When we commented earlier that the coronavirus pandemic means that the vast majority of Chinese small and medium enterprises (SMEs) have at most 2-3 months of cash left, a potentially catastrophic outcome that will not only crippled China's economy but its $40 trillion financial system, we summarized the circular quandary in which Beijing finds itself, to wit:
... unless China reboots its economy, it faces an economic shock the likes of which it has never seen before in modern times. Yet it can't reboot the economy unless it truly stops the viral pandemic, something it will never be able to do if it lies to the population that the pandemic is almost over in hopes of forcing people to get back to work. Hence the most diabolic Catch 22 for China's social and economic system, because whereas until now China could easily lie its way out of any problem, in this case lying will only make the underlying (viral pandemic) problem worse as sick people return to work, only to infect even more co-workers, forcing even more businesses to be quarantined.
Shockingly (or perhaps not at all in light of China's tremendous human rights record), Beijing has picked output over life expectancy, and in a furious scramble to restart its economy, which as we showed earlier remains flatlined...
Ultimately, the core problem China is facing as we explained earlier today, is one of trust: trust by workers that their employers, and certainly the government, has their best interest in mind when it is urging everyone to get back to work. Or lack thereof.
"Our factory is still missing quite a lot of workers, so we can only resume limited production," said Dong Liu, vice president of a textile manufacturer in Fujian, southeastern China, that employs more than 400 workers. Dong said he applied to the government on Feb. 17 to restart and the inspector came the next day and gave permission. “More and more factories are allowed to reopen this week,” he said, although as they reopen, they find the problem mentioned before: nobody is gullible enough to go back to work. After all why risk it if a return to the place of work with the pandemic still raging means a material chance of a death sentence?