October: 5th Plenum responds to COVID
The Party's 5th Plenum wrapped up 29 October, setting the course for the 14th 5-year plan. Responding to both COVID-19 and US pressures, it is more urgent than ever that new growth be generated from within, powered, it is planned, by an ultra-large domestic market. Security and national interest dominate, as innovation for high-quality development converges with self-sufficiency. Engagement in global affairs, meanwhile, moves to the back burner. Longer-term targets for 2035 have emerged as well: at the midpoint in Xi’s national rejuvenation project running to 2049, they are heavy with political meaning.
Uncertainty and risk in the external environment mounts. While Chairman Xi hammered a ‘China Proposal’ at the UN virtual sessions, domestic commentary expressed grave concerns about the future of global governance. Meetings to reactivate the ‘Quad’ (India, Australia, Japan, US) prompted little reaction from Beijing, but an alarming commentary on the Malabar naval exercise was widely circulated.
The official Q3 GDP uptick betokens positive growth for 2020 as a whole. Consumption is edging up yet lags other drivers. A mixed ownership action plan foresees SOEs propelling ‘healthy development’ of private firms over three years, further blurring lines between state and private. Successive financial forums in Beijing and Shanghai saw top-level officials outline their agendas; hot items include financial opening, expanding IPO registration and Party leadership in the corporate governance of banks.
Official notices of a bumper harvest despite serial natural disasters are belied by market signals: corn prices keep rising, hitting a 4-year peak. Grain markets are volatile, adding to concern over supply shortfalls. The recent global COVID-19 surge, and virus detected in imported frozen goods, again threaten the security of cold chains. Beijing is striving to balance safety with timely supply of frozen foods, lest overly restrictive measures hamper recovering ag trade.
Expanding graduate education, above all in professional degrees, is underway due both to jobs pressure and international tech blockades. To ease doubts regarding quality, new modes of evaluation are proposed, ending reliance on quantitative publication data. Similar changes are in store for compulsory ed, where the emphasis on placement is shifting to a more holistic judgement of ethics, academic results, sport, arts and physical work.
From Biosecurity and Patent to Personal Information Protection, innovation-related laws are emerging (and being amended) on all sides. Strategic industries are boosted by Beijing: quantum technology was personally endorsed by Xi Jinping, and a 15-year strategy for new energy vehicles finally passed. Localities, castigated for high-profile semiconductor investment disasters, are advised against overhype.
With 14th 5-year plan discussions in train, Xi’s UN pledge of carbon neutrality by 2060 is rallying the renewable industry. It will filter into planning for a national emissions trading system and hydrogen development etc. A first high-level climate finance policy was issued on 26 October, with local pilots to be rolled out and national project reserves built. Climate finance will be channeled to mitigation and adaptation. International and private investors are urged to take part.
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5th plenum: China pivots to ultra-large domestic market
Xi’s ‘dual circulation’, equipped with a robust domestic ring and new modes for global cooperation and competition, will underpin macro-economic planning over the next five years. Indigenous innovation and self-reliance will be paramount. Playing a lead role in global affairs becomes secondary. full post open access →
october policy movers
policy professionals in and out of the establishment
Cai Kaiming 蔡开明 | Dentons Law Firm senior partner
Legal expert in international trade and investment, Cai helped draft the Export Control Law. His advice on managing the ‘entity list’ and allowing firms to apply for exemptions has been included in the final version. Cai advises using blocking statutes to hinder the US applying extraterritorial legislation. He helped the China International Chamber of Commerce respond to the USTR 301 investigation, and is legal counsel for China Council for the Promotion of International Trade and China Chamber of Commerce for Import and Export of Machinery and Electronic Products.
