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January 4, 2025 13 mins
Reports of a New Outbreak In China Overwhelming Hospitals & we talk The Chinese Economy

China Update provides listeners with the most up to date political, economic, and geostrategic analysis on China - so that you are on top of the world's number 2 economy.   These podcasts are based on hundreds of articles, think tank reports, government statements and other resources in English and Chinese every week. The views and analysis are all my own and I produce the podcasts. 
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Disclaimer: China Update is not a financial advisory channel. While I take great care in researching everything discussed in these podcasts, nothing I say should be taken as investment advice. Please speak to a professional before making any investment decisions. #China
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Transcript

Episode Transcript

Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Happy Saturday, everybody. Welcome to another episode of China Update,
where I provide you with the most up to date political, economic,
and geostrategic analysis on the world's number two economy. My
name is Tony. Let's jump in and we begin today's
episode with some rather concerning news. We need to discuss
the news and rumors of a new outbreak in China.
I've been holding off covering this for a few days

(00:21):
because it's difficult to get concrete details or confirm much.
I've been talking to contacts on the ground for the
last few days, and it's still difficult to get these details.
So for now, we simply take note of what is
being discussed, and we take everything with a pinch of salt.
What is official is that China is indeed facing a
mysterious viral outbreak of some kind. The outbreak is reportedly

(00:43):
overwhelming hospitals, with social media videos showing packed wards long
lines in pediatric units and mask wearing patients receiving treatment.
Some reports also claim crematoriums and funeral homes are struggling
to cope with increased demand, but it is very difficult
at the moment to verify any of these videos. Or
confirm the details therein. Videos of incredibly busy hospitals are

(01:06):
circulating online to viewers and developed countries. They can look
quite terrifying. While it could be the case that these
hospitals are overwhelmed. As someone who has lived in China
for years and being to hospitals many times, I can
tell you that hospitals often are very, very busy. I
have been in crowds like some of these videos while
I've been in hospitals. Now. That is not to suggest

(01:27):
that these videos are misleading or inaccurate. I'm simply giving
some context when it comes to thinking about hospitals in China.
Local news suggests the outbreak could involve HMPV, a virus
that typically causes mild cold like symptoms, although this remains unconfirmed.
According to the US Center for Disease Control, HMPV is

(01:48):
a respiratory virus that causes upper and lower respiratory infections.
It affects individuals across all age groups, with young children,
the elderly, and those with compromised immune systems being most vulnerable.
Official reports from the Chinese Center for Disease Control and
Prevention CDC attribute much of the surge to influenza, with
thirty percent of tests returning positive for flu in fourteen

(02:10):
percent of hospitalized respiratory cases linked to it. The wave
that we've seen over the last week or so follows
a similar outbreak in winter of twenty twenty two to
twenty twenty three, when low immunity from prolonged COVID nineteen
lockdowns led to a surge in pneumonia. Cases dubbed white
lung flu like illnesses now account for seven point two
per cent of outpatient visits in northern provinces, twelve percent

(02:32):
higher than in the previous week, and five point seven
per cent in southern regions, marking the highest seasonal level
since twenty twenty one. In some areas, high witness accounts
add to the alarm around some of these stories and
these surges of cases In the last week or so.
A farmer from Hornan Province, for example, reported multiple deaths
in his area, spanning all age groups. A funeral director

(02:53):
described long lines and crematoriums operating at capacity, likening the
scene to a bustling trade. Fear bej Being issued a
press statement to address the concerns yesterday Friday, with China's
Foreign Ministry spokesperson Bulding saying quote, respiratory infections tend to
peak during the winter season. The World Health Organization is
yet to issue a statement as of the filming of

(03:14):
this episode, at least on the outbreak of the virus
in China, and no set of emergency has been declared
by the Global Health Body or Beijing. The countries neighbouring China,
especially India, are strictly monitoring the situation. Hong Kong Today
has reported a few cases of HMPV. Health experts advise vigilance,
noting that flu and other respiratory infections can rebound strongly

(03:36):
in populations with waning immunity. Meanwhile, anecdotal accounts and videos
of overwhelmed facilities continue to circulate, fueling unease as China
confronts yet another healthcare challenge. Obviously, with the memories of
the pandemic, Beijing's early cover up, and the who's incompetence
still painfully fresh in our minds, there is a temptation
to prematurely jump to conclusion or exaggerate the nature of

(03:59):
the situation, especially as rumors and unconfirmed stories can spread
like wildfire online. Indeed, I still get goosebumps when I
think back to my reporting on the then mysterious pneumonia
outbreak in or Han in December of twenty nineteen. Nevertheless, however,
we must calmly and cautiously monitor these developments as they happen,
which is what I will do here on the channel. Now.

