January: CEWC, Foreign Investment Law, Beidou
Beijing hoped for a soft landing on the tech-trade war with the US, making up for pressures in late 2019 over its autonomous regions. 2020 however opened with the shock of US actions in the Middle East, drawing harsh comment globally and complicating relations with Washington. Among the repercussions, Chinese commentary expressed an interest in censuring Washington without upsetting the trade applecart, diverging from Russia’s drive to extract political advantage.
Leaders focused on three domestic challenges in December 2019: the Party’s role in keeping the economy in growth territory, how to get local cadres on the front foot, and refocusing anti-corruption. Don’t try to manage everything, officials were reminded: focus on major risks. They drew criticism for ignoring public sentiment, and failing to adapt. Do more to supervise officials, provinces were instructed, keeping abuses of power in check.
The slowing economy was if anything the policy focus in December. The CEWC (Central Economic Work Conference) outlined policy for 2020, stressing 'stability', suggesting official uncertainty as to how much the economy can slow. Responding to record numbers of corporate bond defaults in 2019, People’s Bank of China called for comment on further marketisation of the bond default process. In addition, revisions to the Securities Law were passed, outlining an IPO process that will be implemented under State Council direction.
Foreign investment is one way to boost the economy. Equal treatment for domestic and foreign firms and better protection for foreign investment were detailed in supporting measures released in the run up to enactment of the Foreign Investment Law (1 Jan 2020). Legal clarity on the foreign investment framework was also provided in a judicial interpretation issued by the Supreme People's Court.
After four reviews, the Basic Healthcare and Health Promotion Law was passed on 28 December, laying the groundwork for more specific healthcare laws. Healthcare authorities are moving to ensure that hospitals prescribe centrally-procured drugs, while also laying out the rules for the next round of central procurement.
This year’s Central Rural Work Conference was held 21-22 December, setting the course for rural and ag policy in 2020, the deadline year to win the ‘anti-poverty battle’ and build a ‘moderately prosperous society’. The conference called for the rural sector to be given budget priority, have better public officials and improved rural infrastructure and services. Somewhat sidelined in the agenda, agriculture per se is expected to be discussed in detail in the forthcoming 2020 Central No.1 document.
The national energy work conference, hosted 16 December, reiterated the state’s commitment to a clean and low-carbon energy system. But it also underscored the importance of reconciling energy transition and supply stability. Provincial energy departments’ comments were sought on draft 2020 solar construction regulations. Proposed new rules are largely in line with the 2019 framework. Keeping the current regulatory framework intact has been welcomed, ensuring the sector’s stability during the transition to grid-parity.
The launch of two satellites in December completed the core of the BeiDou navigation network, China’s answer to US-controlled GPS. Long-term investment in indigenous tech was emphasised at CEWC: Xi Jinping reaffirmed the roles of Jing-Jin-Ji, Yangtze River Delta and the Greater Bay Area as leading innovation drivers. Meanwhile, academic institutions are piloting bureaucratic streamlining, but commentators remain concerned about research integrity with several high-profile cases of misconduct emerging.
december policy movers
policy professionals in and out of the establishment
Lei Xiaohua 雷小华 | Guangxi Academy of Social Sciences ASEAN research centre vice-director
Lei is an expert on China-ASEAN economic integration and cross-border economic zones. As the Southern Transport Corridor allows cargo to be shipped from Chongqing to Singapore within seven days, Lei urges Guangxi province to exploit this advantage. He worries that the two inland provinces may compete with each other in ASEAN markets. Yunnan should, he argues, orient itself towards land trade facing the Indo-Pacific, while Guangxi should focus on sea-route development.
Rao Yi 饶毅 | Capital Medical University president and former Peking University School of Life Sciences dean
Veteran neurobiologist with a stellar career in America, Rao returned to become an advocate of reform in Chinese science. He repeatedly called for systemic changes in research funding, including scrapping the mid- to long-term sci-tech plan. He has repeatedly criticised malpractice among funding administrators and academics. Rao was publicly passed up for the honour of CAS (Chinese Academy of Sciences) academician in 2011. His strong-worded letter to NSFC reignited criticism of China’s scientific establishment.
