Xi warned officials that efforts to stop virus could hurt economy: sources

Xi tells local officials that some of the actions taken to contain the virus are harming the economy

REUTERS: Chinese President Xi Jinping warned top officials last week that efforts to contain the new coronavirus had gone too far, threatening the country’s economy, sources told Reuters, days before Beijing rolled out measures to soften the blow.

With growth at its slowest in nearly three decades, China’s leaders seem eager to strike a balance between protecting an already-slowing economy and stamping out an epidemic that has killed more than 1,000 people and infected more than 40,000.

After reviewing reports on the outbreak from the National Development and Reform Commission (NDRC) and other economic departments, Xi told local officials during a February 3 meeting of the Politburo’s Standing Committee that some of the actions taken to contain the virus are harming the economy, said two people familiar with the meeting, who declined to be named because of the sensitivity of the matter.

He urged them to refrain from “more restrictive measures”, the two people said.

Local authorities outside Wuhan - where the virus is thought to have first taken hold - have shut down schools and factories, sealed off roads and railways, banned public events and even locked down residential compounds. Xi said some of those steps have not been practical and have sown fear among the public, they said.

China’s state council information office did not immediately respond to requests for comment.

The official Xinhua News Agency, reporting on the Politburo meeting last Monday, called the coronavirus outbreak “a major test of China’s system and capacity for governance.” It added, without details, that “party committees and governments of all levels were urged to achieve the targets of economic and social development this year.”

Since the meeting, China’s central bank has vowed to step up support for the economy and prepared policy tools to offset the damage. The NDRC said at a weekend briefing that it was urging companies and factories to resume work, especially in “key industries” such as food and pharmaceuticals.

“In the context of the epidemic and the downward pressure on the economy, it is more important to maintain economic growth,” Pan Gongsheng, vice-governor of China’s central bank, said on Friday.

On Monday, Zhejiang province, an economic powerhouse in eastern China, ordered local authorities not to overreact by restricting everyday movement or shutting down “shops of chain stores and convenience stores that sell daily necessities such as vegetables, cooking oil as well as meat, eggs and dairy products,” according to a government release.

China has unveiled new tax policies as it tries to reduce the burden on industries hit heavily by the epidemic.

Reuters reported this month that policymakers in China are preparing measures, including more fiscal spending and interest rate cuts, amid expectations the outbreak will devastate first-quarter growth.

Many in China returned to work on Monday after the Lunar New Year holiday was effectively extended for about 10 days, but morning commutes were far less crowded than usual and numerous factories remained shut.

The ruling Communist Party’s propaganda department last week ordered state media to focus on “economic recovery”, according to a person with direct knowledge of the order, who declined to be named because of the sensitivity of the situation.

China’s official media has been trying to project calm. In a Monday editorial, the official People’s Daily urged the public to deal with the epidemic with a “positive mood”.