(04:20):
I know that a small number of viewers will get
angry with this cautious approach and take my refusal to
present unconfirmed online reports as hard facts as evidence that
I'm a shill or propagandist, just like they did a
year ago when I said reports that Chu Jinping had
been detained were likely false. But I know the majority
of China Update viewers watch this channel for grounded and
sober analysis, not tabloid speculation and spin. My commitment remains

(04:45):
to that grounded in sober analysis. If you are looking
for rumors and speculation, punitary and spin, I would say
that this is not the channel for you. Everyone else,
let's continue with today's episode. The People's Bank of China
China Central Bank is poised to make a historic shift
in its monetary policy, aligning more closely with the frameworks
of the US Federal Reserve and European Central Bank. In

(05:08):
a statement to the UK based Financial Times, the People's
Bank of China confirmed plans to cut interest rates from
the current one point five percent quote at an appropriate
time quote in twenty twenty five. This move underscores a
pivot from quantitative loan growth targets to market oriented interest
rate controls, signaling a significant modernization of China's monetary policy.

(05:29):
For decades, the People's Bank of China's approach relied heavily
on directing bank's loan books toward high growth sectors like manufacturing, property,
and technology. However, this model has contributed to overcapacity, bad debts,
and indiscriminate lending, undermining long term economic sustainability. The People's
Bank of China aims to phase out such practices, prioritizing

(05:51):
risk based loan pricing and fostering high quality development. That's
the plan. At least, we will have to see how
successful they are and that everybody in the leadership is
on board with their plan. Meanwhile, speaking of the People's
Bag of China monetary policy, the onshore Yan, China's currency
has slipped past the psychologically significant seven point three per

(06:13):
dollar level for the first time since late twenty twenty three,
signaling potential for further depreciation as China grapples with economic headwinds.
This breach, despite the People's Make of China maintaining its
daily reference rate, highlights the central bank's struggle to balance
currency stability with growth pressures. The Yan's weakening lines with
rising dollar strength and declining domestic bond yields, as noted

(06:36):
by Wee Kwanyong of b in Y, The currency briefly
touched zero seven point three one nine on Friday before stabilizing,
with further drops potentially testing levels last seen in two
thousand and seven. The shift has also impacted other Asian currencies,
with the Taiwan dollar in South Korean one showing declines.

(06:57):
China's strategy of propping up the U against trading partners
currencies to a multi year high had an invertedly hurt
export competitiveness. The recent breach suggests the People's Bank of
China may be adjusting its approach, as rigid currency controls
in the past, such as the twenty fifteen devaluation, triggered
market volatility and capital outflows. Market sentiment remains bleak, with

(07:22):
China's stock index closing at its lowest in September, and
sovereign yields at record lows. BNP, Paribas and JP Morgan
force further depreciation, with projections of the Yan weakening to
seven point four to five to seven point six by
mid twenty twenty five. Analysts expect a collaborated adjustment rather
than a chaotic decline, with the People's Bank of China

(07:45):
leveraging tools like its daily fixing and direct interventions to
stabilize markets. Speaking on this news today, Peaking University professor
of Finance Michael Petts observed, quote, currency devaluation works very
much like import tariffs. It may exports more competitive, but
at the expense of domestic demand. If China were to
depreciate the R and B against all currencies and not

(08:07):
just the USD, this would only be expansionary if the
rest of the world were able and willing to absorb
a significant increase in China's trade surplus. If it were not,
currency depreciation would actually reduce total demand for Chinese production
by reducing domestic demand without a commensurate increase in the
trade surplus. Every action has its own reaction. Next up,

(08:33):
we have two more economic updates to cover, but as quickly.
If you're getting some vilie from today's episode of China Update,
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(08:54):
I rely primarily on your support, subscriber support to keep
going and to continue producing these episodes every day. Thank
you so much everybody for the ongoing support. Next up
for the economy, Thursday saw the release of the Taste
in China General Manufacturing Purchasing Manager's Index PMI, which seeks
to give an independent snapshot of the country's manufacturing sector.