Xu Liangping 徐良平 | Zhejiang Zhuji Party Secretary
A forceful spokesperson for mobilising residents to address social problems (the fengqiao or ‘Maple Bridge’ model), Xu argues that better local governance involves pressuring officials to resolve public concerns by providing better services. Grassroots participation is crucial, but so are Party cadres regularly reaching out to residents and hearing their concerns. Neither citizens nor officials can fully solve problems by themselves, only in tandem.
policy ticker highlights
gems from our feed of policy releases and domestic debate
geopolitics
China could learn from Russia’s web unplugging test
Global Times | 30 December
context: Russia announced on 23 Dec 2019 it had completed a series of tests checking that its internet services could function if the country were cut off from the worldwide web. The review follows a ‘sovereign internet’ bill introduced in November, which gives the Kremlin the possibility to switch off connections within Russia, or to the worldwide web completely, ‘in an emergency’.
Russia’s internet unplugging test will boost the connectivity and security of global cyberspace and should be studied and emulated by China, argues Fang Xingdong 方兴东 Communication University of Zhejiang Centre for Internet and Society director.
The test is one of the most consequential incidents in terms of global cyber security over the past few years, of no less importance than the 2013 Snowden incident. The test has
shaken US’ absolute hegemony in cyberspace
deprived the US of the ability to paralyse a country's infrastructure by disconnecting it from the internet
removed from the US its ‘nuclear button’ in cyberspace
made it much less likely for the US to disconnect other countries
There are several key points worth noting in order to properly understand the Russian test
Russia is not building a new network that is incompatible with the rest of the world
it is only for emergency situations, and does not affect daily use
it is not an act of self-isolation: Russia is not building a domestic intranet
In contrast, some people in China have been saying that Chinese internet must start anew and develop a closed and incompatible system. But a closed network has little value, he observes. Therefore, it must oppose
ultra-left thinking that calls for self-isolation and passive defence
ultra-right thinking that advocates openness and dismisses defence
China's cybersecurity strategy needs to find the right balance between the two extremes, Fang argues.
governance
People’s Daily editorial connects CEWC with governance efficiency
People's Daily | 18 December
context: In the wake of the Central Economic Work Conference, commentaries have stressed carrying out its conclusions. What is being prioritised specifically remains contentious, as a result we are seeing many editorials designed to convey and secure consensus, particularly where the Party’s role is concerned.
An authoritative People’s Daily editorial notes that adhering to the Party's centralised and unified leadership of economic work is a major advantage of the socialist system with Chinese characteristics. In the face of the complex situation of rising risks and challenges at home and abroad, the fundamental reasons why it can maintain momentum in sustainable and healthy development are
adhering to the centralised and unified leadership of the Central Committee
maintaining strategic focus
adhering to progress amidst stability
deepening reform and opening up
giving full play to the dual initiatives of central and local governments
It argues China's economy is a giant ship. The larger the size, the greater the storm, the more important it is to navigate by transforming institutional advantages of the Party's leadership in economic work into governance effectiveness. Drums should be beat to promote stable control of the vessel. Party members should have firm confidence and the courage to take responsibility. It needs to improve the incentive mechanism for taking on responsibilities and do a good job in reform, development and stability. It must realise that to strengthen the party's leadership over economic work is
not to do everything, but to manage and discuss major events
to play a role in guiding the direction
managing the overall situation
ensuring implementation
It is necessary to optimise economic governance through
system theories
coordinating different departments positions and functions and policies
improving foresight, pertinence and effectiveness of macro-control
scientifically and steadily grasping counter-cyclical adjustment of macro-control policies
transforming external pressure into a strong driving force for deepening reform and expanding opening up
concentrate on doing our own business well
finance
debate over maintaining six percent GDP growth
Jiemian (1), Jiemian (2), Jiemian (3) | 10 December
context: As the economy slows, pressure on officials to stimulate the economy grows. However, key officials are pushing back believing a return to massive stimulus would be counterproductive. Compounding the problem is that six percent growth in 2020 is needed to realise government's goal of doubling the economy between 2010-20.&
Debate intensifies on whether the government should use stimulus to ensure GDP growth remains at or above six percent, or let it fall.
