President Xi Jinping during his trip to Wuhan on Tuesday as new cases of the coronavirus start to slow. Photo: Xinhua News Agency

The battle for Wuhan might be nearly over. But the battle for China’s economy is about to begin.

On Tuesday, President Xi Jinping complete with face mask visited the epicenter of the Covid-19 outbreak and praised the “tireless work” of “frontline” medical staff before mingling with quarantined residents.

Paying his first visit to the city since it was ravaged by the epidemic at the start of 2020, he signaled that the crisis “had effectively been curbed.”

“Xi expressed gratitude to local communities and frontline workers who were playing key roles in the prevention and control of the disease,” the state-run China Daily newspaper reported.

So far, the death toll has hit more than 3,000 with nearly 90,000 people infected in the country. Most of them were in Wuhan or surrounding Hubei province in central China. 

But in the past 10 days, new cases have dried up to a trickle as the battleground against the virus switches to other parts of the world, such as close neighbors South Korea and parts of Europe, including Italy.

“Xi’s visit is to signal that the outbreak has been effectively curbed, and is an attempt to quieten external criticism of him not going to the frontlines,” Hua Po, an independent analyst in Beijing, told the AFP news agency.

Politically, this has been a public relations nightmare for General-Secretary Xi and the ruling Communist Party. Accusations of incompetence have been leveled against the administration for its early response to the “disaster,” as well as claims of a “cover-up” by officials in Wuhan.

Changing the narrative became a priority for Beijing and involved a diet of piped propaganda by China’s state-run media.

“Xi doesn’t want to be associated with the disaster, but with the recovery,” Adam Ni, a researcher at the China Policy Center in the Australian capital of Canberra, said.

Still, while the central government is starting to ease travel restrictions and a lockdown that involved vast swathes of the country, untangling the supply chain and getting people back to work is proving a mammoth task.

In January, China was forced to shut down factories, businesses and schools to curb the spread of the coronavirus. Even now, the economy is on life-support with up to 230 million migrant workers struggling to return to their jobs. Amazingly, that is just slightly less than the entire workforce of the 27-nation European Union.

“As many as 230 million migrant workers may still be unable to return to work as disrupted supply chains make it difficult for goods that are still being manufactured to make it to port. This is a double whammy in the sense you have a demand shock – people quarantined, unable to work or go shopping, travel or go to the cineplex – and a supply shock,” Chris Taylor, an associate partner with the Access Asia Group, a risk-management firm based in Singapore, told Asia Times.

Last week, a survey released by the China Enterprise Confederation involving 500 of the leading manufacturers barely registered a business heartbeat. More than 75% were private companies with the rest state-owned enterprises or SOEs.

Key findings were: 

  • More than 95% of those polled saw their revenues drop;
  • Up to 97% reported a drop in profits;
  • Nearly 50% said they would struggle to survive the losses they were incurring.

“The survey shows that the epidemic has significantly affected the production and the operation of companies in the first quarter,” the 21st Century Business Herald, a leading Chinese newspaper, stated.

Economically, business activity has flatlined in the PRC with manufacturing and the service sector plunging to record PMI lows. Exports and imports also tanked in January.

Small- and medium-sized companies have been particularly badly affected by the fallout from the outbreak.

Painting a picture of industrial chaos, Huang Qifan, the vice-chairman of the National People’s Congress Financial and Economic Affairs Committee, has warned that the impact of the Covid-19 disease is “scarier than the epidemic itself.”

“If measures are not taken, a large number of small and medium-sized manufacturing enterprises will fail. Just as importantly, the industrial ecology of some of the more fragile manufacturing industries will be destroyed, leading to longer-term negative effects,” Huang, the former mayor of Chongqing, wrote on the Chinese-language Sina Finance website.

For Xi, kickstarting the economy might prove more difficult than containing the invisible enemy that still lurks in Wuhan and its population of nearly 11 million.