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Here’s why the White House doesn’t trust China’s coronavirus numbers

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Chinese President Xi Jinping, also general secretary of the Communist Party of China Central Committee and chairman of the Central Military Commission, inspects the novel coronavirus pneumonia prevention and control work in Beijing, capital of China, on Feb. 10, 2020.

Xinhua News Agency

The coronavirus that emerged from China’s Hubei province over a month ago and has spread to two dozen countries is already fueling mistrust from the U.S. government on whether China can provide accurate information about the epidemic. 

The White House said this week it does “not have high confidence in the information coming out of China” regarding the count of coronavirus cases, a senior administration official told CNBC. Meanwhile, China has reportedly been reluctant to accept help from the Centers for Disease Control and Prevention, and has reportedly suppressed information about the outbreak from scientists that it deems alarming.

U.S. officials’ mistrust of China goes as far back as the 1950s, when national authorities set unrealistic production quotas that led local officials to inflate data. Mishaps with the 2003 outbreak of SARS, which sickened 8,098 people and killed about 800 over nine months, and discrepancies in reporting of economic data over the past two decades has only hardened the U.S. government’s belief that China cannot be trusted, experts say. White House advisor Peter Navarro has even called China a “disease incubator.”

Since emerging from the city of Wuhan, the new virus has spread from about 300 people as of mid-January to more than 64,000 as of Friday — with the number of new cases growing by the thousands every day. World health officials say China’s response to the virus is an improvement from past outbreaks. China has been more transparent, World Health Organization officials told reporters this week. Chinese health authorities quickly isolated the virus’ genetic sequence and shared it on a public database in a matter of weeks, they said, giving scientists a chance to identify it.

A WHO-led team of 12 international experts are expected to arrive in China this weekend to collaborate with Chinese counterparts, WHO Director-General Tedros Adhanom Ghebreyesus said Friday. But praise from the WHO has not kept top U.S. officials from criticizing China’s handling of the outbreak. On Thursday, White House top economic advisor Larry Kudlow told reporters the U.S. is “quite disappointed,” citing a lack of transparency. Such criticism is far from new.

The SARS outbreak

Skepticism over China’s handling of public health crises dates back to 2003, according to Yanzhong Huang, a public health researcher at the Council on Foreign Relations and director of the Center for Global Health Studies at Seton Hall University.

At the time, the Chinese government was accused of trying to cover up the outbreak of Severe Acute Respiratory Syndrome, more commonly known as SARS, which rapidly spread to more than two dozen countries and caused world health officials to declare it a global health threat.

The flu-like virus, which produced symptoms such as fever, cough, chills and fatigue, had never been seen before, and poor management and delays from the government was blamed by world leaders for the rapid spread of the disease, Huang said.

The earliest case of the coronavirus is thought to have emerged in November 2002. Chinese health authorities were alerted to the mysterious respiratory disease that mid-December, but it would take several more months before the disclosure of the illness to the public.

Health officials reported on Feb. 11, 2003 more than 300 cases of SARS in the province of Guangdong, where the outbreak began. The officials also admitted that there were no effective drugs to treat the disease and that the outbreak was only tentatively contained, said Huang.

China’s leadership later took proactive steps, including working with WHO and other officials to contain the outbreak, Huang said. But the initial failure to inform the public heightened anxieties, fear, and widespread speculation, including in the U.S., and spurred an ousting of top health officials, he added.

“There are certainly similarities” to the SARS response and the new virus, said Huang, adding that China’s response has been much better this time.

Currency manipulation

When the Trump administration officially designated China a currency manipulator in August last year, it drew bipartisan support from American politicians.

“China has been manipulating their currency long before and since President Trump took office,” Senate Democratic Leader Chuck Schumer said at the time. “He should finally tell his Treasury Secretary to label China a currency manipulator. That’s all he needs to do to make it happen.”

There’s little evidence to support the notion that China has manipulated its currency in recent years, David Dollar, senior fellow at the John L. Thornton China Center at the Brookings Institution who specializes in China’s economic system, said. However, the support for such a move underscores U.S. officials’ frustrations with and skepticism towards China’s historical economic data, Dollar said.

“Back around 2005, 2006, it would be fair to say that China was intervening to keep the currency low,” he said. “Historically, they would have met the definition of currency manipulator 15 years ago.”

