January: 'becoming strong'
A ‘new development stage’ is at hand, Xi Jinping told provincial and ministerial cadres convening at the Central Party School. National development is now poised, he proclaimed, to advance from ‘standing up’ and ‘getting rich’ to ‘becoming strong’. ‘Chinese characteristics’ remain keys to the road ahead; this was stressed also by CCP Central Committee’s first ever 5-year plan dedicated to the ‘rule of law’.
Fostering BRI (Belt and Road Initiative) ties and supporting domestic vaccines were major topics of Foreign Affairs Minister Wang Yi's 王毅 trips to Africa and Southeast Asia. On the domestic front, MofCOM (Ministry of Commerce) is urging localities to help businesses embrace and comply with RCEP. To protect domestic firms from ‘unjustified extraterritorial application of foreign legislation’, MofCOM issued its own screening provisions, resembling the EU’s and those of other countries. Vague wording permits the PRC to use it more liberally, should it face sanctions.
GDP officially grew by 2.3 percent in 2020; while consumer spending lags, finance was the sector to receive most senior attention in January. A slew of bank-related measures took effect. These cap banks’ real estate-related loans, and set new criteria that prioritise national development and the real economy.
Fintech was a target: third-party bank deposit platforms were banned, and measures on online-payment monopolies floated for public comment. The picture is somewhat clearer, but criteria defining monopoly are awaited.
The national carbon market entered its first compliance cycle, kickstarted by Beijing. Over 2,000 coal-fired power firms will be covered. Carbon quotas will be allocated freely at first; auctioning will phase in. Despite the initial lax design, the market is expected to scale up, given new ambitious climate targets. Renewables registered staggering growth in 2020: nearly 72 GW of wind power was added, surpassing the previous three years’ total.
With absolute poverty formally eliminated, macro rural policy is shifting to ‘rural revitalisation’, endlessly reiterating the building of a modern ag and rural sector (it no doubt was on the agenda of the first communist Party meeting in 1921). It sets the tone for the coming 14th 5-year plan: food security is more urgent than ever; rural industries and entrepreneurship will also be nurtured to boost the off-farm economy. Hard and soft infrastructure (e.g. health, pensions and grassroots governance) in rural regions will both see new funding.
With the ‘Western declinism’ narrative officially nurtured, state academic institutions, SOEs and private enterprises are on notice to tackle technology and innovation imperatives. Problems are abundant: tech giants from Alibaba to Bytedance face scrutiny from all regulators, anti-monopoly, cyberspace, fintech, labour and more. The research establishment confronts fresh criticisms over scientific integrity, undermining the long-term goal of boosting the PRC’s research capacity.
featured analysis
Viable and profit-driven, the DSR covers all things digital along the virtual path of BRI: digital economy, e-commerce, IT infrastructure, smart cities and more. The 14th 5-year plan is sure to deliver more policy support, above all in digital trade, data rules and urging third-party buy-in. full post open access →
january policy movers
policy professionals in and out of the establishment
Li Shulei 李书磊 | CPS (Central Party School) vice president
Graduate of Peking University, Li has spent most of his career at CPS. Briefly heading Fujian’s Propaganda Department, he returned to the capital in 2015 to serve as Party secretary for municipal discipline. Joining CCDI and NSC, he served as vice head of both agencies concurrently. Deemed a rising éminence grise, Li now heads CPS at full ministerial rank. He will likely oversee upcoming efforts to hone the 'new development stage'.
Lu Hongzhou 卢洪洲 | Shanghai Public Health Clinical Centre Party secretary
The discoverer of human infection by H7N9 in 2013, Lu is Party secretary of Shanghai’s dedicated COVID-19 hospital, and on the national expert group for COVID-19 treatments. Commenting on a recent rural breakout, Lu deems rural clinics to be virus spreaders. They must institute social distancing, he insists, and quarantine measures. If they cannot test patients, they should refer those with symptoms to urban hospitals or collect samples for testing facilities. This hints at how alarmed he is at the gap in services.