Mao Weiming 毛伟明 | State Grid board chair
Trained engineer and career politician, Mao was ‘parachuted’ into State Grid in January, the first chair without previous experience in the energy sector. His three immediate predecessors had risen through the ranks of the company itself. Before the move, Mao was the top-ranked vice governor of Jiangxi, his portfolio covering development and reform, fiscal and financial policy, energy, transport and more. As State Grid chair, Mao prioritises securing economic growth, leading innovation and stimulating the energy sector’s green transition. He is expected to support State Grid’s strategic development of smart grids and internet of things, and, perhaps more importantly, ensure the Party’s demand that the grid reform is quickly realised.
Zhu Boshan 祝波善 | Shanghai Tacter Management Consulting founder and general manager
Restructuring guru Zhu has consulted for SASAC and worked with scores of SOEs, e.g. Wuhan Iron and Steel. A new aspect of SOE reform, he notes, is that they must help develop private enterprises. Prior to this, mergers and restructuring were mainly aimed at large SOEs, but they now must play a leading role in the ‘healthy’ development of private firms. The result will be private- and state-owned capital becoming more intertwined both in firms and across sectors.
policy ticker highlights
gems from our feed of policy releases and domestic debate
global impact
uncertainty in post-pandemic global governance
Weixin | 9 October
context: Although Beijing still seems proactive in shaping global governance through the UN, analysts are ever more aware of faltering multilateralism.
Global governance is facing challenges and uncertainty due to the pandemic and US–China competition, concur experts at the 29 Sep 2020 CICIR (China Institutes of Contemporary International Relations) seminar
existing global governance system is near collapse
cannot predict whether globalism or regionalism will prevail
two parallel systems cannot yet form as the existing system is not completely broken down
Analysing major countries' strategies, CICIR's area studies institutes report
US: developing rules beneficial to itself in 'Western' economic areas (Europe, Asia-Pacific, Europe, Japan, Western hemisphere)
Russia: maintaining balance between US and China, meanwhile improving its international standing
EU: expanding EU governance at a global scale
Japan: hoping to be a bridge between China and the US
India: pushing for 'multilateralism with reform', navigating China and US through issue-based alliance
Brazil: withdrawing from global governance to prioritise domestic development, allying with 'Western developed countries'
Africa: major demands include shared prosperity, defending the existing system and reforming based on altruism, but its vision is unstable due to myriad of voices
China should adapt to the situation and respond proactively
regional cooperation BRI partners should be prioritised, and then successful experiences promoted globally, says Fu Mengzi 傅梦孜 CICIR vice director
soft power should be strengthened, a replacement for neoliberal ideology will help secure global support, says Niu Xinchun 牛新春 CICIR director of Middle East studies
public goods supply, especially COVID-19 vaccine, should be used to secure global acceptance, says Zhang Yuncheng 张运成 CICIR director of global economics
governance
new Party regulations further bolster Xi’s authority
Xinhua Net, People's Daily | 12 October
context: The new regulations were approved during Politburo meeting of 28 Sep 2020. The renewed stress on allegiance to Xi would indicate that internal tensions are rife. The new regulations also pave the way for Xi's consolidation of power ahead of the Party Congress in 2022.
Xinhua released the full text of the approved 'Regulations on CCP Central Committee work' on 12 Oct 2020. The new regulation came into effect following their promulgation by CCP Central Committee on 30 Sep 2020. The Regulations urge strict compliance of all localities and departments, calling for
safeguarding the authority and centralised leadership of CCP Central Committee with Chairman Xi Jinping at the core
specifying CPC Central Committee's leadership status, system, functions and powers, style, decision-making and self-improvement
giving the lead to members of the CCP Central Committee, its Political Bureau and Political Bureau's Standing Committee to implement regulations and safeguard the status of Chairman Xi Jinping as the core
urging all localities, departments, Party members and officials to implement the regulations and closely follow the CCP Central Committee with Chairman Xi Jinping at the core in terms of thinking, political orientation and action
Consolidating the core position of Xi Jinping and the centralised authority of the CCP Central Committee is crucial to ensure Party rule and the country’s long term stability, a People’s Daily commentary explains.