(09:16):
According to the new data, activity in China's manufacturing sector
expanded at a slower pace in December, while falling exports
dragged on overall demand and employment remained in contraction. The
index came in at fifty point five compared to fifty
one point five in November. A reading above fifty indicates
an expansion activity, while the number below that signals a contraction.

(09:37):
The official manufacturing PMI, released by the National Bureau of
Statistics on Tuesday, also showed slowing growth in activity, with
the index dropping to fifty point one in December from
fifty point three the previous month. The tastes in surveys
showed that growth in manufacturing output in December was the
slowest in the fourth quarter. Growth in total new orders,
a key indicator of overall demand, also slowed from November.

(10:00):
External demand returned to decline, employment continued to shrinkle, though
at a slower pace, The inflationary pressure increased to and
businesses became less optimistic again all. According to the report
Quote surveyed businesses reported concerns about the outlook for the
economic recovery and the looming trade war between China and
the US. The diminishing business optimism was reflected in the

(10:24):
indicative for future output expectations, which fell by more than
three points from November, although staying in positive territory in
Quote all in all fairly poor numbers. In an accompanying report,
Wangja chief economists behind the index warned that the economy
still faces prominent downward pressure, marked by tempered domestic demand.

(10:47):
And mounting unfavorable external factors quote. The external environment is
expected to be more complex the share requiring early policy
preparation and instant response in quote. Manufacturing accounted for twenty
six percent of China's GDP in the first three quarters
of last year, and as regular viewers know, Majing has
pumped its state directed capital from housing in infrastructure into manufacturing,

(11:12):
which brings us to the final story for today. This week, BYD,
China's leading electric vehicle manufacturer, reported record breaking sales in
twenty twenty four, solidifying its position as a global EV powerhouse.
The company sold four point three million evs and hybrids worldwide,
far exceeding its initial target of three point six million.

(11:33):
This included one point seven six million pure evs, second
only to Tesla, which delivered one point seven nine million
evs last year. BYD's strong performance highlights its dominance in
the world's largest car market, even as fierce competition intensifies.
Other Chinese automakers such as Li Auto, Leap Motor, and Salmi,

(11:53):
also surpassed their targets, selling five hundred thousand, two hundred
ninety thousand, one hundred thirty five thousand evs respectively. Selmi,
a newcomer to the market, made waves with its SU
seven Sudan, capitalizing on demand for personalized affordable evs. China's
EV market continues to evolve, driven by significant government support,

(12:15):
including subsidies and a trade in scheme that offers consumers
twenty thousand R and B two thousand seven forty US
dollars for replacing gas powered cards with evs. Analysts predict
that by twenty twenty five, evs, including hybrids, will outsell
traditional internal combustion engine vehicles for the first time. Despite successors,
smaller players face mounting pressure amid a prolonged price war

(12:38):
and fierce competition. Companies like ex Pun and Neo fell
short of sales targets, while startups such as High Fee
and d Do collapsed in twenty twenty four. Consolidation is
reshaping the market, with major players like Yeelee merging sub
brands to streamline operations. In his recent New Year speech,

(13:00):
General Secretary Shooting Ping praise the industry's achievements, noting that
China's annual production of new energy vehicles past ten million
units for the first time, underscoring the country's growing dominance
in the global ev market. As we've seen. However, the
industrial policy and strong state support which buttresses the success
has caused a backlash around the world, including and especially

(13:22):
in the EU, which has erected to train barriers to
protect local players. Indeed, potential trade wars, not just with
the US, but with others will be one of the
main stories to follow for China and twenty twenty five. Okay,
that is today's episode of China Update. Thank you so
much everybody for watching. Have a good Saturday, have a

(13:44):
rest for weekend. There may be an extra episode tomorrow.
There's been so much to cover this week, I may
have to do an extra episode tomorrow. So I'll either
see you tomorrow on Sunday or for a new week
on Monday.
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