The U.S. briefly labelled China a currency manipulator before removing them from the list last month as the two countries prepared to sign a phase-one trade deal. Nonetheless, Dollar said it’s clear that China historically suppressed the rise of its currency to maintain a trade advantage with the U.S. and other countries. This history, Dollar said, as well as other disputes related to trade has been a point of contention and distrust between the U.S. and China.

GDP data that’s “no good”

When it comes to internal economic measures, even Chinese officials struggle to trust the data. Chinese Premier Li Keqiang in 2007 called provincial GDP data “man-made.” Those comments, which were made in private to U.S. diplomatic personnel and later leaked, gave rise to what’s now called the Li Keqiang index.

The index is a figure used by economists to examine the underlying factors of China’s economy, such as electricity consumption, rail cargo and amount of loans disbursed. Keqiang told U.S. officials these figures were more accurate than the provincial GDP data provided by local officials under pressure to inflate their numbers.

Thomas Rawski, professor of economics and history at the University of Pittsburgh whose research is focused on the development of China’s modern economy, said it’s widely understood by economists and Chinese officials alike that provincial data is “no good.”

“When things aren’t going well, and we see this on both a national and provincial level, they publish data that show things are better than they are,” he said. “Assuming the best possible effort, it’s just not easy to measure such a large economy. On top of that, there are also questions about whether there is an interest at all in actually reporting accurate numbers.”

Rawski has observed China’s economic growth since before the Asian financial crisis around 1997, which is when he began to see the data run away from reality, he said. He published an article in 2001 that claimed data on manufacturing output was out of step with underlying figures on electricity consumption.

“Thinking about the flu business, it is entirely the same as the GDP issues,” he said. “In both cases, there are a lot of technical issues as well as what I call veracity issues. And there’s the question of motivation of people collecting and reporting the data at all levels, and you have to ask is there an incentive to distort. I think the answer is obviously yes.”

WHO defends China

Despite the past issues between the U.S. and China, world health officials are urging leaders to mount a coordinated response to the new outbreak.

WHO officials on Friday defended China after the Trump administration claimed the country wasn’t being transparent about the outbreak.

“This is a very obviously tense political environment because of the economic issues and because of everything else,” Dr. Mike Ryan, executive director of the World Health Organization’s emergencies program, said at a news conference at the agency’s headquarters in Geneva. “Please, let our scientists get on. Let our public health professionals get on. Let them work together.”

Officials are also asking the public to remain calm, not recommending “measures that unnecessarily interfere with international trade or travel.” They say China is doing everything they can to contain the outbreak.

“This is the time for facts, not fear. This is the time for science, not rumors. This is the time for solidarity, not stigma,” Tedros said last month when declaring the virus a global health emergency.

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China reports March manufacturing PMI amid coronavirus outbreak

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China on Tuesday said the official Purchasing Manager’s Index for March was 52.0, beating expectations for an economy hit by the coronavirus outbreak.

Analysts polled by Reuters had expected the official PMI to come in at 45 for the month of March.

In February, the official PMI hit a record low of 35.7.

PMI readings above 50 indicate expansion, while those below that level signal contraction.

China’s National Bureau of Statistics said in its announcement of the PMI reading that there was continued improvement in the prevention and control of the outbreak in March, with a significant acceleration in the resumption of production.

Sub-indices for production, new orders and employment expanded, the bureau said.

In March, the situation of epidemic prevention and control in China continued to improve, the order of production and living was steadily restored, and the resumption of production and production of enterprises accelerated significantly.

Earlier this year, manufacturing activity slowed dramatically in China as the government instituted large-scale lockdowns and quarantines to contain the spread of the coronavirus disease, formally known as COVID-19.

On Monday, China’s Ministry of Industry and Information Technology said that as of March 28, the resumption of work rate for industrial enterprises was 98.6%, and the return of workers stood at 89.9%.

A private PMI survey by Caixin and IHS Markit will be released on Wednesday.

The Caixin/Markit survey features a bigger mix of small- and medium-sized firms. In comparison, the official PMI survey typically polls a large proportion of big businesses and state-owned companies.

— CNBC’s Evelyn Cheng contributed to this report.

This is breaking news. Please check back for updates.

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Amazon fires Staten Island coronavirus strike leader Chris Smalls

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Amazon has fired a Staten Island warehouse worker who organized a strike to demand greater protections for employees amid the coronavirus outbreak.

Chris Smalls, a management assistant at the facility, known as JFK8, said he was fired Monday afternoon following the strike. Smalls and other employees walked out to call attention to the lack of protections for warehouse workers. The workers are also urging Amazon to close the facility after a worker tested positive for the coronavirus last week. The organizers said that at least 50 people joined the walkout.

