august: summer of discontent
month in focus
welcome all…
oops… published ‘building a Zhonghua identity’ yesterday and found that this was still in draft. But where else can you get such an all-round view of moves in the PRC? So I am sending it quick smart… or rather slow smart :(
On Zhonghua identity, we made all the links public today. If you were looking at any and found them behind the paywall, they have now been set free. Do go back and look. The piece is a good example of how we build the story from Chinese-language sources.
Happy reading
Philippa
Weak July GDP growth triggered yet more debate over boosting consumption via cash vouchers for households. Retail consumption growth of only 2.7 percent y-o-y didn’t help. Chronically weak figures, coupled with a drumbeat of cuts to financial sector salaries and central bank curbs on bond purchases, added to mounting financial sector tension. Fund manager exits are at a nine-year high, reports Wind data.
More simmering malcontent was revealed in a provocative essay by Zhao Jian 赵建 Atlantis Research Institute: Beijing is repeating the ‘Zero Covid’ debacle in the financial sector, he contends. A fixation with curbing risk (‘baseline’ or ‘limit thinking’ in recent usage) sees officials tightening control to avoid blame, increasing the chance of ‘black swan’ events capsizing the social contract.
Soon scrubbed by censors, Zhao’s warning reflects exhaustion widely felt with Beijing and Xi’s ‘scitech superpower’ project.
Starting from a lower base than 2023, July saw a trade uptick of some seven percent. Frontloading of goods as a hedge against sanctions boosted exports; manufacturing and industry upgrades did more than domestic consumption to spur imports.
An anti-subsidy probe was launched targeting EU dairy products a day after the EU confirmed additional duties on PRC EVs (electric vehicles), with only marginal reductions in amount. Beijing has brought a WTO case against these duties. PRC–EU talks are not promising, raising fears of further trade risk and volatility. A deal signed with Belarus will open services, investment and entry of business personnel.
State Council once again highlighted services in August. An Opinion was issued urging services consumption in catering, domestic service, tourism, sports, education, aged and childcare. New moves passed by State Council to open high-quality services and the 2024 foreign investment negative list were reported; details are pending.
‘Institutional opening’ has stayed in the spotlight following the July Third Plenum’s renewed call to open. A new State Council Opinion pledges to improve market access through ‘transparent, relaxed and predictable rules’. Pilots will be launched. A new three-year action plan to improve the Beijing–Tianjin–Hebei business environment issued from the NDRC (National Reform and Development Commission). Markets will be further integrated, with targets to standardise rules, address local protectionism and open trade and investment.
A new list of replicable results of FTZ (free trade zone) initiatives promotes wins in trade facilitation ‘opening’. They recognise overseas qualifications, consumer welfare protection, and more. Such ‘opening’ can address the growing PRC trade imbalance with partners, proclaims trade pundit Zhang Bin 张斌 Chinese Academy of Social Sciences. With more pro-market measures and less distortion, institutional opening makes resource allocation more efficient, mitigating the impact of subsidies and local government interference blamed for the PRC trade surplus.
Beijing’s diplomatic schedule, as usual, wound down in August—just a bit. Wang Yi 王毅 visited Myanmar and Thailand 4–17 August, co-chairing the ninth Lancang–Mekong Cooperation (LMC) foreign ministers’ meeting in Thailand.
Li Qiang 李强 travelled to Russia 20–23 August 2024, co-chairing a 29th regular meeting between PRC and Russian leaders. He visited Belarus as well, then in the process of placing troops on the Ukraine border.
President Xi spoke by phone on 23 August with UK PM Keir Starmer. Against strained relations, it was his first call with a UK leader in over two years. Starmer had promised to prioritise an ‘audit’ of UK–PRC relations. Foreign Secretary David Lammy reportedly plans to visit Beijing in September 2024.
Visiting Beijing 27–29 August, US National Security Advisor Jake Sullivan held a new round of China–US strategic talks.
