city of

Nanjing, CCTV said.

South Korean Foreign Min-

ister Kang Kyung-wha criti-

cized the quarantines as ex-

cessive, saying Seoul has

exercised restraint in imposing

immigration controls on trav-

elers from China while the

coronavirus was spreading

there.

BYCHUNHANWONG

China Steps Up Health Screening

A quarantine officer at Daxing International Airport in Beijing holds a health document to be filled out by arriving passengers.

NICOLAS ASFOURI/AGENCE FRANCE-PRESSE/GETTY IMAGES

“But we have to be ex-

tremely cautious about relax-

ing travel and other restric-

tions,” the official said. “There

is still a lot of uncertainty

over the virus and we don’t

want to see all our efforts go

to waste.”

Other officials are trying to

pass along the pressures to lo-

cal businesses.

In the coastal city of Li-

anyungang, in eastern China,

the local finance bureau is de-

manding companies in a 50-

square-mile industrial zone

put up 100,000 yuan deposits

to restart production.

Companies that keep infec-

tions at bay will be rewarded

with 50,000 yuan each, ac-

cording to a notice from the

finance bureau. But if any em-

ployees fail to wear masks to

ensure safety, their employers

would be fined as much as

10,000 yuan.

Elsewhere, steps to remove

barricades or otherwise en-

courage production to resume

aren’t having as much impact

as hoped, because companies

are still encountering prob-

lems caused by restrictions in

other areas.

In Wuhan, speculation

about when to lift the local

quarantine started almost as

soon as it was put in place, un-

der Mr. Xi’s personal orders, in

late January. The city’s abrupt

flip-flop on quarantine rules

on Monday came a day after

Mr. Xi held a rare teleconfer-

ence with some 170,000 cadres

throughout the country, calling

on them “to advance the work

on coordinating the prevention

and control of the Covid-19”

virus, along with economic

and social development.

Mr. Xi has said authorities

should decide how and

whether to ease quarantines

based on local health risks,

though some say the uncer-

tainty over the virus makes it

hard to gauge the risks.

Some state-controlled

newspapers blamed Wuhan’s

confusion on a deputy mayor

who failed to seek higher-level

approval. For some Wuhan of-

ficials, it was evidence of the

stress on local governments as

they struggle with the top

leadership’s twin objectives.

“How would the epidemic

evolve going forward? Can

factories return to production

in time? How to balance epi-

demic control against eco-

nomic development?” said Wu

Ge, a former central-bank offi-

cial who is now chief econo-

mist at Changjiang Securities.

“Those have all become the

key contradictions” faced by

China’s policy makers.

Beijing

Is Pressed

On Controls

Some American companies
say they could lose as much as
half their annual revenue from
China if the coronavirus epi-
demic extends through the
summer, as businesses strug-
gle to get boots back on the
ground amid travel restric-
tions and shortages of basic
protective gear.
Nearly half of U.S. compa-
nies in China said they expect
revenue to decrease this year if
business can’t return to normal
by the end of April, according
to a survey conducted Feb. 17
to 20 by the American Chamber
of Commerce in China, or Am-
Cham, to which 169 member
companies responded. One fifth
of respondents said 2020 reve-
nue from China would decline
more than 50% if the epidemic
continues through Aug. 30.
Microsoft Corp. warned
Wednesday that supply-chain
disruptions would dent this
quarter’s sales, the second ma-
jor tech company after Apple
Inc. to lower earnings expecta-
tions because of the public-
health crisis in China.
Work-from-home policies
had been implemented by 94%
of the responding companies,
but businesses that require
workers on-site said travel re-
strictions had created burden-
some delays.
American companies cited
global travel disruption as their
biggest obstacle to business
and said reduced productivity
and employees’ inability to get
to work are among their great-
est challenges.
“The crisis is real, and peo-
ple are prioritizing the virus
first and resumption of the
economy second. Getting pro-
tective gear and getting it in
the quantities necessary to
keep the workforce safe is a
challenge for a lot of compa-
nies,” AmCham Chairman Greg
Gilligan said in an interview.
While many white-collar em-
ployees in China have been able
to work from home, the coun-
try’s 291 million migrant work-
ers who live in rural areas but
work in cities—typically in jobs
that require their physical pres-
ence—have struggled to return
to work. Fewer than one-third
have done so, China’s transport
minister said recently, estimat-
ing that the last migrant work-
ers could return in March.

BYJULIEWERNAU

American

Companies

Fear Hit

To Sales

 Coronavirus squeezes
Amazon sellers....................... B

SEOUL—The U.S. and South
Korea on Wednesday post-
poned planned joint military
exercises “until further no-
tice,” as South Korea struggles
to contain the coronavirus.
The Seoul government
raised the virus-alert status to
its maximum level over the
weekend and on Wednesday
reported 1,595 coronavirus
cases—nearly 20 times the
number just a week before. On
Tuesday, a 23-year-old Ameri-
can soldier stationed in South
Korea became the first U.S.
service member to contract
the coronavirus.
The main clusters of coro-
navirus are around Daegu, the
country’s fourth-largest city,
where both the U.S. and South
Korea have military bases.
Seoul has put its facility on
virtual lockdown, as around 20
soldiers have contracted the
virus and nearly 10,000 are
quarantined. The American
military has told soldiers to
avoid traveling off base.
The U.S. has around 28,
military personnel in the
country and placed its largest
overseas military base about
40 miles south of Seoul.
In recent years, the joint
military exercises have been
scaled back at President
Trump’s request, following a
pledge made after his 2018
Singapore summit meeting
with North Korean leader Kim
Jong Un. The exercises simu-
late a violent confrontation
with North Korea.

BYTIMOTHYW.MARTIN

U.S., Seoul

Put Off Joint

Military

Exercises