February: subdued new year
In line with Chairman Xi's signature carbon neutrality pledge, a broad framework for green, low-carbon and circular development was laid out by State Council in late February. Ahead of the 14th 5-year plan unveiling next month, it outlined measures for greening production, consumption and distribution. Major advances in solar and wind power were called for. Long-term growth in renewables is taking shape, with provinces on notice to factor in more renewably-sourced power.
Domesticating big tech is occupying ever more policy bandwidth, as the anti-monopoly rules on the platform economy were, with much PR, tightened. Non-compliant tech giants now face disaggregation and/or forced opening of their data.
A new action plan for market reform was issued by the CCP Central Committee, with measures for competition policy, hukou reform, land and IP markets, among others. Despite plans for reform, the state remains committed to subsidies and other age-old industry policy tools.
Urged not to travel home to celebrate the New Year, workers, some even staying at work, drove retail and catering sales above recent years. While warning of long-term 'scarring' of the global economy, PBoC reiterated that risk prevention and reducing leverage are still its main priorities. In line with this call, CBIRC notified tightening the screws on e-finance by raising firms' capital contribution ratios in joint loans and tightening internet loan quotas for banks.
Following MofCOM training courses in January on how localities should implement RCEP, Premier Li Keqiang relayed the message to the State Council: align manufacturing quality with international industry standards, and train firms how to apply for certificates of origin, etc. Local governments are following suit. Shandong is building a pilot zone for RCEP trade cooperation, and designing special logistics channels for trade with Japan and South Korea.
Resources for the ag–rural sector will serve broader development goals, following ‘victory’ proclaimed for poverty alleviation. Modernising ag, deemed the basis for higher-level food security, acquires systematic design in 2021. Rural construction programs and land reform will contend with urban–rural gaps that hinder national development. Inter-agency and central-local coordination, resource consolidation and supervision are to be deployed in their roll-out.
As the low birth rate crisis becomes ever more acute, signals multiply that birth restrictions may soon be lifted. Yet bringing costs of child rearing down is equally necessary to encourage child bearing. Affordable preschool education and a friendlier working environment for mothers may well feature. Universities will likely offer more training programs for aspiring early childcare professionals.
Chairman Xi launched a new campaign for studying (well-curated) Party history ahead of its centenary. Party members are urged to stay true to the traditions of revolutionary times, upholding the spirit of past martyrs as the PRC undertakes a ‘new development era’. In a set of guiding opinions to come into effect on 1 March, the Supreme People’s Court proclaims itself a vehicle for integrating ‘socialist core values’ into judicial texts.
introducing China Executive Briefing
China Executive Briefing is an exciting new venture for us teaming up with Asia Society Australia. It provides up-to-date, impartial and accessible analysis of China’s economic policies and trends and their implications for Australiasia and beyond. The new homepage page is here →
open to autarky: China’s coming 5-year plan
To be unveiled in March, plans for the next five years will power the PRC’s ambition to become the leading world economy by mid-century. Supply chain security now outranks economic growth, elevating science, technology and innovation high up the agenda. Carbon neutrality wins a faster trajectory, while urban middle-classes are urged to spend more. Foreign trade, investment and knowhow are welcomed, if only to reduce future reliance on foreign tech and imports. full briefing here →
featured analysis
Ag production’s very own ‘chip technology’ has been identified at last: seed development. Encompassing development of seeds, breeding animals and their genetic material, it was flagged for the first time at the 2021 annual economic planning conclave last December. This upgrade will bring capital investment and resources to drive research and streamline paths to market. full post open access →
february policy movers
policy professionals in and out of the establishment
Xu Guangyao 许光耀 | Nankai University law professor
Anti-monopoly campaigner for more than two decades, Xu is well regarded among his peers. Bound to set precedents, an amended Anti-Monopoly Law should appear in 2021; revisions focus on the online sector. The law first appeared in 2008, but was not strictly enforced. Officials, says Xu, worried it would inhibit growth in the sector. Exploding internet usage helped power the economy during the 2000s. Yet the rise of internet giants, he notes, has shrunk the space; monopoly behaviour is rampant.
Wang Tao 汪涛 | UBS China chief economist 瑞银证券中国首席经济学家
After eight years as an IMF economist, Wang argues for ‘holidaying at home’: it may put pressure on consumption, but will also boost production. Real estate sales in large and mid-sized cities went up 13 percent y-o-y. Furnace operating rates have left steel production untouched. Winter factors, however, may still stymie industry and building activities. Overall, real GDP in Q1 2021 may fall by as much as 1 percent, she estimates.