Liu Shijin 刘世锦 Chinese People’s Political Consultative Conference economic committee deputy director believes potential output between 2020-25 will fall 5-6 percent (considered median speed), attempts to increase output over potential output will have short term benefits but long term risks
growth slowing because of
peak in real estate, export, infrastructure demands
ageing population
shrinking technology gap
environmental concerns
to maintain new medium growth rate, officials must
improve production flow between urban and rural areas
dismantle monopolies
create fair market for private firms
form innovation centres to stimulate competition
improve SME financing
encourage green development
Wang Yiming 王一鸣 State Council Development Research Centre deputy director posits the slowing economy is natural and reform will be key to maintaining medium speed growth
six percent growth is not a watershed number, slightly higher or lower growth OK
focus on high-quality, over high-speed, growth important
nevertheless growth rate important, too slow will lead to unemployment and other problems
development is the foundation and key to solving economic problems
government must
ensure stable growth
strengthen counter-cyclical adjustments
continue supply-side reforms
Xu Gao 徐高 Bank of China International Securities chief economist argues maintaining 6 percent growth is crucial for market confidence
given China's poor resource allocation, attempts to use long-term trends to estimate potential output will fall short
if growth falls below 6 percent, market confidence will shatter with increasingly reduced private and company investment and reduced aggregate demand
trade
judicial interpretation of the Foreign Investment Law
Jiemian | 27 December
context: The country’s top legislature adopted the Foreign Investment Law in March 2019. It was criticised as being too general to be implemented. These new rules specify contracts required for establishing new foreign-invested companies and transfer of shares, property or stock rights.
People’s Court issued a judicial interpretation of the Foreign Investment Law on 27 Dec 2019. The interpretation will take effect on 1 Jan 2020, concurrent with the law.
During trials, foreign investment contract disputes increased significantly, so the interpretation focuses on their settlement, especially the determination of contract effectiveness, observes Luo Dongchuan 罗东川 People’s Court vice president. Contracts are essential for investors and are an important part of international trade, he added.
According to the interpretation
investment contracts formed in areas not on the negative list are void because the contracts have not been approved or registered by administrative authorities.
investment contracts formed in areas where foreign investment is restricted by the negative list can still take effect as long as the parties concerned take necessary corrective measures before courts make effective judgements
investment contracts that did not meet the requirements of the negative list when they were signed can still be deemed valid if the negative list loosens restrictions before court judgements take effect
These designs aim at guaranteeing the legitimate rights and interests of investors to the largest extent under the prerequisite of safeguarding the stability of foreign capital management, Luo said.
agriculture
Rural Work Conference emphasises 2020 targets
Xinhua Net (1), Xinhua Net (2) | 21 December
context: Longer-term goals of rural revitalisation seem to have been placed aside temporarily to prioritise 'wining anti-poverty battles' and building the moderately prosperous society scheduled for 2020 completion. There was less ag-related discussion this year, with emphasis only on guaranteeing ag product supply.
The 2019 Central Rural Work Conference was held in Beijing on 21–22 December 2019, chaired by Xiao Jie 肖捷 State Council secretary general and attended by Hu Chunhua 胡春华 State Council vice premier.
CCP and the State Council 'Opinions on paying adequate attention to key works of 'three rural issues', ensuring the realisation of a moderately prosperous society in all respects as scheduled' (draft) was discussed at the meeting. It highlighted
poverty alleviation
concentrating efforts to complete remaining tasks
consolidating achievements and preventing return to poverty
adhering to current standards
stabilising policies, and continuing to advance poverty reduction
three rural issues
promoting rural infrastructure construction, guaranteeing water supply
improving rural education quality
strengthening rural health care services
strengthening rural social security
improving rural public culture services
strengthening rural environment governance, improving rural living environment
farmer incomes
developing rural industries
stabilising employment for farmer migrants
addressing migrant workers' wages default
ag products supply
strengthening awards and support to major grain production counties
improving ag subsidy policy
stabilising grain planting areas and production
speeding up restoring pig production
speeding up construction of high-quality farmland
strengthening ag facilities building, including irrigation projects and cold chain logistics
rural party leadership
prioritising rural and ag development
improving land, technology and talent policy for rural development
adhering long-term stability of rural land contract system, and comprehensively rolling out rural collective property right reform pilots
strengthening grassroots governance, mediating and resolving rural disputes
China's imbalanced and inadequate development is reflected in the laggard rural and ag sector, says Ye Xingqing 叶兴庆 State Council Development Research Centre Rural Economy Department director. Prioritising rural is particularly important amid economic downturns and external uncertainty.
Ensuring per capita income in 2020 is double that of 2010 is a critical target for building a moderately prosperous society, argues Ye. Average annual growth of rural resident's per capita income was 8.5 percent from 2011-18. As long as the average annual growth reaches two percent in 2019 and 2020, the target will be hit, he says.