The very reason why the Party was able to successfully face one challenge after the other is inherently due to Xi’s core position. As external and internal conditions become increasingly complex, maintaining Xi at the core and consolidating the centralised authority of the CCP Central Committee is key to opening up new development paths both for the Party and the country, it concludes.
macroeconomy
industrial upgrading through SOE mergers with private enterprises
Jiemian, National Business Daily, Economic Observer | 28 September
context: The highest-level meeting so far in 2020 for SOE (state-owned enterprise) reform was held in Beijing deploying major policy directives. Although the 3-year action plan has not been publicly released, in recent months high-level officials have hinted at a reform direction of SOEs worth watching for.
The flagship ‘3-year Action Plan of SOE Reform’ is being fully launched, and is expected to be released to the public shortly, according to Xinhua Finance. Overall directives are out on 27 September, with Liu He 刘鹤 Vice Premier heading the meeting of the State Council SOE Reform Leading Group.
Five requirements are put forward for the implementation of the 3-year action plan, including
making SOEs market players with core competitiveness
allowing SOEs to play a greater role in
leading innovation
improving the industrial supply chain
safeguarding people's livelihood and coping with major challenges
maintaining national economic security
SOEs must first be true market entities, with innovation a top concern. The highlight is the emphasis on achieving innovation through incentive schemes, notes Li Jin 李锦 China Enterprise Development Research Centre.
In particular, SOEs will play a leading role and influence the development of private enterprises. Depending on different concentration requirements among industries, SOEs must
help improve market structure
cooperate with private enterprises to promote M&A and strategic reorganisation
strengthen the synergy between upstream and downstream of the supply chain
jointly create advantageous industrial clusters with private enterprises
In the past, M&As were mainly between large SOEs, notes Zhu Shanbo 祝波善 SOE restructuring expert. M&As with private firms are new and could mean
M&As and strategic reorganisation will be important for future economy upgrades
restructuring may face various difficulties, but enterprises should improve synergy
the integration of state-owned and private capital will be ‘deeper and broader’ in the future
agriculture
MARA: autumn harvest in good shape
Ministry of Agriculture (1), Ministry of Agriculture (2) | 21 October
context: Officials are lauding a bumper harvest, despite a year of natural disasters. Although it is difficult to verify the figure for grain-planted areas and yields, the grain market is giving out quite different signals: corn prices keep rising, hitting new highs since 2015 and overall grain markets are very volatile this year.
Citing optimistic numbers for the harvests of summer grain, early rice and the upcoming autumn grain, Wei Baigang 魏百刚 MARA (Ministry of Agriculture and Rural Affairs) Department of Development Planning director predicts a record harvest in 2020, adding up to more than 650 million tonnes of annual grain output for the sixth consecutive year. The good harvests have come along with changing planting structure, said Wei at the 21 Oct press conference, noting that
high-quality wheat accounted for 35.8 percent of total wheat land under cultivation
high-quality rice areas increased
soybean areas expanded for the fifth consecutive year
Increasing grain acreage contributed to over 50 percent of the growth in output, says Liu Lihua 刘莉华 MARA Department of Crop Farming Administration deputy director. Ag production also survived pandemic-led lockdowns, the invasion of fall armyworm, flooding in southern provinces, and typhoons in the northeast. In addition, ag was less affected by drought this year, which used to explain half of the annual grain loss, says Liu.
Hu Chunhua 胡春华 Politburo member and vice-premier urges the planting of autumn and winter crops, above all winter wheat and oilseed rape, to lay a good foundation for next year.
society
innovative graduate ed schemes needed to train talents in critical technologies
Ministry of Education, Science and Technology Daily, ScienceNet | 29 September
context: For decades, eminent scientist Qian Xuesen’s question of ‘why our higher education has not produced outstanding talents’ has dominated thinking on graduate education reform. It has now taken on renewed urgency amid technological embargoes imposed on the country. The latest reforms will attempt to boost education quality as well as aligning it more closely with national and social demands.
