As the Wuhan coronavirus spreads globally, the figures on new infections in China are now remarkably low. But be careful who you believe.
China's Communist Party is intent on manipulating its public image, which gives it a great incentive to ensure that cases are underreported. Workers who have been stranded since the Lunar New Year holiday are continuing to return to the provinces where they work. So there's scope for a second surge in infections.
On Wednesday morning, China's National Health Commission reported that China imported more new cases than arose at home, not counting the Wuhan epicenter itself. In fact, there was only one new "home-grown" case outside Wuhan, whereas five people brought the virus from Italy to Beijing, one brought it from the United States to the capital, and one person took it from Iran to the distant northwest province of Gansu. There was another imported case in Shanghai and one in eastern Shandong Province.
The Beijing leadership is desperate to get to a day where it can announce no new cases of the coronavirus. On Wednesday, it did report 13 new infections in Wuhan itself, the city where this all kicked off, and 22 deaths in the city and surrounding Hubei Province.
But the Communist top brass are this close to saying the rest of the country is saved. No less a dignitary than President Xi Jinping, who has kept an extremely low profile during the outbreak, has made an appearance in Wuhan. Bar those pesky imports - it's not clear if the travelers were foreigners or Chinese citizens returning home.
Xi, in widely circulated videos, appears to be telling people a lot of things during his trip to Wuhan. I'm not sure how much use that kind of talk from politicians is. People listen. Viruses just get on with replicating.
China's total cases now stands at 80,778. But the number is barely creeping up, while Italy has now shot past 10,000 cases. There are now almost half as many cases outside China as there have been within.
Is China's economy about to resume in full? Will consumption and production resume?
U.S.-listed Haidilao (HDALF) , China's biggest hotpot chain, says it will reopen 85 restaurants in 15 Chinese cities, as of Thursday. The company raised almost US$1 billion with an initial public offering in September 2018, giving it a primary listing in Hong Kong.
Haidilao's specialty is spicy Sichuan hotpot, with its mouth-numbing peppercorns and red-hot chilies. Among the wild speculation surrounding the Covid-19 disease, people have suggested that both hot food and hot climates could kill off the virus. Beware that advice, too.
The chain closed its mainland restaurants, all 758 of them, in response to the crisis. On Feb. 21, it announced it has received 2.1 billion yuan (US$299 million) from the Chinese lenders Citic Bank and AIBank to help it manage the plunge in business.
Yet its shares have hardly suffered, down only 1.7% this year in U.S. trading. They are up 9.9% in Hong Kong. Both figures are detached from reality.
The Hong Kong brokerage Huatai Research estimates that Lunar New Year accounts for 10% to 30% of a hotpot chain's sales. So Haidilao and hotpot competitor Xiabuxiabu Catering HK:0520 are hit hard.
A 10% decline in sales will hit Haidilao's bottom line to the tune of 36%, the brokerage estimates. Due to higher leverage, Xiabuxiabu could see earnings dented 52% for the year. The latter, which has restaurants under the brand name Xiabu Xiabu, has shuttered 933 restaurants, although it has kept 100 branches open to deliver food.
Xiabuxiabu shares have cratered 25.5% in 2020. That kind of performance seems more appropriate given the circumstances.
But Xiabuxiabu, which specializes in Japanese-influenced, Taiwan-style hotpot, has already been contending with operational problems of its own. It was intending 2020 to be a turnaround year. The company saw US$190 million wiped off its market value in 2018 after a video went viral of a customer plucking a dead rat out of the soup with her chopsticks at a Xiabu Xiabu restaurant in the city of Weifang.
If Haidilao's share performance is hard to believe, so too is the trading in Jiumaojiu International Holdings, which suspended all its restaurant operations on Jan. 26. The pickled-fish specialist chose a bad time to go public, with an IPO on Jan. 15 that saw its shares jump as much as 47.7% on debut.
The Jiumaojiu offering is Hong Kong's largest so far this year. The chain raised HK$2.1 billion (US$267.4 million) to back expansion plans beyond the 328 outlets that it now runs, mainly under the Jiumaojiu name and Tai Er. Or would run, if it was in business. It ranks No. 1 among sauerkraut fish restaurants in China, if that's your thing.
There's something fishy that Jiumaojiu's shares remain 44.5% higher than the HK$6.60 offer price. The speculation is that private-equity companies may start sniffing around Chinese consumer tickers as the country cleans up from the coronavirus.
I would not be buying Chinese shares at this stage, particularly not restaurant and consumer names that appear artificially propped up. Likewise, while the official infection figures are looking good, China is far from back in business.
Shanghai is reporting that there was an average of 3.3 million trips per day made by passengers on its subway in the last week. That's 70.7% lower than the same time last year. Guangzhou reports an average of 2.94 million trips, down 68.5% compared with the same time in 2019. While people may be avoiding public transport, there are clearly lower populations in those cities than in 2019 as well.
Coal consumption is down 24.3% compared with the same time last year. Household energy consumption is presumably relatively stable, potentially even slightly higher than normal since so many people are staying home. Since home use accounts for around 14% of total coal used, the amount used for manufacturing production is likely down around 29.0% compared with last year.
Wuhan itself claims to be about to get back to work. The city says that "strategically important businesses" can apply for permission to return to work. Companies in strategic sectors such as public transit, food delivery and medical supplies are being actively encouraged to resume.
It is worth watching power generation figures. There's gossip in the Hong Kong media that Chinese companies are claiming to be "back in business," but not actually operating, keen to please their Communist overlords.
Nomura has been running an interesting weekly report tracking business resumption in China. It has estimated that only 49.2% of people who went home for Lunar New Year have returned from that trip. But now, explaining that it should adjust the travel numbers to screen out students and tourists, it estimates that 65.6% of employees have returned to its sample of 15 cities.
It estimates business resumptions now stand at 74.1% across China, and 61.6% in the worst-affected areas. By the end of March, Nomura forecasts, 91.8% of businesses across China should be back in business.
We'll see. Although China has attempted the biggest human lockdown in history, how long can that continue? Even if China is importing more cases than it is generating - excellent PR by the way - who is to say that an imported case won't generate another Wuhan in another Chinese city?