Chen Yaosheng 陈瑶生 | National Pig Industrial Tech System chief scientist
Scientific pig breeder Chen specialises in genetic evaluation. His team developed technical standards at Sun Yat-Sen University for large-scale farming of lean meat-producing pigs. Over 80 percent of the pig herd are international breeds, with domestic varieties in fast decline, warns Chen. Domestic breeding has failed to develop superior breeds, hence the heavy reliance on imported varieties. To remedy this situation, Chen’s team has created a data centre and gene bank to preserve domestic breeds and their DNA.
policy ticker highlights
gems from our feed of policy releases and domestic debate
trade
continuing efforts to deepen foreign trade and investment
Comnews, China Trade News | 5 February
context: Following the successful conclusion of RCEP and BRI, China looks to deepen foreign trade and investment. Recent efforts include signing the upgrading protocol of the China-New Zealand FTA.
Seizing the opportunities provided by RCEP and BRI, local governments continue to unblock channels and improve transit transportation cooperation.
Yunnan has
increased opening up to Laos
accelerated the layout of industrial parks along the China–Laos railway
promoted the construction of Zheshang Industrial Park in the Mohan–Boding Economic Cooperation Zone in Laos
continued participation in the construction of the China–Laos Economic Corridor
Chen Tiejun 陈铁军 Yunnan Academy of Social Sciences researcher notes
importance of transport infrastructure construction in Yunnan
should focus on border development for developing port economies
pace of development affected by attitudes of neighbouring countries
Meanwhile, Shandong has made proposals such as
building a pilot zone for RCEP economic and trade cooperation
establishing a small and medium-sized enterprise RCEP cooperation forum
further advancing action plans for trade cooperation with Japan and South Korea
jointly creating a ‘golden channel’ for international logistics
encryption of air and sea flight routes
normalising vehicle transportation between Weihai and Incheon, South Korea
Building on RCEP and BRI, Gansu intends to
continue integrating with BRI
speeding up construction of large transport channels and hubs
promoting construction of Lanzhou national logistics hub
speed up construction of ‘Air Silk Road’
optimising international logistics distribution
multimodal train from Lanzhou to Guangxi and on to ASEAN
deepening foreign exchanges and cooperation
increase and diversify trade fairs
Hu Chao 胡超 Guangxi University for Nationalities professor urges the transformation of trade channels to industrial trade. Hu suggests
moving to formalised international trade
developing border processing trade
accelerating urbanisation of border areas
to develop the port economy
improve conditions for economic development
utilising advantages of border pilot FTZs (free trade zones)
Guangxi pilot FTZ in Chongzuo
promoting reforms to optimise business developments
governance
reviewing flow-on from delegates’ proposals at 2020's Two Sessions
State Council | 18 February
context: The Two Sessions are set to open imminently on 4 and 5 Mar 2021 respectively. Reviewing the implementation of proposals put forward by the attendees during last year’s meeting is part of the 2021 meetings' preparations.
Premier Li Keqiang 李克强 presided over State Council executive meeting on 18 Feb 2021 to hear reports on the handling of the 2020 Two Sessions proposals to promote socio-economic development. Related departments reportedly adopted some 3,700 pieces of advice from over 10,000 received proposals, introduced in about 1,500 policies.
As this year’s Two Sessions approaches, the meeting further called for gathering collective wisdom to promote healthy and sustainable socio-economic development by
collecting opinions and proposals to be put forward during the meetings
integrating the handling of suggestions with government work
improving the quality of handling of suggestions
stressing relevant departments' responsibilities
strengthening supervision and overall management
macroeconomy
red lines for commercial bank internet loans
China Banking and Insurance Regulatory Commission, National Business Daily, China Securities Journal | 22 February
context: Regulating internet finance ranks high in the 2021 policy agenda. The wild growth of internet consumer loans has worried regulators—economically a ticking bomb and politically a manifestation of rampant consumerism and social stratification. This time clear red lines are drawn on the boundaries of cooperation between banks and internet platforms in the hope of bringing down the overall scale of this business.
