october: no breaks for consumers

month in focus

Hong Kong cuts liquor tax from 100 to 10 percent, latest reason for HK-olidays?

Warm welcome all…

Xi remains fixed on a long-term vision for the economy, while financial agencies throw out the odd jellybean to keep sentiment up. Trade friction continues as, step by step, Beijing builds its preferred alternative framework. If you did not read our brief on ‘institutional opening,’ do so now. It’s another phrase that may soon become the pervasive buzzword.

Happy reading

Philippa

---

macro outlook: Beijing holds out for long-term gain 

Signs of strain have not let up in the economy: GDP growth slowed to 4.6 percent y-o-y in Q3, short of the 5 percent target again stressed by Xi Jinping in an inspection tour of Anhui. Trade is no more encouraging: September exports grew by 2.4 percent, imports by just 0.3 percent y-o-y. The surplus reached US$82 billion in September, a 5 percent rise over 2023 but a modest easing compared to earlier in Q3.

Market hopes of serious fiscal stimulus in October were dashed. Fiscal measures foreshadowed by NDRC (National Development and Reform Commission) on 8 October have failed to arrive. Shares responded by diving. A solitary positive sign came on 12 October when the Ministry of Finance waved in special bonds for local governments to buy back idle land from property developers, shoring them up while allowing localities to repurpose the plots. Housing officials later pledged a million new units by renovating urban villages, partly funded by such special bonds.

Rather than give in to clamours to re-inflate the property sector via a one-off major stimulus, Beijing’s strategy is to provide markets with a trickle of support measures to improve sentiment. Expect measures to be frequent but small. The Third Plenum charted the path to improving macro governance, notes Li Jiangtao 李江涛 Central Party School. The focus is now on driving development through cross-cyclical, geographic and sector coordination.

bonding at BRICS

The looming US elections remained central to discussion in PRC foreign policy circles. The outlook is grim as ever: no candidate is to Beijing’s liking. Eyebrows were raised by Trump’s comment on 18 October limiting the US response to a Beijing ‘move on Taiwan’ to sanctions and tariffs. Triggered by a Republic of China National Day speech by Taiwan President Lai Ching-te 赖清德, massive military exercises around Taiwan saw Beijing deploy record numbers of aircraft on 14 October. Xi inspected a PLA Rocket Force unit in Anhui days later (19 October), his first such visit reported since 2016. He urged combat readiness; rumours swirled about the presence of Zhang Youxia 张又侠, top-ranked Central Military Commission vice chairman, formerly deemed out of favour.

Xi attended the 16th BRICS Summit in Kazan, Russia, 22-24 October, the first following a major expansion to its membership, highlighting its agenda (peace, innovation, green development, justice, and humanitarian exchanges) and urging initiatives to boost BRICS states’ cooperation. PRC commitment to its growth was proclaimed, along with the need to make it a ‘primary channel’ for strengthening Global South solidarity and cooperation. On the sidelines, he held talks with Russian President Putin and Indian PM Narendra Modi.

tit for tat trade friction

Trade friction continues to be a bugbear in Q4. MofCOM anti-dumping measures, provisionally placed on EU brandy, entail security deposits of 30.6-30.9 percent—comparable with levels imposed by the EU on PRC EVs. Most threatened is France, a supporter of duties on EVs from the PRC and largest brandy exporter to the PRC.

Hong Kong quickly followed the MofCOM announcement by dramatically cutting its liquor tax from 100 to 10 percent for spirits, including brandy. Its brandy market is only some 7 percent of the PRC’s, yet the timing embodies a punch pulled in Beijing, cushioning its hit on EU brandy. Carrot-and-stick continues, with MofCOM mulling tariff hikes on large autos, primarily imported from the EU.

Dual-use export controls were stepped, adding to measures with which Beijing wards off Global North sanctions. Stricter rules are imposed on end-users, extending export controls to extraterritorial dual-use items that utilise PRC materials or tech.

trade expansion

 ’Institutional opening'—Beijing’s response to changing trade dynamics―is being actively tested with partners.

