July: correcting ambitions
First half GDP figures aside, disappointing data across manufacturing, trade, and, of course, equities performance spurred a search for new growth models and drivers. Trade and industrial policy are due for reconfiguration, while central agencies embrace once-threatening Internet finance as key to unlocking rural consumption and bankroll marginalised entrepreneurs. As the closed-door Party conclave at Beidaihe approached, the stock market slump took top leadership into damage control mode. The A-shares market should easily have handled the correction; why make such a meal of what really called for a display of calm? Use of the Public Security Bureau to crack down on market manipulation steered blame away from the regulators, framing the issue as political, not economic.
Other crackdowns—on rights-defence lawyers—detracted from hard-won gains elsewhere in judicial reform. In the countryside, subsidy policies began the inevitable decoupling of price support in favour of market-based approaches. Foreign relations saw a string of successes running on from AIIB, culminating in a successful resolution of the Iran nuclear issue, in which China's mediating role won acclaim.
featured analysis
the changing face of the Chinese consumer
The consumer market, once symbolised by folk who could afford Lamborghinis, polo horses and bling, quickly broadened to take in upwardly mobile professional classes. Migrant and rural groups are now to gain access to consumer credit, as the state wakes up to their growth-model transforming potential. full post open access →
policy movers
1. Chinese social media is demanding my dismissal for causing, or at least failing to prevent, the stock market tumble in late June through July.
Indeed, under my direction, CSRC's attempts to curb margin finance focused more on visible, medium leverage umbrella trusts, rather than higher leverage lenders on the periphery of the system. Nonetheless, my term has been productive, with a switch from approval-based to registration-based IPO on the table in the upcoming Securities Law revision (due autumn 2015).
2. A protégé of Hu Jintao’s 胡锦涛, I have a solid legal background and once held the post of Hunan Party Secretary.
Since taking up office at the Supreme People’s Court, I have pushed for a more professional, autonomous, and transparent judiciary—a move that has received general applause though divided the legal profession over ways and means. Specifically, my move to cap the number of judge positions in the courts has caused panic among judges and clerks and threatens a mass talent exodus. My prized judicial reform agenda, faced with backlash from the rank-and-file, is now at a crossroads and my career is at stake.
3. An experienced diplomat and former Ambassador to Japan, I recently attended the ASEAN Regional Forum in KL, where my statement on island building in the South China Sea, ‘China has stopped.
You want to see who is building? Take a plane and go see who is still building’, was dismissed as a definitional word game. For my part, I announced China’s rejection of proposals that ‘seemed just, but really expressed double standards’. At a joint press conference, Thailand Foreign Minister General Tanasak Patimapragorn declared, ‘If I were a woman I will fall in love with His Excellency’; I was uncertain how to respond.
governance and law
trials and tribulations
Widely reported recent action against lawyers and other institutions has had limited direct impact on international firms, agencies and individuals. Difficult to ignore, though, is the high-level policy gridlock it signals. Meanwhile, the SPC under reformist Zhou Qiang 周强 is still set to clear up dysfunctional courts and raise the morale of the judiciary. full post client access →
anti-monopoly: beware foreign IPR holders
A June NDRC announcement on drafting new anti-monopoly IPR guidelines, both industry-wide and -specific, signals a tougher stance on IPR holders. Follows April SAIC regulations on IPR violations. full post client access →
mid july positions:
Security Law extends net: new law to sift security threats with a finer mesh
end july positions:
unwinding SOE corporate governance: strengthening Party role foreshadows return to industry consolidation among SOEs; reduced role for mixed ownership
economy
who took a profit last week?
Plunging stock prices pose a political as well as economic test. The search for a scapegoat pervades conventional and social media, nurturing a host of conspiracy theories that foreign fund managers are behind malicious short selling, and that CSRC deliberately poured cold water on the bull market. Wrapping themselves in the flag, some economists signed an open letter calling retribution down on ‘selfish’ stock dumping by big shareholders. full post client access →
mid july positions:
markets: to save or not to save: reformists call to end state intervention, pragmatists ask ‘at what risk’?
