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June 3, 2020

ASIA: The politics of coronavirus – Weekly update

BY Gabriel Wildau, Bob Herrera-Lim, Tobias Harris

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( 5 mins)

Below is the latest edition of our weekly Asia coronavirus update. Please do not hesitate to contact us if you want to discuss any of the countries mentioned in more detail.


China’s central bank announced on 31 May that it will buy RMB 400bn (USD 56bn) in small and medium-sized business loans from selected regional commercial banks. The program is monetary expansion, since the RMB400 bn represents new base money, and the funds will be interest-free for commercial banks. But the loans will remain on the balance sheets of the commercial banks, who will therefore bear the credit risk.

The new mechanism is an effort to loosen monetary policy while exerting control over how new money is used, reflecting concerns that previous monetary expansion has fueled housing and other asset bubbles. The loan program also reflects the government’s focus on helping small businesses, who have recovered more weakly from the Covid-10 shock than larger companies. Though helpful at the margin, the policy does not address the problem of weak loan demand from businesses, which in turn reflects weak consumer spending and business investment. More forceful stimulus aimed at boosting final demand through infrastructure spending, and possibly tax cuts or consumer subsidies, could come later in the year.

South Korea

Daily new Covid-19 cases in greater Seoul have remained around 50, as clusters have emerged at churches. The government has already imposed stricter social distancing requirements for Seoul and its neighboring provinces in response to earlier recurrences of Covid-19 and has continued to warn that if the outbreak has not receded by 14 June, it could reintroduce such measures for the entire country.

South Korea has nevertheless continued to reopen schools, with three of four phases of reopening now complete. However, students in phase three are still being educated with a mix of online and in-person instruction, attend schools in shifts, and engage in other social distancing to reduce the risk of infection. The final phase is scheduled to take effect on 8 June. The central government has also been struggling with infections transmitted at private “cram schools,” which have continued to operate and may be less diligent in enforcing hygienic practices.


Though the absolute number of new infections remains low, central and local authorities warned of another wave of infections, after three prefectures rose above the threshold of 0.5 infections per 100,000 people over the past week. Fukuoka prefecture, in western Japan, remains the largest hotspot, with more than two cases per 100,000. But Tokyo has also seen its caseload increase since the state of emergency was lifted on 25 May. After three days of new cases in the double digits, Tokyo Governor Yuriko Koike activated the so-called “Tokyo alert,” which warns residents to be cautious but otherwise has no practical impact on business and social activities. The Abe government has been debating criteria for reintroducing a state of emergency, but other than indicating that an increase to 30% in the share of new cases whose source could not be identified could trigger new restrictions, the government has not indicated other criteria that would trigger government action.

Despite concerns about new infections, the Abe government has been preoccupied with fiscal stimulus. Critics have highlighted delays in distributing JPY 100,000 (USD 918) cash payments and business subsidies included in the first supplemental budget, in part because the online application system was unprepared to handle the flood of applicants. Some residents of major population centers have not yet received their payments. The government has also had to fend off criticism from opposition lawmakers about the JPY 10tn (USD 91.8bn) reserve fund in the second supplemental budget. The ruling parties, however, are determined to pass the second budget before the Diet session ends on 17 June, without extending the session.


The full reopening of domestic transportation – bus, rail, air and sea – is the next priority for the government, possibly by this weekend. Of Thailand’s 76 provinces, only 19 may be exempted from the change. Social distancing measures will likely halve bus capacity, so the government plans on providing bus companies with subsidies to make their trips viable.

The policy change is part of the effort to help the tourism sector. The government will also launch a promotion in July, where USD 63-94 travel vouchers will be given to up to four million people, while about 1.2mn healthcare workers will be able to travel for free. International flights are still banned, as there is still substantial concern about imported transmission. Thailand plans to remove all movement and business restrictions by 1 July, but the government is still hedging about whether this will include foreign tourism and business travel. Prime Minister Prayuth Chan-ocha said the cabinet has not yet discussed the matter. The governor of the Tourism Authority of Thailand also said last week that foreign tourists are only likely to be allowed in by the fourth quarter – and possibly only from countries that have contained their domestic outbreaks and only for travel to specific destinations in Thailand.


The government will decide on 6 June whether to recommend that states further loosen restrictions on people’s activities, specifically reopening personal care businesses such as hair salons and barbershops, night and farmers markets, and religious gatherings. The current movement control order, which has already been relaxed substantially in recent weeks, is supposed to end on 9 June. Religious matters fall under local jurisdiction. For instance, in Kuala Lumpur, gatherings are limited to 30 people, while in the city of Ipoh, the state capital of Perak, the limit is 12. Congregational prayers at mosques have been subject to limits since 18 March, after thousands were infected during a gathering attended by about 16,000 people, which resulted in cases throughout Southeast Asia. The government will also issue guidelines for reopening of schools this week.

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