January: trade surges as the economy shivers
Total PRC exports and imports broke through US$6 tn in 2021, following strong global demand, but the 2022 trade outlook is wobbling. Broader export credit and better insurance coverage, tax cuts and other sweeteners have been rolled out, expanding financial support for struggling small exporters. As Beijing seeks additional momentum, cross-border e-commerce and offshore trade are getting more help. High-level Opinions urge boosting domestic/foreign trade synergies to stoke domestic markets and prod state champions to go global.
Import windows are opening: RCEP, in effect since 1 Jan 2022, promises a larger range of ag imports. Australia, New Zealand (beef, lamb and dairy) and ASEAN (tropical fruits) stand to benefit from growing PRC appetites for ‘quality’ produce. Meanwhile, stringent new food import rules (decrees 248/249) add more red tape and raise the bar for compliance. The spread of the Omicron variant adds uncertainty, with chilled and frozen food imports facing hardened safeguards.
Easing measures rolled out by the central bank to stabilise the economy included cuts to the interest rate and 5-year benchmark lending rate. This has shored up the real estate market amid weak housing sales and falling consumer spending. More fiscal expenditure and infrastructure investment are expected, as timely issuance of SPBs (special-purpose bonds) is urged. Mounting local debt burdens constrain the amount of SPBs; localities struggle to lure private capital into fixed-asset investment. Following pilots in Shanghai and Guangdong to eliminate implicit debt the measures have expanded to Shaanxi. Meanwhile, with Omicron disrupting supply chains, rising inflation risks dampen industry productivity.
‘Green and low carbon development’ is the eco-ministry’s top priority for the year, but it must be done in an ‘orderly manner’, walking back the ‘speed-up’ promised for 2021. Central energy SOEs are to lead in decarbonising, raising renewables to over 50 percent of their installed capacity by 2025. Yielding some 60 percent of the nation’s power supply, the implied build-out of renewables is massive. Wetlands, invaluable biodiversity stores and carbon sinks, while now shielded by a first-ever Wetlands Protection Law, remain hostage to ‘major national projects’.
National R&D expenditure grew steadily in 2021 despite an economy under pressure and Beijing’s drive to boost basic research. Makeovers mooted in MoST’s annual work conference included a 15-year scitech strategy, a 10-year basic research plan, several 5-year plans and a 3-year system-wide reform. While new energy vehicles impressed with a 160 percent jump in annual sales, AI remained hostage to regulatory scrutiny and has hit a profit ceiling. Big tech can expect relative policy certainty, despite looming corruption probes by the Party's empire-building disciplinary agency, CCDI (Central Commission for Discipline Inspection).
On the political front, Party-building work is expanding from anti-corruption to restoring cadres’ faith in their cause. Rent-seeking links between officials and entrepreneurs must be severed; meanwhile, CCDI revels even more in the role of guardian of the central mission.
Special economic zones are forerunners in changes to laws affecting non-PRC players. In three opinions issued in January 2022, the Supreme People’s Court backed judicial opening in SEZs (Pudong New Area, Qianhai and Hengqin). The move allows the application of other countries and international law in trials. In parallel, the scope of PRC law is being actively expanded.
The crude birth rate hit a record low in 2021, according to 17 Jan 2022 data. Localities now offer birth incentives, ranging from extended maternity leave to housing benefits. Stigmatising workers’ marital or family status will be made illegal in the Women’s Rights and Interests Law. A 5-year plan for medical equipment and another for the pharma industry have appeared, bolstering healthcare provision and supply chain security.
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2022: no drama please
After a torrid 2021 of regulatory tightening threatening domestic growth and global finance markets, the pursuit of stability marked the regular December policy planning conclaves. Yet a roster of tensions and setbacks may see more drama than stability in 2022. Weak demand, supply-chain gaps and pessimistic expectations are dragging growth, admitted the CEWC (Central Economic Work Conference), the annual end of year assembly that sets the economic tone for the coming year. The Economic Blue Book, a yearly think tank review, listed further underlying issues: slow recovery of consumer spending, lack of jobs for the young and middle-aged and high upstream prices. It forecasts official GDP growth for 2022 falling to 5.3 percent—lower than the 8.1 percent predicted for 2021, and the pre-COVID 6 percent. And the 20th NPC (National Party Congress), at which Xi will extend his tenure, looms in Q4. full post open access →
january policy movers
policy professionals in and out of the establishment
Li Chunding 李春顶 | China Agricultural University School of Economics and Management Department of Economics and Trade dean
Joining RCEP is a great achievement, yet the PRC should not rest on its laurels but keep up economic and trade cooperation, asserts Li. CPTPP and DEPA (Digital Economy Partnership Agreement) are the go-to agreements; other chances should not be missed. BRI offers chances to build ties, not least with Latin America and Africa. Even the US supply-chain crisis may prove an opportunity, he hopes: worries about shortages and inflation may dampen Americans’ appetite for WTO litigation. Non-tariff trade barriers must be reduced at the borders (not least FTZs). Cross-border e-commerce pilot zones and digital protocols will soon be needed.
