Halting China’s Economy Was Hard. Restarting It Is Harder.

“Wait for the defaults — they need cash flow and that’s not happening,” said Anne Stevenson-Yang, the research director of J Capital Research, a consulting firm specializing in China. “All that leverage, so little cash.”

More than 50 million migrant workers have not yet returned to their jobs, according to official data. Some remain in quarantine. Others are stranded in rural areas where bus service has not resumed. Many are not yet needed by employers because consumers and businesses are barely spending.

Signs of fraud have already emerged, making it harder for officials in Beijing to figure out what is going on around the country. One scam involves businesses that turn on air conditioning and run machinery with no output, said Cao Heping, a Peking University economist. The goal is to burn enough electricity to qualify for restart subsidies.

“They need to warn the different regions, ‘Don’t do a numbers competition, look at real economic production,’” Mr. Cao said.

Businesses have been under intense pressure from landlords to reopen, sometimes with rent forgiveness as a lure. Rents are often much higher per day than salaries, making it cheaper for companies to open shops with no customers than leave them closed and pay rent.

Most car dealerships reopened by late February but remain largely empty. Car sales in China dropped 80 percent in February from the same month a year earlier.

“In the past, more than a thousand people would enter a dealership in a month, and now only ten groups of people might go into a store in a month,” said Cui Dongshu, secretary general of the China Passenger Car Association. Dealerships are stuck with five months’ worth of unsold cars, he added.

Article source: https://www.nytimes.com/2020/03/12/business/china-coronavirus-economy.html