But when the coronavirus outbreak began, the Communist government had to quarantine tens of millions of people in an effort to contain it.
In doing so, thousands of Chinese factories were shuttered, dramatically reducing the country’s GDP — and affecting the government’s budget in a massively negative way.
As Zero Hedge noted this week, the Chinese government is facing a conundrum: Continue to do the right thing by working to contain the spread (and lethality) of the virus, or do the ‘economic’ thing and restart factory production to ramp up GDP, the people’s health be damned.
As Rabobank’s Michael Every stated, “China appears to have perhaps decided that the economic damage being wrought by a demand collapse and supply-chain shutdown is just too much to bear.”
After days of reduced factory output, President Xi Jinping announced a few days ago that China would not only meet all of its economic objectives as well as win the battle against the coronavirus, but the Communist government has begun urging firms to bolster their output despite the fact that there are widespread quarantines still in effect.
How can Xi have it both ways? “…[I]ncrease economic activity from here and the virus will spread, both internally and globally,” Every noted further. “Concentrate on just the virus, and the local and global economic impeach will be enormous” due to under-production.
So, choosing mercantilism over common sense and prudence, the government ordered factories reopened and employees back to work, which has already lead to harsh realities and hard-luck results on the part of workers.
Journalist Jennifer Zeng reported that after a company in Suzhou reopened as ordered, officials immediately discovered at least one employee was stricken with the virus, CoVid19, as it's official known.
As a result, the 200-plus employees at the firm were not permitted to go back home and instead were placed immediately under quarantine — at the factory.
‘Truly awful’
Zero Hedge noted:
This is just the first such case. Expect many more -- especially across Hubei and its neighboring provinces -- as latent cases of Coronavirus which were never caught and cured spark new infections and mini epidemics, all of which are dutifully captured on a smartphone clip for everyone in China to watch and freak out even more.
Rabobank explained further last week why the situation China is facing regarding the coronavirus and lost production is “truly awful.”
“The quandary for China between releasing the quarantine straitjacket in days to stop its economy from getting truly sick, and allowing a virus like this to spread further as people start to mingle again” is the result of having “no good options.”
That’s equally true for most of the rest of the world which is dependent on a steady stream of products flowing from Chinese factories in order to feed and sustain the global economy.
“For a world with a serious lack of final end-demand, and which has been relying on China, along with increasingly “Chinese” central banks, this is going to be a nasty shock either way that Mr. Market is treating like his is Mr. Magoo,” Rabobank reported.
In reality, Chinese leaders may have discovered a way out of their quarantine-production decline dilemma: Simply demand that workers return to their jobs, quarantine them in place, and hope for the best. That way, at least production will continue for a while longer, maybe even giving Beijing and Xi a way out.
But that would mean the virus would have to die out before much of the workforce, and at this point, there’s no indication coronavirus has run its course.
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