A notice on tightening the screws on the internet loan business was released by CBIRC (China Banking and Insurance Regulatory Commission), stipulating
implementing risk control requirements
commercial banks must
carry out internet loan risk management independently
complete loan risk assessment independently
it is strictly forbidden to outsource key aspects of pre-loan, in-loan and post-loan management
strengthening the management of the capital contribution ratio
the capital contribution ratio of the partner institution in a single loan must not be less than 30 percent
effective 1 Jan 2022
reinforcing the centralised management of cooperating institutions
where a commercial bank and a partner institution jointly fund an internet loan, the balance of the bank's loan with a single partner (including its related parties) must not exceed 25 percent of the bank's net tier 1 capital
implementing total loan quota control
the balance of internet loans issued jointly by a commercial bank and all cooperative institutions must not exceed 50 percent of the bank's total loan balance
strictly controlling cross-regional operations
local corporate banks must serve local customers and not conduct internet loan business across jurisdictions of registration
exceptions may be made by CBIRC
effective 1 Jan 2022
a transitional period has been set for institutions to complete the rectification before 17 Jul 2022
Substantially tightening the requirements of internet lending policies, the Notice is a refinement of existing regulations, notes Dong Ximiao 董希淼 Merchants Union Consumer Finance chief researcher. It aims to implement the central government's requirements on fully regulating fintech and the platform economy, strengthening financial supervision and better preventing financial risks, Dong argues.
agriculture
2021 No. 1 Document: policy transition to rural revitalisation
Xinhua Net | 21 February
context: Resources for the ag and rural sector will go to broader development goals following 'victory' in the poverty alleviation program. Ag modernisation setting the basis for higher level food security has systematic design this year. Rural construction programs and reforms will continue to bridge urban-rural gaps that hinder the latter's economic development.
The end of the anti-poverty campaign marks the start of a new era, says Central Committee of the CCP and State Council's released '2021 Central No.1 Document: Opinions on the rollout of rural revitalisation, accelerating ag and rural modernisation' on 21 Feb 2020. The document stipulates
I. connecting poverty alleviation with rural revitalisation
keeping key supportive policies unchanged in the 5-year transitional period
consolidating poverty alleviation achievements, preventing relapse into poverty
promoting rural revitalisation in previous poor regions through the production of ag specialties, consumption promotion and employment creation
constantly monitoring and supporting low-income rural residents, providing them with employment opportunities and social security
II. accelerating ag modernisation
improving production capacity for staple grains and other key products
government and Party committees sharing the responsibility for food security
securing the supply of grain, cotton, oil, sugar and meat
stabilising planting area and improving yield
building functional grain production regions, key product protection regions and a national food security industrial belt
ensuring farmers' profits
optimising rice and wheat minimum purchase price schemes
optimising corn and soybean producers' subsidies
promoting structural reform of ag production, encouraging high-quality products, standard production and brand building
producing high-quality animal feed, including forage corn
stabilising soybean production, while developing other oil crops including canola and peanuts
supporting grain-producing counties
expanding pilots of full-cost insurance and income insurance for wheat, corn and rice
promoting high-quality grain projects
setting up a modern animal husbandry system
protecting pig production capacity and stability over the long term
actively developing cattle and sheep farming
continuing dairy revitalisation
promoting green aquaculture, fishing port building and management
diversifying food import sources
encouraging domestic companies to join global ag logistics
cracking down on ag product smuggling
strengthening inspections at customs to prevent bio-invasion
preventing food waste during production, distribution, processing, storage and consumption
resolving seed industry challenges
protecting and utilising ag germplasm resources
improving national crop, livestock/poultry, and aquaculture germplasm bank
ensure long-term support for basic research, launching key R&D projects
nurturing high-quality varieties
promoting commercialisation of biotech breeding
encouraging leading seed companies to build private breeding system
improving seed bases, notably Nanfan base
incorporating breeding, propagation and extension
protecting the 120 million ha of farmland 'red line'
implementing the strictest farmland protection
prohibition on taking farmland for construction and environmental purposes
prioritising permanent farmland for staple production and other farmland for grain, cotton, oil crop, sugar, vegetable and forage
Improving monitoring of farmland transfer
enhancing quality of high-standard farmland, establishing maintenance mechanism
developing 6.7 million ha of high-standard farmland in 2021
promoting intra-provincial swap of farmland quotas
promoting monitoring of farmland quantity and quality
developing ag tech and facilities
upgrading infrastructure in irrigated areas
supporting ag R&D, not least basic research
encouraging academic institutions to provide tech support for rural revitalisation
strengthening the ag tech service system, sending scitech commissioners
setting up national tropical ag R&D centre
improving ag machinery R&D capacity, above all smart products and machines for hilly areas
providing more purchase subsidies and operating subsidies
strengthening animal disease prevention/control and crop disease prevention/control systems