Lian Ping 连平| Zhixin Fund chief economist
Peking University graduate Li is a CPS veteran. Briefly heading Fujian’s Propaganda Department, he returned to the capital in 2015 to run the Party discipline system. Joining CCDI and NSC, he served as vice head of both agencies concurrently. Deemed a rising éminence grise, Li now heads CPS at full ministerial rank. He will likely oversee upcoming efforts to hone the ‘new development stage’.
policy ticker highlights
gems from our feed of policy releases and domestic debate
trade
renewed emphasis on Belt and Road at the start of 2021
China Trade News (1), China Trade News (2), 21st Century Business Herald, Comnews | 18 January
context: Ministry of Foreign Affairs has pushed back against the criticism of falling BRI (Belt and Road Initiative) investment in the foreign English-language press. While policy banks' and high-level government investment may be slowing, business activity at the level of firms is moving forward.
Wang Yi 王毅 minister of Foreign Affairs started the year with trips to African and ASEAN countries. He highlighted both BRI and vaccine diplomacy on his trips. Highlights are
Africa trip
visited
Nigeria
Congo (DRC)
Botswana
Tanzania
Seychelles
Wang highlighted BRI MoU's signed with DRC and Botswana and discussed future Africa–China relations, pointing out China will
continue to help develop Africa's transport, energy, and communications infrastructure
support the construction of free trade zones in Africa and develop large related markets in both China and Africa
promote investment to help industrialise Africa
strengthen cooperation in scitech innovation, particularly digital economy and green development
Southeast Asia trip
visited
Myanmar
Indonesia
Brunei
the Philippines
from January 11 to 16, and reached broad consensus with other countries on uniting and cooperating in response to the epidemic and promoting the quality and upgrading of China–ASEAN relations
discussions highlighted
the countries have purchased or received China's COVID-19 vaccine
new BRI projects were signed
China and Indonesia discussed further opening the Chinese market to Indonesian exports and China building 5G and cloud computing infrastructure in Indonesia
Imports and exports to BRI countries grew by 1 percent in 2020, according to GAC (General Administration of Customs) data. In addition, non-financial direct investment increased by of 24.9 percent. A recent report on BRI risks by China Chengxin RAEX-Europe Rating and VIS Group noted
East Asian countries face lowest risk
South Asia and Central Asia are most at risk due to COVID-19 and a global recession impacting debt repayment
in general developed nations also face less risk while high-risk countries include
Kyrgyzstan
Pakistan
Ukraine
Iran
The focus of BRI has expanded from infrastructure and M&As to include trade, climate change cooperation, and poverty alleviation, notes Wang Dan 王丹 Hang Seng Bank chief economist. Due to increased investment scrutiny in Europe and the United States, Chinese investment activity will pivot from developed to developing countries, and mergers and acquisitions by Chinese companies in developed countries will be similarly reduced.
governance
call for Party control over propaganda ahead of CCP's centenary
People's Daily | 6 January
context: In July 2021 the CCP will celebrate its 100th anniversary. The date is not only ritually significant but will also mark the beginning of a ‘moderately prosperous’ milestone in realising the ‘Chinese Dream’ and 'the great rejuvenation of the Chinese nation'.
Wang Huning 王沪宁 Politburo Standing Committee member gave a speech at a Central Propaganda Department meeting on 6 Jan 2021. Wang stressed
fostering essential reforms in publicity
prioritising publicity and implementation of Xi Jinping Thought on Socialism with Chinese Characteristics for the New Era as an important political duty
strengthening cadres' and the people’s support of Xi Jinping as the core
organising centennial celebrations of the founding of CCP with all-out efforts
realising the cultural priorities set by the 14th 5-year plan to enhance ‘soft power’
consolidating Party leadership over publicity
Huang Kunming 黄坤明 Propaganda Publicity Department minister subsequently underlined
targeting the building of a culturally strong country
innovating foreign publicity work
maintaining ideological security
macroeconomy
payment industry braces for tighter operations, antitrust regulations
People's Bank of China, National Business Daily, 21st Century Business Herald, China Securities Journal | 25 January
context: In line with our expectations, regulators have picked up on the clean-up order issued to Ant Finance, releasing one of the most comprehensive regulatory documents for the payment industry to date. Further clarification is offered as to what constitutes market dominance and the regulatory orders that could follow, potentially setting a precedent for other industries.
