November: trumpeting multilateralism
The Trump shock brought the Party and many of its critics into agreement: Pax Americana is finished, and the 'America in decline' narrative suddenly seems vindicated. Global Times said the election proves Churchill wrong about democracy being the worst system of government, 'except for all the other forms'. Some see the dawn of a 'post-hegemonic' era, with China shaping a new multilateral order.
Observers spent the month considering the consequences of Xi Jinping's 习近平 new 'core' status. Escalating numbers of officials detained for corruption makes clear whose Party it now is. Three provinces are piloting new anti-corruption ‘Supervision Commissions’—independent of provincial governments, they are likely to cover misconduct by all government staff. State media hints this is not just about fighting graft, but may signal large-scale Party-state restructuring to come.
A rare economy-focused Q3 politburo meeting put restraining asset bubbles top of the Q4 agenda. The insurance regulator moved to restrict insurance firms from investing in real estate products, and the two stock exchanges prohibited using funds raised through real estate bonds to buy land. Contingency measures for local government debt require governments to cut budgets, sell assets and reduce investments if they hit certain risk thresholds.
After passing the Cybersecurity Law, the Cyberspace Administration is drafting related guidelines on accessing online data, trying to ease concerns that the new law opens the door for police abuse of power. The government extended the transitional period for cross-border e-commerce regulations, announced in May, to end 2017. The 5-year plan for the steel industry forbids any capacity additions and calls for all related investments to cease. Northeast revitalisation will focus on SOE mixed-ownership reform and state-owned asset management firm pilots to bring new growth drivers to the struggling area.
In ‘Healthy China 2030’, the state aims to increase life expectancy to 79 from 2015's 76.34, and lower infant mortality by more than a third. 'Opinions on deepening pharmaceutical and healthcare reform’ bring together several reforms piloted over the previous several years, aiming to push them out nationally, and calling for better integration of the three seperate reform areas of healthcare, pharmaceutical and health insurance.
‘Opinions on separating rural farmland ownership, contracting rights and management rights’ seek to clarify rules between owners and new farming entities, protecting peasants’ interests while encouraging agricultural upscaling. But the question of ‘who will farm’ remains controversial. Attention is now turning to the annual Rural Affairs Conference in December to solve conflicting issues.
featured analysis
compliments of our cp.signals service
settling for more: urban registration push
The state launched its ’Settle in the city plan’ to give 100 million migrants urban hukou by 2020. full post open access →
october policy movers
policy professionals in and out of the establishment
Xiao Jie 肖捷 | Finance Minister
A 29-year veteran of finance and tax agencies, Xiao was the youngest ever State Administration of Taxation (SAT) chief and Ministry of Finance (MoF) vice minister. At SAT, he set up a taxpayer and legal service department to handle complaints. Xiao has maintained a low profile, but media reports suggest he is a hard worker and shares his more outspoken predecessor’s vision of fiscal system overhaul. In 2009, he dismissed western media claims that China’s overall tax burden is too high, arguing there is room for expansion. Xiao inherits a higher profile MoF, with major tax reforms and central-local fiscal restructuring in the pipeline.
Liu Yuanju 刘远举 | Shanghai Institute of Finance and Law researcher
Liu is frequently critical of policies promoting entrenched interest groups over market forces. Jobs arising from the ‘Internet+’ plan, such as those in ride-hailing and food delivery services, rely on labour supplied from across the country, Liu points out, and are well positioned to absorb workers laid off through downsizing in steel and coal. Provincial policies, however, are often protectionist, he says, making it difficult for displaced workers from other areas to find local employment. Recent local-level regulations strictly limiting who can work in ride-hailing services are another instance of ‘soft resistance’, says Liu, undermining central goals. If the state is unable to deliver on urban passenger transport, it may lose credibility on pushing through more significant reforms, he argues.
Ma Huaide 马怀德 | China University of Political Science and Law
The first administrative law LLD in the reform era, and now China Administrative Law Society chair, Ma advises government on corruption and administrative reforms. Advocating restructuring the anti-corruption system, he targets inefficiency and evasion of supervision. In July 2016, Ma proposed expanding the power of the supervision authorities, providing them with a separate line of authority, allowing them to oversee public schools and hospitals, and making them independent of individual agencies. The ‘Supervision Commission’ pilots recently launched in Beijing, Shanxi and Zhejiang embody his ideas. Their impact, says Ma, will depend on how well they integrate existing anti-graft resources and personnel.