building modern rural industrial system
developing ag whole-supply chain and related standards
developing ag specialties initial and deep processing
building modern ag industrial parks, leading ag industrial counties, and industrial clusters
promoting ag distribution system
developing leisure ag and rural tourism
building 500 modern ag demonstration zones by 2025
supporting green development
protecting black soil, promoting conservative tillage
encouraging crop rotation and fallow system
reducing fertiliser and pesticide
promoting green methods to control crop disease and pest
strengthening animal manure recycling
rolling out straw utilisation and plastic film recycling
selecting demonstration counties for nonpoint source pollution treatment
strengthening the monitoring of food quality and safety
developing green products, organic products, and product geographic indications (GIs)
piloting ag product certification
protecting aquatic resources
promoting fisheries law enforcement
implementing ten-year fishing ban on Yangtze river
ensuring the livelihood of fishers who quit fishing on Yangtze river
developing water-saving ag and dry farming
reducing desertification, stony desertification and soil erosion on sloping farmland
preventing and reducing soil pollution
protecting underground water, preventing overdraft
improving rural water systems
consolidating the achievements of returning farmland to forest/grassland
restoring grassland ecosystems
promoting modern ag operation system
developing moderate large-scale ag production
encouraging family farms
enhancing the quality of farmers' cooperatives
nurturing professional ag services
supporting innovation and development of leading ag companies
educating professional farmers
attracting entrepreneurial talents to rural areas
III. stepping up rural construction
accelerating rural planning
upscaling rural infrastructure
promoting transportation, water, electricity and telecommunication systems
applying digital techs in rural area and smart ag, including GPON (Gigabit Passive Optical Networks), 5G, and IoT (Internet of Things)
improving rural living environment by focusing on 'toilet revolution', waste disposal and village cleaning and greening projects
upgrading rural public service, including education, healthcare and elderly care
incentivising rural consumption through better logistics infrastructure and e-commerce service
integrating rural and urban development
small cities and counties critical to rural-urban connection
prioritising ag and rural investment
increasingly allocating central budget to rural and ag sector
enhancing the share of land transfer revenue for ag and rural investment
supporting local government to issue bonds for modern ag and rural development
setting up market-oriented rural revitalisation fund to attract private capital
deepening rural financial reforms, with policy tools including re-loan, rediscount and favourable required reserve ratio
building up credit system for new ag operators within three years
developing digital inclusive finance
promoting microcredit, pledging insurance policy for loans, mortgage loans with ag machines and facilities as collateral
providing medium- to long-term credit support to rural infrastructure projects
expanding credit guarantee system
replacing ag insurance subsidies with rewards
optimising reinsurance mechanism
developing 'insurance plus futures'
deepening rural reform
optimising rural collective property right mechanism and market-oriented factor allocation
insisting on collective ownership of rural land and household contracting system
orderly extension of farmland contracting period for additional 30 years after the second round of land contracting expires
exploring ways for rural construction land marketisation
releasing negative list for rural construction land uses
experimenting on the separation of homestead's ownership, contract right and use right
developing rural collective economy
ensuring rural migrant's farmland contracting right, homestead plot use right, and the right to share collective revenue; designing measures for right transfer with compensation
promoting reforms of ag water pricing and collective forest rights
social policy
support for child rearing essential to encouraging child bearing
National Health Commission, 21st Century Business Herald | 18 February
context: Although central support for care provision for children under three was announced in 2019, the market remains feeble. Contrary to intentions, efforts to make kindergartens more affordable have actually resulted in a declining supply of preschool education in many places. If none of these problems are resolved, Zhai Zhenwu 翟振武 China Population Association president predicts that only 300,000 more babies will be born even if birth restrictions are done away right now.
The green light from National Health Commission for north-eastern provinces to scrap birth restrictions comes with planned support for preschool and early childcare, including
supporting non-state investment in affordable early childcare
providing tax benefits to community-based early childcare institutions
educating early childcare professionals, with at least one university in each province offering early childcare majors
offering professional skills training to early childcare service providers
innovating new insurance products
Zhu Yu 朱宇 Fujian Normal University Research Centre for Population and Development Studies director says removing birth restrictions alone will not reverse low birth rates in north-eastern provinces, which are far below national averages, reports 21st Century Business Herald. The two-child policy in 2016 resulted only in a small rebound in the birth rate that year, but it swiftly continued to plunge in 2017. Thus, on top of removing birth restrictions, support for child rearing is essential, says Zhu. Caring for children under three is a heavy burden for parents who are both working, and public services are often unaffordable. Zhu also points out new mothers should be allowed flexible working arrangements, and suggests monetary support for child bearing.