Public comment is now open for ‘Regulations on non-bank payment institutions’ until 19 Feb 2021, drafted by PBoC (People's Bank of China), the central bank, to
strengthen the supervision and management of non-bank institutions
regulate the operation of non-bank payment institutions
strengthen anti-monopoly in the payment finance industry
The regulations stipulate
licensing, establishment, changes in operations, and termination of business
payment institutions must not engage in credit granting activities
classifying payment business into
deposit account business
payment transaction processing business
payment business operation rules
regulatory requirements based on risk levels
cross-institution payment services shall be processed by clearing institutions
payment institutions must deposit reserves in PBoC or a commercial bank that meets requirements
strengthening anti-monopoly in the industry
maintaining a fair competitive market order
situations that may trigger an early warning
an institution's share in the market reaches one third
the total market share of two institutions reaches one-half
the total market share of three institutions reaches three-fifths
situations that may trigger an investigation of market dominance
an institution's market share reaches 50 percent
the total market share of two institutions reaches two-thirds
the total market share of three institutions reaches three-quarters
PBoC may recommend measures to State Council’s anti-monopoly law enforcement agency to
stop the abuse of market dominance
stop the concentration of undertakings
split institutions according to the type of payment business
building a marketised exit mechanism
guiding payment institutions to
return to main business
pay more attention to product innovation and meeting user needs
Clearly, the release is a ‘concrete manifestation’ of the spirit of strengthening anti-monopoly and of preventing the disorderly expansion of capital of the Central Economic Work Conference for 2021, believes Dong Ximiao 董希淼 Merchants Union Consumer Finance chief researcher.
agriculture
rural revitalisation in the post poverty-alleviation era
State Council Information Office, Sina Finance | 13 January
context: With the end of the poverty alleviation campaign, Xi Jinping spoke of a ‘major victory’ while urging perseverance to prevent relapse into poverty. Rural revitalisation has now become the main theme, aiming for overall prosperity and modernisation of the rural and ag sector.
The highly publicized victory over absolute poverty does not mean assured security above the poverty line for rural residents, nor has overall prosperity been achieved in rural areas. The focus of rural work will now be rural revitalisation, which connects with the previous anti-poverty campaign to some extent, while further stressing the building of a modern ag and rural sector, says Liu Huanxin 刘焕鑫 MARA (Ministry of Agriculture and Rural Affairs) vice minister. The 14th 5-year period is also a transitional period for all former poor regions and households, which will be monitored frequently and supported if they again face difficulties. Based on protections against relapse into poverty, MARA will prioritise four tasks, namely
securing the supply of grain and other key ag products by fostering the seed industry and improving farmland quality
developing rural industries and rural entrepreneurship to boost off-farm income
improving rural infrastructure and public services
strengthening rural governance and education for farmers
Accounting for some 98 percent of ag operators and farming over 70 percent of arable land, smallholders remain the core of rural strategy. MARA aims to protect smallholders from being harmed by larger ag producers and further link them with modern ag. This should go hand in hand with the development of new ag operators. Smallholders that are willing to farm in the long term will be encouraged to upscale to family farms with a 'moderate' production scale. Both smallholders and family farms can be connected by cooperatives and supported by professional ag services, says MARA. As of October 2020, China had
over 1 million family farms
over 2 million farmer coops
some 900,000 ag service organisations
social policy
rural areas become the new soft spot in COVID-19 control
Ministry of Agriculture, Weixin | 14 January
context: Unlike previous outbreaks, the winter wave mostly started in rural areas. Some are in close proximity to international airports, suspected to be the sources of many outbreaks. The vulnerable multi-level care system is now fully exposed.
CCP Leading Group on Rural Affairs and Ministry of Agriculture and Rural Affairs jointly released ‘Announcement on preventing and controlling COVID-19 in rural areas’ on 14 Jan 2021, specifying
utilising grassroots governments
guiding farmers to practice social distancing, personal hygiene and environmental sanitation
discouraging migrant workers from returning
ensuring daily supplies for areas with COVID-19
minimising the effect on transporting ag products
At the State Council press conference on 13 Jan 2021, Wu Hao 吴浩 NHC (National Health Commission) Committee on Disease Prevention and Control expert says strategies such as blocking entrances to villages are no longer working because transmission is more complex, reports Southern Weekly. Rural doctors are incapable of testing. Wang Baolu 王保鲁 Zhaosong Village rural doctor says he used to just give some anti-fever medicines to fever patients. Since COVID-19, he has asked all such patients to go to urban hospitals per government directives. But for some people in the 239 villages in Shanyang, Shangluo in Shaanxi province, going to the county hospital means a prohibitive 200 km journey. Though county-level hospitals are now capable of testing, Wang Baolu hopes testing kits can be developed for rural doctors, but Wu is concerned about biosecurity risks. So far, rural doctors are limited to taking patient samples.
