May: dreaming big but acting practical
A new strategic blueprint 'Made in China 2025' emerged this month that aims to upgrade China's place in the value-added chain, without ceding its status as the world's workshop. In the last month technocrats have narrowed their vision to what is achievable in 2015. The PBoC stepped in to ensure the September due date for swapping C¥1 trillion provincial debt will be achieved. County and urban hospitals have issued solid numerical targets for reducing dependency on drug sales.
featured analysis
reform frustration sees carrots trump sticks
Bold reformers are to be promoted, rules the latest meeting of the elite Decision-Making Group on Deepening Reform, chaired by Xi Jinping 习近平. Devolution and removing approvals has yet to yield substantial results. Positive inducements—carrots rather than sticks—are now in order. full post client access →
policy movers
can't put a name to the face? go to page footer
1. A veteran of the submarine fleet, I was considered a top favourite until in 2012 I was pipped at the post by Wu Shengli.
As expert strategist, I chair the China Institute for International Strategic Studies; which is no doubt why I was delegated to attend the 2015 Shangri-la Asian Security Summit in Singapore. My remarks there on the South China Sea were considered balanced—both defending Chinese territorial claims while assuring others that China will not change its policy—I am nonetheless labelled a hawk, as evidenced by my claims that China faces a threat of invasion, which made headlines in March.
2. I was Party secretary, first in Shandong and then in Tianjin, before ascending to the Politburo Standing Committee.
Lacking provincial credentials, I nonetheless have ties to former power broker Jiang Zemin. Not noted for my charisma in public, I am nonetheless a major player responsible for implementing the Xi-Li agenda, leading task forces on climate change, food safety, devolution and Belt and Road.
3. I am a rarity in Chinese politics—female, born in Inner Mongolia, and one of few high ranking officials to shun hair dye.
After a successful diplomatic career, my attention has turned domestic; at the 2015 NPC meeting I held my ground as spokesperson, insisting tax powers be transferred back to the NPC. I faithfully follow the Party line, but don’t write me off as a mere mouthpiece; my quick-wit and charismatic TV presence ensure my place as a magnet for domestic and international media.
policy updates
social policy
hospital service fee hike mooted to replace drug sales dependency
Hospital funding is to be less dependent on sales of over-prescribed and expensive drugs. Replacement revenue is to come from higher service fees and central fiscal transfers. Savings are to come from efficient accounting and operations. full post client access →
governance and law
reconsolidating while making nice
Xi Jinping’s 习近平 administration moved to reconsolidate this week. Assembled in Beijing, personnel from the State Security Ministry and the United Front agency (the Party’s interface with non-communist elites at home and abroad) were called upon to turn on the charm. Insiders read this as reflecting Xi’s hopes of refreshing the Party’s legitimacy by posing consultative as an acceptable alternative to electoral democracy. full post client access →
holding tigers to account
Whispers on the Chinese internet, echoing offshore speculation, suggest that while the administration can catch tigers, they are proving difficult to hold to account. Former Party disciplinarian Zhou Yongkang 周永康 has, it is said, recanted his confession. Delays to his trial throw into question moves on lesser tigers: retired military chief Guo Boxiong 郭伯雄, and former king-maker Zeng Qinghong 曾庆红. full post client access →
energy and environment
appeasing public with results-based water action plan
16 apr 2015: State Council released the ‘Action plan on water pollution prevention and control’. This signifies further recognition on the part of the state that environmental issues must be addressed to maintain political legitimacy. The Water Action Plan, complementing the Air Action Plan, promises a comprehensive response to all stages of the water pollution cycle. full post client access →
economy
domestic rebalancing and Russian roulette
Finance Minister Lou Jiwei 楼继伟 remains the man of the hour as his fifty-fifty ‘middle-income trap’ fears—confessed during a Tsinghua University speech—continue to send commentators into a flurry and stir uncertainty in markets. Lou’s sobering appraisal deflates this hubris and indicates ongoing reforms are petty, compared to the structural changes he advocates. Rebalancing the economy is now the indisputable top priority, yet all parties remain determined to work it to their advantage. full post client access →
re-aligning policy banks with national priorities
Environment policy continues to generate tension domestically, with the Ministry of Environmental Protection MEP caught in a never-ending game of snakes and ladders. It slid down a snake in April with the massive explosion of a paraxylene plant in Zhangzhou, Fujian, before zipping up a ladder by seemingly successfully blocking a major dam project on the Yangtze near Chongqing. full post client access →
policy ticker
early pilots show success in eliminating drug markups
Xinhua | 28 may
Beijing healthcare reform pilots that began in 2012 have had some success in eliminating drug markups, with drug revenues dropping from 70 to 58.8 percent of total income.
PPP projects in search of partners: NDRC releases list
NDRC | 26 may
NDRC launched a PPP project database, linking to 1,043 projects totalling nearly C¥2 trillion in 28 provinces, cities and municipalities, as well as the Xinjiang Production and Construction Corps. Transport infrastructure, ‘ecological civilisation’ and public services constitute the majority of projects.
SOEs global oil investments: honey or poison?
Chinese Economic Weekly | 26 may
Reacting to pressure from the international oil price slump CNPC, Sinopec and CNOOC have, between 2009 and 2013, together spent US$110 billion on overseas acquisitions. Some overseas projects are profitable.
‘Tiger Hunting’ no longer an anti-corruption priority: People’s Daily
People’s Daily | 25 may
Striking an optimistic tone in a speech at Peking University, economist Yao Yang 姚洋 joined fellow reform advocates in painting the high-tech industry as a strategic opportunity China can seize right now to upgrade its economy.
Wang Zhongmin 王忠民: pension investment cannot blindly follow international experience
Caijing | 22 may
Pension funding debates have turned to the basic pension investment plan due out this year after Shandong province allocated assets from 30 percent of three provincial SOEs to its pension fund this week, in line with rumoured consensus.
selected texts of the month (clients only)
social policy
full coverage critical insurance; system is designed to guarantee success
mixed-ownership not popular in public hospital reform pilots?
geopolitics
China should speed up adjustment of its South China Sea policy
China and the US need to build a new economic cooperation framework
energy and environment
governance
economy
SASAC and CDB team up to promote PPP given a success rate of less than 20 percent
capital injection for policy banks a bigger stimulus than the RRR cut
disagreement over housing policy bank; too many interests involved experts claim
lexicon
healthcare system on a drip以药养医 yǐyàoyǎngyī
Lacking government funding and unable to raise treatment fees, hospitals and doctors rely on drug sale commissions for their main source of funding. With drug markups capped at 15 percent, hospitals prefer to purchase expensive drugs. Legions of underpaid doctors can only increase their incomes by prescribing expensive medicines, exacerbating this rent seeking behaviour. Patients are hurt in the hip-pocket and health insurance funds are drained.
in the media
Lifting its game: a short and glorious history of soccer in China
ABC News | 24 may
'[Xi Jinping] has done a fairly good job, I think, of demonstrating himself to be a fan. And that's not a new thing. But, to be honest, I see it much more as being politically motivated. As we all know, China is facing a slowing economy. You know, unending tensions with its regional neighbours. And football: if they can get football to get the public onside, that is sort of a low-risk way for them to consolidate public support.'
Did you catch our 'hip flicks'? a fabulous slide show of modern Chinese cinema with links to the movies.
quiz answers:
1. Sun Jianguo 孙建国 PLA Admiral and Deputy Chief of Staff
2. Zhang Gaoli 张高丽 Deputy Prime Minister and Politburo Standing Committee member
3. Fu Ying 傅莹 vice foreign minister and NPC spokesperson
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