• Beijing finalised 3.0 FTA upgrade talks with ASEAN. Supply chains, tech standards, and digital and green economy cooperation are to the fore. Conformity assessment, above all in emerging trade areas like NEVs and electronic appliances, is being jointly developed 

• a new special economic zone will be built near the International Airport in Riyadh, Saudi Arabia, boosting bilateral relations, logistics, trade and cross-border e-commerce 

• edition 2.0 of the Mainland-Hong Kong FTA, effective March 2025, was signed, expanding market access in seven industries for Hong Kong service providers

Striking an optimistic tone, Long Guoqiang 隆国强 State Council Development Research Centre notes the vital role of services trade and predicts more policy support from central agencies.

involution hits green sectors

With global temperature rise nearing a mean of 1.45°C, making the 1.5°C limit by 2030 unlikely, climate change adaptation is already a matter of survival. This is especially so for developing countries, Vice Chair and former lead climate negotiator Xie Zhenhua 解振华 warned the China Council for International Cooperation on Environment and Development’s annual meeting.

To stabilise green production, industry associations spoke out against ‘involution’ triggered by cut-throat competition and below-cost pricing. Wind power leaders set competition rules, and the photovoltaics association pledged closer monitoring.

An inter-provincial power spot market was officially launched, improving cross-provincial distribution within the State Grid framework; it is edging towards a unified national market. The China Electricity Council now seeks public comment on its draft unification blueprint. Local carbon assessments, industry carbon control, corporate carbon management, project carbon evaluation, and tracking of product carbon footprint are supported in a new work plan for enhanced carbon emission statistics and accounting. The China Iron and Steel Association proclaimed a low-carbon steel standard, delivering on the plan’s goal of releasing industry-specific carbon accounting and carbon footprint standards.

Opinions issued by PBoC and other agencies call for green finance support for the ‘Beautiful China’ initiative. Planning for a series of landmark major projects and launching a Beautiful China project database are also noted.

plan for moon landings

Scitech self-reliance was a theme of Xi Jinping’s inspection tour of Anhui. During his visit, he repeated the mantra that high-tech progress cannot be bought externally. 

Long-awaited ‘network data security management regulations’ were released, following a 2021 draft. Provisions for state agencies to requisition data from tech platforms have been deleted. Classification, stipulated in a 2021 draft, of data into 'general', 'important' and 'core', is ended as well, having proven confusing. Its removal may simplify understanding but risks inconsistency with other provisions. 

To ease access and unlock the potential of public data, the National Data Administration issued new 'opinions' clarifying registration, authorised use, and pricing for data held by state agencies and SOEs.

A space science development plan has been released. Moon landings, Mars and Venus research, and solar system edge exploration are envisaged, underscoring Beijing's ambition to join the leading space powers by 2050.

farmer woes

Fulfilling the typical rosy narrative, PRC farmers delivered another ‘bumper harvest’: annual grain output officially topping 700 million tonnes for the first time—good news for food security. Reserves are now claimed to be able to supply the whole nation for at least a year. Yet the harvest failed to translate into better livelihoods for small farmers. September corn prices hit new lows. As market prices dropped below the threshold, minimum purchase prices for rice were set in southern provinces. A weak livestock industry adds another layer of woes as feed grain demand shrinks downstream.

early childhood and student support

Support for vulnerable groups, not least university students, will improve in 2024-5. Residency rules for cities with over three million permanent residents will be eased, and infrastructure renovated to assist population flow.

Early childcare gets attention under new NDRC and National Health Commission guidelines. With some 30 million children under three and current childcare fees ranging from thousands to over C¥10,000, managed pricing structures for public and inclusive private kindergartens are to make services more accessible.

In education, doctoral admissions are growing. State Council noted the need for world-class Chinese-style doctoral education, segregating academic from professional degrees and aligning with strategies in science, engineering, ag, medicine, etc.

Given fraud scandals and hospitalisation rates threatening the national health insurance fund, the National Healthcare Security Administration set up ‘social supervisors’ to protect the fund, unifying traceability codes and imposing a ‘licence-like’, points-based supervision model to detect fraud.

Bolstering third pillar pension funds for the expanding aged population, a Notice formally defining annuity insurance and outlining future policy directions was issued by the National Administration of Financial Regulation on 23 October.

legal and judicial reform

With efficiency gaining in 2024 Q1-3, long-pending court cases dropped by some 58 percent; appeal rates easing by half a percentage point y-o-y. Unauthorised camera surveillance and eavesdropping faced crackdowns, with an over fourfold increase in cases involving illegal manufacture and sale of devices. In addition, a growing focus on tax avoidance was seen in response to the 27 percent y-o-y rise in tax crime.