At a press conference on 22 Sep 2020, Hong Dayong 洪大用 MoE (Ministry of Education) Department of Degree Management and Graduate Education director announced ten campaigns to implement graduate education reforms. Among them, training talents in critical technologies has been highlighted. Hong believes resources must be gathered from World Class 2.0 institutions and top enterprises, as well as implementing ‘extraordinary education schemes’ to expedite training.
Chu Zhaohui 储朝晖 National Institute of Education Sciences researcher interprets ‘extraordinary education schemes’ to refer to more focused training at the graduate level, reports Science and Technology Daily. The usual egalitarianism in evaluation should be avoided for these talents. Chu also believes universities should engage in institutional innovation to emphasise education quality and help students fulfill their potential.
Interdisciplinary studies could be one direction for training talents in critical technologies. At the July conference on graduate education, interdisciplinary studies were designated the 14th and latest discipline category, reports ScienceNet. IC, previously a subject under the level one discipline of electronic science and technologies, will become a level one discipline of its own under the new category of interdisciplinary studies. Hong says further support for interdisciplinary studies will require new development zones and research centres. A list of nationally supported disciplines will also be drawn up. Chu says the list is expected to include basic, as well as high tech, disciplines.
energy and environment
non-fossil fuel growth to explode in 14th FYP
China Energy | 12 October
context: China's commitment to reach carbon neutrality by 2060 has greatly boosted the outlook for renewables.
The expectation for investment in the renewables industry is high. Li Jun 李隽 Global Energy Interconnection Development and Cooperation Organisation expects that
planned additional wind power generation capacity may exceed 290GW, with an annual installation of 50GW
by 2025, total planned wind power generation capacity will reach 540GW (including 30GW offshore installation)
planned additional solar power generation capacity may exceed 320GW, with an annual installation of 60GW
by 2025, total planned solar power generation capacity will reach 560GW
Renewables’ share will be a lead indicator in the new plan, expects Zhu Yue 朱玥 Xingye Securities. The Electric Power Law (draft under review) will link with the Renewable Energy Law, says Lin Boqiang 林伯强 Xiamen University, stipulating equal rights for renewable energy dispatch.
science and innovation
spotlighting quantum policy shortfalls
Xinhua Net, Science and Technology Daily, Yicai | 20 October
context: Quantum tech is a hot topic following a Politburo study session. It is one of the few frontier tech areas where China does not rely on imports, argue domestic commentators. More support is likely on the way, given China's 2030 'megaproject'.
Quantum R&D remains in its early stages, argue several commentators, noting Beijing and Hebei research groups are not far behind their foreign peers. Despite market hype, fund managers struggle to assess the value of quantum tech firms, they told China Securities Journal. Areas of discussion include
international exchange and indigenous innovation
competition should focus on industrial development, leaving research unaffected, argues Xue Qikun 薛其坤 Beijing Academy of Quantum Information Sciences director
develop quantum research equipment independently, suggests Han Zhengfu 韩正甫 University of Science and Technology, warning high-precision research equipment still relies on imports
state and business investment
set up cross-disciplinary labs co-developed by industry and academia, says Yu Haifeng 于海峰 Beijing Academy of Quantum Information Sciences, building on the success of Google and IBM in bringing research to the engineering and commercial stages
research silos must be broken, adds Han, given the emerging signs of 'overhype'
future development must be application-driven and industry-sponsored, argues Guo Guoping 郭国平 University of Science and Technology, citing IBM's building of an industry alliance also involving users
state investment should be targeted, adds Guo, noting the state is already among the top ten financiers
promote the use of domestic quantum programming languages and operating systems, especially in universities, says Guo, as user habits are hard to change once developed
small enterprises that cater to key users are key to technology growth nationwide, notes Han, arguing for a better ecosystem
talent
cultivate research coordinators as well as courageous and conscientious young talent, recommends Yu
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