China's virus-hit industrial cities start to ease transport curbs

Big manufacturing hubs on the Chinese coast are starting to loosen curbs on the movement of people and traffic while local governments prod factories to restart production, following weeks of stoppages due to the coronavirus outbreak.

In their early efforts to contain the rapidly spreading virus, authorities extended a week-long Lunar New Year holiday in late January by about 10 days, instituted quarantines, and imposed restrictions on traffic in large parts of the country.

The tough measures slowed the sprawling industrial sector to a crawl, with companies unable to resume production or restore output to normal levels due to a lack of workers. Many have also been unable to take delivery of raw materials or send products to clients due to logistical hurdles, with the disruptions spilling over into supply chains worldwide.

Beijing is conscious of striking a balance between stamping out the epidemic which has infected more than 70,000 people and killed over 2,000 people, and shielding the already weakened economy from more damage.

The city of Foshan, a large manufacturer of electronics and household appliances in southern Guangdong province, said late on Tuesday that businesses no longer need to seek prior approval before resuming operations and they need not require returning workers to show proof of their health.

On Monday, the nearby city of Zhongshan similarly lowered such administrative barriers.

In eastern Zhejiang province over the weekend, the cities of Hangzhou and Ningbo also pared back the approval process for companies looking to restart.

"Macro and microdata suggest production activities are resuming at a slow pace in China, reaching 60-80% of normal levels by end-Feb and normalising only by mid-to-late March," Morgan Stanley wrote in research noted.

"If the spread of the virus is not contained within the next two weeks, the disruption to production could extend into the second quarter."

Analysts polled by Reuters expect China's economic growth could slow to 4.5% in the first quarter from 6% in the previous quarter, but some recently downgraded forecasts again into the 3-4% range, citing delays in resuming production.

Some cities in Guangdong and Zhejiang this week organised buses and trains to ferry workers back from their hometowns.

The city of Taizhou, in Zhejiang, even arranged for several planes to pick up migrant workers from Chongqing, Guiyang, Chengdu, Kunming and Xian, with the local government of Taizhou footing a third of the bill.

The outbreak has also chilled consumer demand and hammered the services sector, with restaurants, hotels, cinemas and travel agents among the segments most visibly hit.

China's auto market, the world's largest, is likely to see sales slide over 10% in the first half of 20202 because of the epidemic.

In a bid to revive consumption, Foshan announced stimulus measures for its auto market, the first city in China to do so amid the outbreak.

The city government will offer subsidies of 2,000 yuan ($285) for purchases of new cars and 3,000 yuan for replacement of existing cars, according to a document published on Feb. 3 on its website.

Foshan, where Volkswagen has a car plant with FAW Group, will also offer subsidies to help offset the marketing expenses of auto companies.