Monitoring returning migrant workers is another challenge. Wang Bin 王斌 NHC Department of Disease Prevention and Control supervisory staffer calls on rural governments to register people returning from areas with COVID-19 or if they work in high risk industries such as importing cold chain food. Wu also warns urban villages could become vulnerable as they tend to have more migrants.
energy and environment
2021 national environmental work conference hosted
Ministry of Ecology and Environment | 22 January
context: Tasks for 2021 are in line with 14th 5-year plan priorities identified earlier. Notably, climate change moved up the agenda, with preparations concentrating on peaking emissions early.
Ministry of Ecology and Environment hosted 2021 national environmental work conference on 22 January. It admitted
environmental protection continues to face structural and fundamental headwinds
green mindset has yet to be firmly installed
improvements are unsatisfactory
pollution reduction results are unstable
certain emissions sources are not covered
In 2021, the ministry will work on the following areas
implementing 14th 5-year plan's overall environmental protection plan and special plans
drafting the action plan to peak emissions before 2030
building a project reserve for nationally determined contributions
speeding up the national carbon market
advancing low-carbon pilots
strengthening local carbon response capacity
drafting '2035 national strategy for climate change adaptation'
maintaining the reduction of air, water, ocean, soil and solid waste pollution
drafting 'Opinions for deepening fight against pollution'
strengthening ecological conservation and restoration
facilitating negotiations for the post-2020 biodiversity framework
drafting 'Guiding opinions for further enhancing biodiversity conservation'
ensuring nuclear and radiological safety
moving forward environmental inspections
fending off environmental risks
building institutional foundations
drafting '3-year plan for building modern environmental governance system'
organising technological research for jointly controlling PM2.5 and ozone pollution, and restoring the Yangtze River
cracking down on the falsification of monitoring data
scitech
new entrepreneurial opportunities in a changed world
Weixin | 17 January
context: After several years of 'mass entrepreneurship and innovation', investment deals for start-ups fell for five consecutive years while a capital winter kicked in in late 2018. The state is still offering support to emerging industries as part of the secure supply chain drive, while investors mostly focus on safe bets (i.e. more promising firms), state-endorsed sectors (i.e. integrated circuits) and COVID-driven opportunities (online education and healthcare).
China will be the most important location where innovation flourishes, claims Lu Qi 陆奇 MiraclePlus and Y Combinator China founder, who addressed a seminar on entrepreneurship opportunities and identifies
long-term trends accelerated under COVID-19 and the evolving global environment
digitisation
life sciences
sustainable development and new energy
the West's decline and the East's rise
major structures through which the world grows
science and technology
government supports scientist-driven research in research universities and national labs
big enterprises focusing on applied R&D and mission-driven research enterprises
digitisation drives conventional research fields forward
market environment and sustainable development
no longer consider the environment as free real estate
digitisation as a major trend in the business environment
open source environment
venture capital
advantages China has
innovation environment
solid foundation of talent, capital, technology and market
mature environment for commercialising technology
a vibrant start-up scene
urban environments conducive to innovation, like Shenzhen
technology as the core driver
5 to 10 years before the domestic environment matures
structural macroeconomic reasons
consumption upgrading
further urbanisation over the next decade
population increase
diverse population structure
domestic and international environment
new infrastructure
innovation shift from the West to the East
transferable model between China and developing countries in Southeast Asia and Latin America
Technology development is always linked to market demand, says Lu, with mission-driven research start-ups like DeepMind and OpenAI emerging to address those issues. He advises offering help to entrepreneurs as they identify product/market matches and navigate issues during enterprises' early grow stages.
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