policy ticker highlights
gems from our feed of policy releases and domestic debate
finance
2016 central economic work conference forecast
Ifeng Finance | 14 november
The 2016 central economic work conference is expected to clarify policies in six areas, say 尹晋男 Yin Jinnan and 冯建林 Feng Jianlin from Beijing-based think tank FOST
growth: tolerance for continued economic slowdown will dissipate as officials expect the economy to enter a period of stable mid- to high-level growth in 2017
supply-side reform: review progress of 2016 supply-side reform and give direction for continue efforts in 2017. Specifically, FOST predicts for
reducing excess capacity: target for steel capacity reduction will be higher than 2016; more marketised methods like mergers and acquisitions will be promoted
reducing inventory: focus will turn to tier-3 and -4 cities and counties; methods will include shantytown renovation resettlement, and directing peasants and university students to these areas
deleveraging: policy direction will follow State Council’s ‘Opinions on actively reducing enterprise leverage ratios’, released in early October 2016, with a focus on eliminating zombie enterprises
reducing costs: possibly reduce VAT rate for the manufacturing sector and costs for the logistics sector, in accordance with Ministry of Transport’s ’Opinions on carrying out supply-side reform and reducing costs for the logistics sector’, issued August 2016
innovation: addressed in two parts, boosting entrepreneurship and supporting new economic drivers; Yin and Feng predict policies will
support entrepreneurship by reducing tax burdens, strengthening IP protection and devolution
support new economic drivers by focusing on strategic emerging industries, IT, internet +, intelligent manufacturing and e-commerce
reform progress: citing that Xi Jinping 习近平 is unsatisfied with slow progress in 2016, the conference will likely urge hukou reform, SOE reform, fiscal reform, financial regulatory reform, rural land reform and price reform
inhibiting asset bubbles: the work conference should clarify which cities have asset bubbles and policy will likely seek to stabilise, rather than lower, housing prices; short-term measures are likely to include increasing land supply for commercial housing, and increasing intensity of utilising land in stock; long-term measures will look to optimise urban industrial distribution and develop satellite cities; restriction on housing loans and issuance of real estate bonds will continue
macro policies: policies are likely to push for more demand for investment, consumption and export; specifically, investment towards emerging industries and public services, consumption as it relates to better services and quality, and upgrading processing trade
geopolitics
into the ‘post-hegemonic’ era
Global Times | 17 november
The Trump victory on 8 November 2016 took so many people by surprise because they were unaware, argues Cheng Yawen 程亚文 Shanghai Jiao Tong University adjunct researcher, that non-hegemony is historically the norm while hegemony is the exception. Trump represents a return to the norm: his interest is a traditional one in making the US a major power, says Cheng, whereas Hillary Clinton sought to keep it a hegemon.
The norm, Cheng elaborates, has the following three characteristics
domestically driven political choices
the preference of autonomy over ‘collective interests’
the preference for regionalisation rather than internationalisation
A return to the norm did not start with Trump, notes Cheng, but with the financial crisis in 2008, marked by
loss of absolute dominance in the global political economy of Western powers, including Japan, USA and Europe
increasing doubt regarding Western values and systems, including democracy, multi-party and welfare systems
With the US retreating from its hegemonic role, argues Cheng, the world has to adjust to the new reality, which will include
the loss of a global provider of public goods, increasing uncertainty in an increasingly challenging global political environment
the fall of the old international system, with the US as a symbol of hope for humanity
the uncertainty associated with building new replacement institutions, requiring major mindset adjustments to accord with the pace of material change
trade and industry
cross-border e-commerce transitional regulations extended
Ministry of Commerce | 16 november
The one-year transitional period for certain cross-border e-commerce regulations announced in May 2016 will be extended to end 2017, announced Ministry of Commerce on 15 November 2016. The extension highlights the government’s cautious approach, allowing itself more time to optimise the cross-border model, says Zeng Fuhu 曾伏虎 HNA USOLV COO. The 8 April 2016 regulatory changes forced many low-threshold enterprises out of the market and allowed large enterprises to integrate the value chain more quickly, says Economic Information Daily, noting a continual influx of new capital and participants bullish about the market’s potential.
Lower thresholds and fragmentation are common and rational as an era of ‘inclusive trade’ takes hold, says Wang Jian 王健 APEC e-commerce business alliance expert. The extension period implies regulators may be inclined to implement simplified procedures for bonded imports, adds Wang. Deepening global cooperation, argues Wang, will
ease access to overseas warehouses for domestic enterprises
lower costs by piloting customs models for bonded goods
reduce overall cross-border e-commerce costs
grow the industry’s scale
Future development will be based on division of labour and specialisation as the supply chain lengthens, adds Zeng, noting e-commerce enterprises need only manage platforms’ operations and traffic flows, leaving supply, warehousing and logistics to third parties. Supervision needs top-level design, say industry insiders, stressing reform was originally intended to regulate the industry and eliminate strategies promoting disorderly and unjust competition, harmful to the national interest. ‘Supervised, orderly innovation’ will become the industry’s new normal, they add, noting consumers will benefit as competing enterprises and supply chains battle to come out on top.
society
multi-level care reform meets local complications
National Business Daily | 15 november
Public hospitals have run into a variety of difficulties in their attempts to implement a multi-level care system, says Economic Information Daily.
