Things in Shanghai do seem to be improving somewhat but the city is far from fully exiting lockdowns, and there are lockdowns and disruptions in dozens of other cities, as Gavekal Research noted in a tweet to today:

Gavekal @Gavekal

Gavekal's bottom-up analysis of China’s top 100 cities by GDP finds that all but 13 have imposed some form of quarantine restriction, and the intensity is increasing. We classified these cities from no restrictions (level 0) to full lockdown (level 4).

9:39 AM ∙ Apr 11, 2022

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No wonder Premier Li sounds increasingly worried about the mounting economic challenges. In the last few days he has held meetings with local government officials and entrepreneurs and economists. The messaging from both meetings has been similar, that there are “greater uncertainties and challenges to the stable economic performance” and “unexpected changes and mounting downward pressures both domestically and externally” and they need to do more.

The readout from today’s meeting with local officials said:

Li Keqiang pointed out that it is necessary to strengthen the tracking and judgment of the external environment and domestic economic operation, study and formulate timely response plans, and stabilize market expectations. We will study and adopt more forceful policy measures as needed.

李克强指出，要加强对外部环境和国内经济运行的跟踪研判，及时研究制定应对预案，稳定市场预期。根据需要，研究采取更大力度的政策举措。

Will policymakers do whatever it takes to hit the 5.5% growth target? “We will study and adopt more forceful policy measures as needed” may be pointing in that direction.

If so then perhaps the floodgates will start opening. Better more stimulus-induced wasted investment sometime in the future than having the economy go off a cliff between now and the 20th Party Congress?

If there is a shift to more stimulus how will it get spent as the country sticks with “dynamic clearing” and continues to have rolling partial and full city lockdowns and massive disruptions to logistics and transport networks?

And if a shift towards much more stimulus is coming what does that say about the leadership’s views about social stability, given how much emphasis they have placed in the last few years on the tough battle of preventing and resolving financial risks?

There is more on this in #3 below.

Today’s Essential Eight:

1. Shanghai outbreak

2. Outbreaks in other cities

3. Premier Li sounds stressed about the economy

4. Stock market needs a boost

5. Another step forward for dual circulation

6. Ukraine-related propaganda

7. South Pacific

8. PRC nuclear arsenal

Thanks for reading.

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