“Amazon would rather fire workers than face up to its total failure to do what it should to keep us, our families, and our communities safe,” Smalls said in a statement. “I am outraged and disappointed, but I’m not shocked. As usual, Amazon would rather sweep a problem under the rug than act to keep workers and working communities safe.” 

An Amazon spokesperson confirmed to CNBC that Smalls was fired, saying he received “multiple warnings” for violating social distancing guidelines and refusing to remain quarantined after coming into close contact with an associate who tested positive for the virus. 

“Despite that instruction to stay home with pay, he came onsite today, March 30, further putting the teams at risk,” the spokesperson said. “This is unacceptable and we have terminated his employment as a result of these multiple safety issues.”

Amazon also disputed the number of employees that participated in the strike, saying 15 people walked out at the facility. The company called the workers’ accusations “unfounded” and said it has taken “extreme measures” to make sure employees are safe while on the job.

“Like all businesses grappling with the ongoing coronavirus pandemic, we are working hard to keep employees safe while serving communities and the most vulnerable,” the company said in a statement. “The truth is the vast majority of employees continue to show up and do the heroic work of delivering for customers every day.”

Still, Amazon employees at multiple facilities who spoke to CNBC argue that the company’s efforts aren’t enough to keep them safe. They say uneven safety precautions at facilities across the country have sown feelings of distrust between workers and their managers. Workers say they’ve become worried that managers aren’t being honest about whether employees are sick with the virus, so that they can keep the facilities open. 

At some facilities, workers say essential supplies like hand sanitizer and disinfectant wipes are rationed or there’s none available, putting them at risk of catching the virus. Warehouse workers say they’re forced to choose between going to work and risking their health or staying home and not being able to pay their bills. 

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Australia stocks jump 3%; China to release manufacturing PMI numbers

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Stocks in Asia Pacific traded higher on Tuesday morning ahead of the release of China’s official manufacturing Purchasing Managers’ Index for March, expected at 9:00 a.m. HK/SIN.

Australian shares led gains in the region’s major markets, with the S&P/ASX 200 up 3.17%. The moves came after the index got off to a flying start to the week and surged by 7% on Monday.

Over in South Korea, the Kospi also rose 1.63% while the Kosdaq index gained 2.58%. Japan’s Nikkei 225 saw more muted gains as it added 0.51%, while the Topix index advanced 0.13%.

Overall, the MSCI Asia ex-Japan index traded 0.76% higher.

Investors will be watching for the release of China’s official manufacturing PMI for March on Tuesday morning. The data could offer clues to the scale of economic impact from the coronavirus outbreak in China, where the disease was first reported.

“We expect the official manufacturing PMI to rebound from 35.7pt in February to 45pt in March,” Joseph Capurso, senior currency strategist at Commonwealth Bank of Australia, wrote in a note. “That would be above the GFC‑low of 38.8pt reached in November 2008,” he said referring to the Global Financial Crisis.

PMI readings below 50 signify a contraction, while figures above that level indicate an expansion.

Overnight on Wall Street, the Dow Jones Industrial Average rose 690.70 points to close at 22,327.48 while the S&P 500 added 3.4% to end its trading day at 2,626.65. The Nasdaq Composite also closed 3.6% higher at 7,774.15.

Oil prices attempted to rebound from the previous day’s plunge in the morning of Asian trading hours on Tuesday. International benchmark Brent crude futures gained 1.19% to $23.03 per barrel. U.S. crude futures were also up 2.84% to $20.66 per barrel.

The moves came after oil prices plummeted Monday to levels not seen in almost two decades — Brent fell 8.7% to settle at $22.76 per barrel, a price last seen in 2002. U.S. crude fell 6.6%, or $1.42, to settle at $20.09, its lowest level since February 2002.

The U.S. dollar index, which tracks the greenback against a basket of its peers, was last at 99.221, below levels above 100 seen last week.

The Japanese yen traded at 108.04 per dollar after touching an earlier high of 107.72. The Australian dollar changed hands at $0.6167, still above levels below $0.6 seen last week.

Here’s a look at what’s on tap in the trading day ahead:

  • China: Official manufacturing PMI and non-manufacturing PMI for March at 9:00 a.m. HK/SIN

⁠— CNBC’s Pippa Stevens contributed to this report.

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