end july positions:
more muscle for ‘leftover funds’ cleanup: 2015 ‘year of fiscal reform': localities now instructed to return idle funds
energy and environment
Paris climate summit: in China’s national interest
30 jun 2015. China officially submitted its Intended Nationally Determined Contributions (INDCs) to the UN for December’s Paris Climate Summit. China’s 2030 targets are to reach, or pass, per annum peak green-house gas emissions; reduce emissions per unit of GDP by 60-65 percent against 2005 levels; increase alternative energy share to around 20 percent; and increase forest coverage by 45 million hectares against 2005 levels. full post client access →
mid july positions:
Xi: the ecological redline is inviolable: top Party meeting reiterates priority of ecological civilisation
end july positions:
Air Pollution Abatement Law amendment disappoints: regionally-coordinated monitoring and evaluation fail to show up
geopolitics
foreign policy gear change
Xi Jinping promises high-speed trains will be hot items on the Belt and Road, his signature foreign policy and solution to domestic slowdown. A flurry of Sino-Vietnamese fence-mending visits foreshadow Nguyễn Phú Trọng’s visit to Washington next month, while China unhelpfully redeploys its oil-rig in disputed waters. full post client access →
China-style PPP to support Belt and Road
Private investment champions and the MOF expect China’s innovative use of PPP will support cross-regional value creation along the Belt and Road. But as China’s major-player status in the international arena becomes taken for granted, foreign policy specialists in China encourage the state to use diplomatic language the world can understand. full post client access →
waving on down the Belt and Road
Despite continued rumblings in around the stock market, the Xi-Li administration’s outward push has scarcely missed a beat. The AIIB, the BRICS, and SCO banks made progress, and state visits to the EU kept up. What the market couldn’t supply in the way of competitive energy, it seemed, the central bureaucracy could. Foreign policy language was ‘unintelligible’, some felt, but there was no lack of supply. full post client access →
social policy
migrant workers: next-gen entrepreneurs?
21 jun: State Council releases policy encouraging migrant workers, graduates and veterans to start small and micro businesses back in their home towns. A forthcoming three-year action plan will detail the measures. full post client access →
mid july positions:
pension investment heads for the market: current chaos not withstanding
end july positions:
Beijing cluster plans take shape: coordinated development fund announced; cluster bank, structural adjustment fund expected to follow
policy ticker highlights
Beijing goes poly-centric
caixin | 22 july
Moving Beijing's administration to Tongzhou, comments Yang Ming 杨明 Beijing Municipal City Planning and Design Institute, cannot ease pressures on the city centre without additional centres elsewhere around Beijing.
Fengrui takedown: collateral damage
Tencent | 22 july
The round-up of Fengrui lawyers is no isolated incident, argues Liang Jianbing 梁剑兵 Liaoning Normal University, and should be seen in the wider context of Criminal Law amendments, legal community divisions, and an incoherent judicial reform agenda.
Belt and Road to promote six economic corridors
The Paper | 22 july
On 21 July 2015, Vice Premier Zhang Gaoli 张高丽 addressed a meeting of the Leading Group for Building the Belt and Road, ensuring a good start for it this year—the task set by Xi Jinping—the group would strive to promote six international economic corridors: the new Eurasian Continental Bridge.
trade policy: vague aspirations, clear needs
State Council | 15 july
A State Council trade policy will expand trade to benefit other economic goals by increasing imports and exports.
Air Pollution Abatement Law amendment premature
State Council | 7 july
NPC's third review of the Air Pollution Abatement Law amendment should be postponed, argues Chang Jiwen 常纪文 State Council DRC. A great many critical issues are yet to be addressed, agrees Wang Jin 汪劲 Peking University. [/highlight]
selected texts of the month (clients only)
geopolitics
governance and law
energy and environment
social policy
funding woes remain without promised fund for migrant entrepreneurs
the entrepreneurial dream: encourage only those migrants who can
returnee migrant entrepreneurs urgently need equally able officials
lexicon
stability maintenance 维稳 wéiwěn
Core policy since the mid 2000s aiming to nip challenges to party authority in the bud. A carrot and stick approach applying buy-offs as well as extrajudicial coercion, its price-tag has exceeded the national defence budget. In the cartoon, ‘detention’ is slammed on would be lodgers of ‘petitions’ (formal complaints lodged by citizens). Associated with fallen public security chief Zhou Yongkang 周永康, the policy remains unmodified.
national condition 国情 guóqíng
Used to legitimise policy and deflect criticism on grounds of unique features: demography, geography, history and culture. In the cartoon, the child’s bowl is labelled nourishing lunches. Dropping a few cents into it, the rich and powerful (official) donor explains: ‘in keeping with the national condition’. Xi Jinping’s view is that SOE reform must conform to the ‘national condition': SOEs are to continue to be centrally controlled through SASAC.
unspoken rules 潜规则 qián guīzé
In a book of the same title by the historical writer Wu Si 吴思, these were rules of bureaucratic power and payback, found to have persisted from imperial times down to the present. Used loosely for shady dealings, the core meaning is the operation of power, collusion and score-keeping behind a veil of public interest.
quiz answers: 1. Xiao Gang 肖刚 CSRC Chairman 2. Zhou Qiang 周强 Supreme People's Court President 3. Wang Yi 王毅 Foreign Minister of the PRC
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