Many lower-level public hospitals have formed partnerships in metropolises with the 3AAA hospitals—the highest level in the state classification system—to have their doctors serve as experts in residence. While the approach has helped generate much-needed revenue for grassroots hospitals, says the paper, it diverts large numbers of patients away from high-level public hospitals, crippling their income stream. The Beijing municipal government provided C¥6.4 bn in subsidies for its 22 3AAA hospitals in 2015, according to the paper, which accounts for only 16 percent of their total income. The rest is acquired by treating vast numbers of patients, says the paper. Moreover, sending 3AAA medical experts to grassroots hospitals to treat difficult diseases runs against multilevel care’s goal to classify hospital functions based on their administrative levels, it says.
After having visited grassroots hospitals, many patients still have to stop by high-level hospitals to undergo medical examinations or obtain pharmaceuticals, but their healthcare provision and medical records are not usually transferrable across localities, the paper points out. The recent ‘three medicals’ reform—the coordination of medical, pharmaceutical, and insurance reforms—is designed to address this problem, says the paper.
governance
CAC to set rules on extracting personal data online
Xinhua | 11 november
Cyber Administration of China (CAC) officials have told state media they have begun to implement the newly passed Cybersecurity Law. Despite this, CAC is working to develop develop specific standards to instruct state access to ‘personal online information’.
While suggesting real-name registration and data extraction are necessary allowances, CAC is also trying to reassure foreign companies that the new powers of review will not compromise products and services, and intellectual property is not in danger.
agriculture
CPC Rural Affairs Conference to focus on land rights reform
Xinhua | 21 november
The annual CPC Rural Affairs Conference will be held in December 2016, reports Xinhua, expecting the meeting to outline next year’s agricultural and rural work, and draft the 2017 ‘Central doc no 1’, focusing on rural land rights reform.
Priorities will include summarising and evaluating the rural property rights system, land system and price formation mechanism pilots ending end 2017, says Li Guoxiang 李国祥 CASS Institute of Rural Development, including
rural land contract rights registration and certification work (22 pilots)
rural land management rights mortgage pilots (232 counties) and rural housing mortgage pilots (59 counties), covering about 9.7 percent of counties
‘three land reforms’: pilots to marketise land requisition, collectively managed construction land, and rural homestead land (33 pilots)
Successful pilots will be extended and included in legislation, while others need to be improved, the article says, including
mortgage guarantee system pilots, suffering from
weak coverage of land rights certification
incomplete mortgage guarantee mechanisms
weak evaluation system
‘three land reform’ pilots, suffering from
each operating separately
slow progress
doubts on how land revenue should be distributed, and whether collective land can be mortgaged and financed like state-owned land
lexicon
short, graphic explanations of trending technical terms and jargon
moderate-scale agribusinesses 适度规模新型农业经营主体 shìdù guīmó xīnxíng nóngyè jīngyíng zhǔtǐ
Literally ‘new-style agricultural operating entities’, they include large professional households, family farms, cooperatives and leading agricultural enterprises. Since the term appeared in 2012, agricultural policies, subsidy adjustments, and land trading reforms have systematically and often explicitly favoured these entities. Officials refer to ‘moderate-scale’ agribusinesses to distinguish them from small-scale farming operations, deemed inefficient, and large conglomerates, deemed exploitative.
The cartoon shows government policy (the red folder) driving its favoured new-style ag entities (the four small cogs) which drive agriculture (the large cog).
china policy in the media
mentions of our work elsewhere
China Embraces Corporate Farming
KTIC | 2 november
“This is going to be a game changer with wide implications both for the economy and the political system,” Erlend Ek, agriculture research manager for consulting firm, China Policy, told VOA. “New opportunities are opening up because Chinese authorities are seeking partnerships with foreign companies in the field of agriculture technology.”
China Policy is a Beijing-based research and advisory company. Supporting our clients at multiple levels, from in-house research teams to CEOs and boards, we help them anticipate, understand and respond to China’s changing domestic policy and geopolitical environment. Contact us for more information on our services.