Annual growth of rural residents' income has been higher than GDP and urban residents' income, says Li Guoxiang 李国祥, China Academy of Social Sciences researcher. Challenges are increasing, says Li, highlighting downward pressure on employment and wages for farmer migrants, and slowing ag growth.
society
Basic Healthcare and Health Promotion Law passed
The Beijing News, Guangming Daily, Xinhua Net, Caixin | 28 December
context: It has taken four years to confirm the final version of the law, and it is expected to serve as an overarching framework for other healthcare laws in specific areas. It is also an important step toward achieving public health targets outlined in ‘Healthy China 2030’.
Five days after the fourth review of Basic Healthcare and Health Promotion Law, NPC (National People’s Congress) gave its final approval on 28 Dec 2019. The law will become effective on 1 Jun 2020, reports The Beijing News. Three revisions were made within the last five days, including
informed consent for surgery no longer has to be in writing
training for doctors must be standardised
emergency services must not require upfront payments
The new law serves as a comprehensive basis for healthcare, says Guangming Daily. Yuan Jie 袁杰 NPC Legislative Affairs Commission Administrative Law Department director notes that much emphasis has been laid on grassroots healthcare, including
prioritising support for healthcare institutions below the county level
promoting grassroots healthcare development through multi-level care
increasing funding for grassroots healthcare and healthcare in remote areas
Other measures to cope with healthcare resource inequality include encouraging non-state healthcare and expanding public health services, Liu Xuanlin 刘炫麟 China Health Law Association deputy secretary points out.
The press conference held on 28 Dec 2019 announcing the passage of the law was completely overshadowed by the recent stabbing of a doctor at Civil Aviation General Hospital by a patient’s relative, reports Caixin. The new law provides multiple measures to protect doctors, says Zhao Ning 赵宁 NHC (National Health Commission) Department of Legal Affairs director. Anyone disrupting normal hospital operations, threatening, harming or disrespecting hospital staff members will be subject to punishment. Hospitals have also been designated as a public space, meaning governments will be responsible for maintaining order.
industry and environment
2020 national energy work conference
National Energy Administration | 16 December
context: The meeting emphasised NEA remains committed to a clean and low-carbon energy system. But it also underscores the importance of reconciling energy transition and supply stability. How regulators intend to address such a dilemma is crucial for pollution reduction and climate mitigation, and will continue to dominate the 14th 5-year energy plan debate. &&&
At the NEA (National Energy Administration) 2020 national energy work conference on 16 Dec 2019, Zhang Jianhua 章建华 NEA director emphasised
implementing new energy security strategies
building a clean, low-carbon, safe and efficient energy system
properly addressing the relationships between
'stability' and 'advancement'
domestic and international spheres
overall and regional planning
development and conservation
short-term and long-term strategies
modernising energy institutional structure and capacity
promoting energy high-quality development
stabilising coal supply and optimising coal capacity
ensuring oil and gas supply safety
ensuring clean energy development and consumption
alleviating poverty and reducing pollution
promoting energy mega-projects and their demonstration
promoting energy cooperation along the Belt and Road
continuing energy institutional reform
science and innovation
should enormous particle collider get a blank check?
Yicai, Weixin, The Beijing News | 9 December
context: A social media article has sparked debate over the immense cost of building large scientific equipment. State Council called for proposals in 2018, but critics worry a lack of domestic knowledge and experience may turn some poster projects into white elephants. The largest projects will be included in the upcoming 15-year plan for sci-tech development.
China has invested over 100 million RMB since 2012 in planning the CEPC (Circular Electron Positron Collider), says Ruan Manqi 阮曼奇 Chinese Academy of Sciences Institute of High Energy Physics. The CEPC complex near Qinhuangdao will be over twice the size of CERN's Large Hadron Collider near Geneva.
The project is entering a five-year, one bn RMB phase of precision engineering, says Ruan. Subsequent phase-one construction is expected to cost C¥40 bn, says Yicai. Phase-two, building the Super Proton–Proton Collider, will cost hundreds of billions of RMB, notes Wechat account CuCu. The state will provide about 80 percent of total investment, notes Ruan.
CEPC's biggest critic is physics Nobel laureate Yang Zhenning 杨振宁, says Yicai. Since 2016, Yang has argued that the vast expense takes funds from other physics research, and underlying theories on the existence of supersymmetric particles are flawed. As a result, six of eleven reviewers at an NDRC committee voted against an C¥800 million state investment in 2016, reports CuCu, admitting all high-energy particle physics experts voted in favour of it.
Discussions over funding are eroding China's main advantages over Europe, says Ruan, decision speed and construction cost.
Yicai calculates that CEPC could be ready by 2030, noting that CERN has been designing a new, larger facility called Future Circular Collider.
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