Other visitors to Beijing in August were
Fiji PM Sitiveni Rabuka (12–21 August)
Vietnam Party leader and President To Lam (18–20 August)
Indonesia FM Retno Marsudi (22–24 August)
Post-Plenum, the Party urges ‘dialectic harmony’ between reform and legislation. To support market unification, asserts Chen Wenqing 陈文清 Central Political and Legal Affairs Commission Party Secretary, all state institutions, functions, levels of access and responsibilities will be gradually standardised, with internal Party oversight strengthened. The state also seeks to refine the constitutional review and record system, guaranteeing the Constitution’s guiding role in nationwide legislation.
To ease pressure at the grassroots level, regulations codifying penalties for ‘formalism’ (stultifying bureaucracy) were rolled out in late August. The need for such a protocol was first mooted in the Third Plenum Decision and then later thrashed out during a 30 July Politburo meeting. Cai Qi 蔡奇 CPC Central Secretariat Party Secretary, pointed out that all grassroots documents, meetings, intra-system evaluations and digital services must be simple, ensuring that admin work will not impact cadres doing their job.
Two new rules on military personnel emerged this month, boosting incentives for them to serve the country. The central finance and the Central Military Commission are to assume more responsibility for work to improve service conditions and care for veterans.
The FATF (Financial Action Task Force) will conduct a fifth round of evaluations in 2025. The results will impact the financial sector, indeed the entire economy. Procuratorates nationwide prosecuted some 3,000 people for money laundering offences in 2023, nearly 20 times the number in 2019. The revised draft Anti-Money Laundering Law underwent its initial deliberation by the National People's Congress Standing Committee in April. In August, a judicial interpretation on handling criminal money-laundering cases was issued, further clarifying the standards for the conviction and sentencing of money-laundering and self-laundering offences.
In energy policy, State Council launched long-awaited binding targets on carbon intensity effective over the coming 15th 5-year plan period. Previous ‘dual control’ of energy consumption had led to ad hoc shutdowns and hurdles to developing renewable power. Total control of emissions promises localities easier deployment of renewables. Breaking down national targets to local levels is the next challenge.
Meanwhile, 11 new nuclear plants were approved by State Council on 19 August, among them a fourth-generation reactor deemed ‘first in the world’ to conjoin high-pressure gas cooling with pressurised water. This promises integration with petrochemical parks, supplying steam and supporting production. Nuclear power development is to speed up, forecast to overtake the US as top producer by 2030.
Beijing issued Opinions on speeding up the green transition. This is the first dedicated national-level policy to spotlight green consumption. The state will improve incentives for green consumption, urging firms to enact their own green procurement guidelines. Separate action plans are expected to provide further detail.
Several provinces have now established forestry and grassland agencies at the county level. The agencies will be responsible for ecological protection and restoration efforts and supervising the development of forests, grasslands, wetlands and desert resources.
Thirteen provinces have set up specialised committees to regulate scitech. Responsibilities previously scattered across such provincial agencies as reform and development, industry and information, and agriculture are now centralised. The move is aimed to dismantle bureaucracy and better align scientific research, education and talent development policy.
MoST launched an ‘innovation points system’ on 13 August, easing finance for innovative firms. Clear metrics are provided for financial bodies and localities to support high-tech companies. To create a more transparent framework for funding, firms will be evaluated on R&D personnel, patents, and employment of fresh graduates, etc.
Antimony, a strategically critical mineral, was placed under export controls by MofCOM on 15 August. Seabed mining is hoped to add to Beijing’s control of the supply. ‘Pioneer II,’ a deep-sea mining vehicle developed by Shanghai Jiaotong University, symbolises the self-reliance thrust. The PRC is, however, not yet fully capable of independent seabed operations: critical gear and components remain foreign-sourced, cautions Wan Buyan 万步炎 Hunan University of Science and Technology.
Held in Beijing 21–25 August, the World Robot Conference aroused fanfare and controversy. Deemed a key ‘future industry’, plans are afoot to build robot-focused industry clusters. Dedicated hubs are underway for Tier-1 cities like Beijing, Shanghai, and Shenzhen. This may, however, devolve into a rat race. The industry is already overcrowded, as venture capitalist Cao Wei 曹巍 observes. Robots, on display at the conference, were capable of only simple tasks. Netizens were amused by some accompanying human models made up to look like ‘robots’.