Relics of the one-child policy should be cleared up, says Huang Wenzheng 黄文政 Centre for China and Globalisation senior researcher. He also warns that delaying retirement could derail birth incentives, as many families rely on elderly people to look after young children.
energy and environment
regulators to tighten provincial renewable consumption targets
North Star Power, Caixin | 13 February
context: This policy, if implemented, will set the tone for renewable power development over the next ten years, and lead to a combined solar and wind installations total higher than 1.2TW. Provinces with low renewable consumption will face immense pressure, as NEA aims to bridge the bridge the gap between different provinces.
The draft '2021 renewable power consumption weighted responsibility and 2022-30 projected targets' from NEA (National Energy Administration) have been circulated on media and industry sites. Against the backdrop of newly updated 2030 non-fossil energy consumption goals, NEA intends to impose tighter provincial renewable power consumption obligations.
The draft stipulates
gradually closing the gap between different provinces, with the aim that all provinces should shoulder equal renewable consumption responsibility
assigning two sets of provincial targets, one for all renewable sources and another for non-hydro power; both targets to be increased each year or at least not lowered
provincial targets for 2021-2030 will be allocated in one go, and later adjusted
baseline conditions
considering uncertainties over hydro and nuclear power development, consumption, responsibility targets will be drawn up based on the goal of non-fossil energy making up 26 percent (rather than 25 percent) of energy consumption in 2030, and 16.6 percent in 2021
primary energy consumption will reach 6 bn tonnes coal equivalent in 2030, and 5.12 bn tonnes in 2021
national power consumption will be 11,000 TWh in 2030, and 8,000 TWh in 2021
over 40 percent power consumed nationwide should come from renewable sources in 2030, including 25.9 percent from non-hydro sources
2021 provincial targets for
all renewable power sources
non-hydro power
2022-30 provincial targets for
all renewable sources
non-hydropower
Total installation of wind and solar power will exceed 1TW in 2025, and about 1.6TW in 2030, based on the NEA's requirements, Tao Ye 陶冶 National Development and Reform Commission Energy Research Institute vice director. calculates. Green energy certification and trading of surplus renewable power will constitute a major approach for some localities to fulfil their obligations, adds Tao.
The share of non-fossil fuel will grow by 1.04 percent each year from 2022-30, highlights Caixin, higher than 0.8 percent annually from 2016-19. Over 20 percent of power consumed in eight provinces will come from solar and wind, adds Caixin.
scitech
C¥10 bn subsidies for Made in China 2025 SMEs
Ministry of Finance | 3 February
context: While Made in China 2025 is no longer mentioned by state media, new subsidy schemes continue to support manufacturing sectors strategic to the state. This is now especially relevant as import substitution becomes highly prioritised.
More than C¥10 bn in subsidies will be offered to highly specialised manufacturing SMEs and public service platforms in the next five years, says a 3 February Notice from MoF (Ministry of Finance). The scheme will support
about 1,000 national 'little giants' already recognised by MIIT (Ministry of Industry and IT) and MoF (excluding those who are listed on stock markets domestically or internationally), who should
ramp up innovation investment related to strategies of
'industrial foundation'
'manufacturing powerhouse'
work with industry leaders and across the value chain
promote digital, network and intelligent transformation
promote branding
accelerate stock market listing
improve international collaboration
no more than nine SME public service platforms in each province, who should use the subsidies to foster 10,000 'little giants'
Provincial authorities are expected to submit their nominations in three batches (March 2021, July 2021 and July 2022). Subsidies are only offered to SMEs passing annual evaluations.
job opportunities
If you want to work at the leading edge of policy analysis on China, please join our team! As we develop our virtual office, networking a team of analysts around the world, we are hiring analysts for our trade policy and agriculture and fisheries teams. We also have an opening for a part-time macroeconomic policy intern. Residence in Beijing is not required. Please see our careers page or contact hr@policycn.com for information.
China Policy is a Beijing-based research and advisory company. Supporting our clients at multiple levels, from in-house research teams to CEOs and boards, we help them anticipate, understand and respond to China’s changing domestic policy and geopolitical environment. Contact us for more information on our services.