Takinga PhD in 2009, Li proceeded to a postdoc in Canada. Most of the 2010s were spent at the Institute of World Economics and Politics of the Chinese Academy of Social Sciences. He joined the China Agricultural University School of Economics and Management in 2018.
Chen Deming 陈德铭 | former Minister of Commerce (2007-13)
Changes in global supply and value chains due to COVID-19 take two main forms: spatial distribution of industries and global division of labour.
to reduce costs and security concerns, industries will concentrate in regions, above all those with higher trade standards, e.g. East Asia, North America and Europe
diversifying and localising, the global division of labour is subject to trade protectionism and corporate suppliers’ diversification strategies. Non-economic factors (rising populism, climate change, traditions and local culture, and geopolitical rivalry) bring ever more uncertainty to global trade
Former Minister of MofCOM Chen holds a doctorate in Management from Nanjing University. As President of the Association for Relations Across the Taiwan Straits, he helped negotiate the ECFA (Economic Cooperation Framework Agreement) between the PRC and Taiwan.
Yi Jiming 易继明 | Peking University International IP Research Centre director
IP in the PRC, argues Yi, suffers from ‘quantity over quality’. Increasingly a core element of global competition, IP is a focus of disputes. Beijing needs to reduce distrust of its global IP reputation. While domestic institutions are being built, much is lacking
defensive tactics against global rivals
coordination of offshore enforcement
support for firms in overseas rights protection
An overseas rights protection fund should, suggests Yi, be set up by financial agencies, providing firms with support.
Taking his doctorate in law at Peking University in 2002 Yi taught in its Law School. Since 2011 he has specialised in IP law, pinpointing defects in the PRC’s decentralised model using a concept of ‘IP institutions’. Many of the resulting reform proposals have been adopted. In 2017, a report he wrote on US IP policy won a first prize for IP strategy information in 2017.
policy ticker highlights
gems from our feed of policy releases and domestic debate
trade policy
promoting synergy between domestic and foreign trade
State Council | 20 January
context: Given an increasingly hostile foreign trade environment and diminishing export momentum, Beijing is looking inward for new domestic market potential to ease pressure for small exporters, while pushing its SOE champions to establish a stronger international footing.
agriculture
ag trade opportunities brought by RCEP
China Trade News, Sina Finance | 3 January
context: Catering to the potential for deeper regional economic engagement, Beijing-led RCEP (Regional Comprehensive Economic Partnership) is depicted as a mutually beneficial channel for ag trade and investment. Meanwhile, exporters to the PRC are faced with tough new measures controlling food imports. Also effective from 1 Jan, these may bring chaos to the flow of trade before RCEP’s benefits are felt.
macroeconomy
benchmark lending rates fall
Society | 20 January
context: Critical to this move was the fall of the five-year rate. The five-year rate is the benchmark for mortgage rates, meaning a decline should stoke the housing market. This is a stark departure of the policy goals in the first half of 2021 which saw local governments roll out purchase restrictions and other policies to dampen demand.
energy and environment
Indonesian coal export ban not a worry, unless extended
China Coal Transportation and Distribution Association | 4 January
context: After the 2021 power crisis, largely brought on by coal shortages and market inefficiencies, Beijing is committed to ensuring smooth coal supply at all costs – it may step in to cool prices if they rise too high. With officials holding up coal as the guarantor of energy security, this instance lays bare a fundamental flaw in this logic: foreign factors can compromise energy security, which would not be the case in a renewables-dominated grid.
science and innovation
laying down the roles of the platform economy and big tech in Xi’s new era
National Development and Reform Commission, People's Daily Online | 20 January
context: Beijing has since late 2020 been domesticating China’s big tech companies, steering capital away from unruly expansion to national priorities. This new nine-ministry document is the highest level update on Beijing’s attitude to the platform economy since April 2019. The document surprised observers by clarifying cross-border data transfer rules, among other things. Separately, the communique issued by the Central Commission for Discipline Inspection’s plenum suggests that investigations of corruption are also moving in on the internet giants.
governance
new disciplinary regulations ensure CCP control in rolling out policy
State Council | 4 January
context: These new regulations reflect how the Party’s disciplinary agencies have transferred their function from being purely focused on fighting corruption to acting as guardians of the Central Committee’s will. As Wang Qishan 王岐山 state vice-chairman proposed, CCDI (Central Commission for Discipline Inspection) will be used to mobilise the Party and government apparatus and ensure cadres implement the Party’s will, as in COVID-19 prevention. In addition, all disciplinary agencies will be asked to emphasise law-based rule and long-term system building.
society
call for inclusion of women’s rights in public interest litigation
Sina Finance | 16 January
context: The amendment to ‘Women’s Rights and Interests Protection Law’ (under consultation) aims to ban female workplace discrimination based on marriage or family status in recruitment or promotion. Current public interest litigation legislation does not include women’s rights. Following high-profile cases, the Supreme People’s Procuratorate and All-China Women’s Federation jointly called for women’s rights inclusion in a 2020 notice.
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