Mass joblessness is meanwhile of concern, fuelled by burgeoning automation. Following Baidu’s robotaxi controversy in Wuhan, job protection and social stability should be prioritised during tough times, urges Sun Liping 孙立平 Tsinghua University sociologist: self-driving taxis would erode the job market buffer created by the ride-hailing economy.
Dairy firm profits plunged in H1 2024, facing market oversupply and falling prices. An EU dairy product anti-subsidy investigation was launched by MofCOM on 21 August, following June’s EU pork anti-dumping probe. The EU accounted for some 40 percent of 2023 dairy imports, second to New Zealand, at a weighted average import price of C¥10–30K tonne cheaper than domestic counterparts.
New Zealand or Australia may well fill the gap, limiting short-term impact on domestic supply, opines Lin Guofa 林国发 Bric Ag Infor Group. EU dairy farmers, grappling with rising costs due to feed shortages, will feel the pain.
Dealing with oversupply, domestic beef prices fell to nearly C¥60/kg on 7 August, a 20 percent haircut since January. Some 70–80 percent of cattle farmers operate at a loss; the industry remains capital-intensive, slow to generate returns and vulnerable to market fluctuations, laments Li Jie 李杰, Inner Mongolia Cattle Industry Association president.
In contrast, vegetable prices leapt 40 percent from mid-June to mid-August. Leafy greens surged 85 percent; fruit went up 60 percent. Seasonality was worsened by farmer pessimism and horrific weather. Floods tormented the east and south, and a heatwave exhausted the north. PBoC added another C¥100 bn to the refinancing loan quota for ag and small businesses across 12 provinces on 13 August.
On 1 August, the State Council released ‘Guiding opinions’ specifying rewards and penalties to encourage remaining enrolled in medical insurance. The guidelines address cost-driven difficulties in collecting healthcare insurance contributions from individuals.
Beijing and Shanghai became the first two pilot zones for innovative drugs approved by NMPA on 2 August. The two cities will follow the ‘pilot work plan’ released in July and shorten the review and approval of innovative drug clinical trial applications within 30 days, aligning with the US FDA. To further promote innovation in medicine, SAMR issued a draft ‘anti-monopoly guidelines for the pharmaceutical sector’ on 9 August. The guidelines crack down on monopolistic behaviour by pharmaceutical firms.
NHSA issued a notice on launching health services for disabled elders (2024–27) on 16 August, providing healthcare services for disabled elderly who are aged 65+, live at home, and have applied. Yet, they are still assumed to have a carer by their side, which is challenging for many.
To step up the medical insurance fund for an ageing population, NHSA issued a notice on ‘Work related to ensuring basic medical insurance for urban and rural residents in 2024’ on 26 August. State subsidy and individual contribution standards have risen by C￥30 and C￥20 compared to 2023, bringing the respective annual minima to C¥ 670 and C¥ 400 per capita. This is the first time since 2016 that the increase in individual contributions has been below the rise in state subsidies.
Providing teaching support has been the education focus for this month. On 2 August, MoE and MoF issued a ‘Notice’ aiming to rehire 7,000 retired skilled teachers to support compulsory education in underdeveloped regions. On 7 August, the two ministries issued another notice to recruit 15,952 teachers to impoverished areas for the 2024–25 academic year. On 20 August, MoE released a plan that supports 11 ‘double first-class’ (top) mainland universities and two Hong Kong universities to recruit and train STEM or education graduate students to become primary and secondary school teachers.
The jobless rate rose in July as provincial audits revealed corruption and misuse of education funds and employment subsidies.
Measures supporting employment keep emerging. On 1 August, six ministries, including NDRC and MoHRSS, supported employment of the disabled, expanding jobs, improving skills, and enhancing their environment. MoHRSS issued interim measures overseeing evaluation of professional titles, the first in the PRC, on 19 August.