November review: COVID resurges
Welcome to the monthly review. Now with extended coverage on substack, we will publish only the wrap-up at the end of each month. The fuzzy photo above was taken by a friend of China Policy on Friday as barricades went up around their neighbourhood.
Good to have you with us… happy reading
COVID has taken several turns for the worse in the PRC. Amid a record surge in cases, the National Health Commission surprised everyone on 11 November by lifting some COVID curbs in moves described as ‘sidling out’ of the zero policy. Localities now struggle to stamp out local outbreaks. Flash responses to excessive measures stay viral on social media.
Export growth went negative, down by 0.3 percent in October, as global demand continues to weaken. Coupled with a high base effect from 2021, the outlook is discouraging. Import growth dropped by 0.7 percent as well, with domestic demand showing no sign of recovery. Sliding commodity prices pulled down the total import value. The global shipping market keeps winding down as container demand plummets. State shipping giant COSCO announced major investment plans to develop integrated and green supply chains to stay ahead of industrial transformation.
If import/export decline weren’t pain enough, retail sales added to adverse signs in October. More robust support measures were rolled out to shore up developers’ finances. Banks were urged to pump funds and defer debts. Some developers were authorised to use up to 30 percent of their pre-sale escrow accounts for ‘non-construction purposes’, i.e. repaying debts.
These steps alone can hardly solve the current crisis, yet they show that Beijing is now in earnest about a housing sector soft landing. More easing is likely, boding ill for macro debt prospects.
Amending the Legislative Law, dubbed the ‘law of laws’, is underway. Paving the way for Xi's third term, the draft stipulates that legislation will no longer exclusively focus on economic development; but areas like environmental protection and political behaviour will also be relevant. Meanwhile, a draft amendment to the Administrative Reconsideration Law has been published; it delegates administrative review to legislatures at all levels rather than central state agencies.
A newly-amended Animal Husbandry Law aims to modernise the industry via added investment in animal breeding, epidemic control and manure recycling. New pastoral farming and slaughtering sections fill regulatory gaps in the supply chain. Brazilian corn and soymeal gained approval from the General Administration of Customs, signalling an expanded Brazilian presence in the PRC grain market.
With PRC youth shunning manufacturing jobs, Beijing unveiled a training initiative in early November, boosting its highly-skilled workforce and hopefully plugging skills gaps critical to its tech self-reliance aspirations.
Beijing deems the next 2-5 years a window of opportunity for virtual reality (VR)-related tech. A 2022-26 action plan for VR and industry application integration development has emerged from the Ministry of Industry and Information Technology and four others. A first national-level directive for ‘metaverse’ tech, it lists priorities for the years up to 2026. Making no direct mention of it, core pillars of the metaverse are foreseen in the plan: applications deploying VR, augmented reality (AR) and mixed reality (MR) tech.
Externally, Beijing successfully lobbied at COP27 for a new Loss and Damage Fund for developing countries. While unlikely to be a recipient, the PRC will be exempted from contributing. Meanwhile, new draft carbon intensity benchmarks for the national carbon market have tightened firms’ allowance allocations in the latest compliance cycle by up to 11 percent.