October: post-congress priorities
The 19th Party Congress etches Xi Jinping’s 习近平 political heft into public consciousness. Launching a ‘new era’ of socialism with Chinese characteristics, his report plumps for a stress on Party, rather than personal, supremacy (though the latter could be glimpsed as a subtext). The ‘new era’ reissues and strengthens old pledges from the Deng and Hu eras of a more inclusive, eco-positive agenda. The aspiration captured in the report is to re-gear these agendas so as to catapult China into full-fledged ‘socialist modernity’ by 2049, where ‘socialist’ signals, above all, Party leadership.
In tandem with the report’s domestic unilateralism, Xi plays the multilateral card for the global stage. Specifically, the report includes proposals to build free trade ports and roll out nationwide the FDI ‘pre-establishment national treatment plus negative list system’. These will support the Belt and Road Initiative and ease some barriers to market access for foreign investment.
Xi stresses the importance of innovation and industrial upgrading, both in traditional industry and in smart manufacturing and civil–military integration. SOE reform comes with a long to-do list. Few imagine it will proceed smoothly, or that SOEs will cease to dominate the economy. Marketisation will be favoured where it preserves Party patronage. Supply-side structural reform will increasingly incorporate qualified market-based measures, particularly in de-capacity. New alliances among industries, universities and research bodies will attract funding, steering the military to solve long-standing technical bottlenecks in national defence. Collaboration will focus on maritime, space, cyberspace, internet, biology, new energy and AI, added vice premier Zhang Gaoli 张高丽.
Claiming to ‘build a community of shared human destiny’, Xi conspicuously updates the foreign policy framework as ‘new era big power diplomacy with Chinese characteristics’. While praising Xi’s global vision, observers hint at the need for some modesty.
The report endorses a dual structure for financial regulation, combining monetary policy and macro-prudential assessment. The two-prong system seeks financial stability above all. Financial liberalisation that jeopardises a stable RMB and securities market will have to wait.
The report’s ‘rural revitalisation’ strategy has immediate implications for farms and agribusiness. A 30-year extension of the second batch of rural land contracts and expansion of the agricultural service sector, signals to large farm operators and ag sector investors that the rural economy is open for business. But more environmental oversight is on the cards as eco-civilisation gains momentum.
Party Congress aside, October saw a major shift flagged in drug and medical device regulation. Clinical trial management, approvals, R&D and market rules will be tweaked as the state seeks to boost medical tech innovation. New and critical imports may see bottlenecks to market entry cleared.
october policy movers
policy professionals in and out of the establishment
Wang Huning 王沪宁 | first secretary of the Party secretariat
Crafting statist norms since the 1989 democracy movement, former politics professor Wang links Party authority to anti-corruption and nationalism, signalled in the ‘China Dream’ stressed in Xi’s first term. Having served three successive presidents, Jiang Zemin, Hu Jintao and Xi, Wang is a survivor with a talent for self-effacement. His access to the general secretary makes him a likely channeller of Xi Jinping Thought. Moving from office director of the Deepening Reform Leading Group, a Party group supplanting State Council as the key economic policy making body, Wang may well retain a role in the Leading Small Group for Advancing the Development of Belt and Road, now solemnised in the Party Constitution.
Bai Ming 白明 | Chinese Academy of International Trade and Economic Cooperation (CAITEC) International Market Research Institute
Bai is an almost daily state media commentator on current international trade issues. His agency, CAITEC, is the leading trade think tank. Contrary views from its staff often circulate in the media. Ma Yu 马宇 and Mei Xinyu 梅新宇 stand out in recent times as ‘left-mercantilists’ with objective standards. Bai’s department conducts research on commodity markets and international investment flows. Non-traditional trade liberalisation tools should be the focus of the global trade governance system, he urges. Since demand for imported goods are increasing in China, he says, the country has a special responsibility to expand trade and facilitate its development.
Tang Dengjie 唐登杰 | Ministry of Industry and Information Technology (MIIT) vice minister and State Administration for Science, Technology and Industry for National Defence (SASTIND) director
With a bachelor’s in mechanical engineering and an MBA from Tongji University, Tang spent 20 years in the auto industry. He became Shanghai’s youngest vice mayor in 2003, serving in the following eight years under Chen Liangyu 陈良宇, Han Zheng 韩正, Xi Jinping 习近平, and Yu Zhengsheng 俞正声. Promoted to China South Industries Group in 2011 and his current posts in May 2017, Tang singles out industry–university–research institute alliances as the way forward for military sci-tech. Military-industrial firms like Aviation Industry Corporation of China and China Aerospace Science and Industry Corp have set up Avicui, CASICloud and other innovation platforms, launching a new model for civil–military cooperation, said Tang. Tang is slated to follow the path of his predecessor Xu Dazhe 许达哲 and lead a ministry or a province.
policy ticker highlights
gems from our feed of policy releases and domestic debate
geopolitics
analysing Abe's goodwill towards China
Cfisnet | 9 October
Should the Liberal Democratic Party prevail at the snap elections, Japanese Prime Minister Shinzo Abe has a chance of cementing his foreign policy legacy by improving Japan's relations with China, says Zhang Yun 张云 Niigata University (Japan) associate professor and Peking University School of International Studies visiting scholar. Abe's foreign policy approach has, he argues, sequential priorities, in the following order
consolidating US–Japan relations
focusing on developed economies and ASEAN
leaving the hardest task (Sino-Japanese relations) for last
Zhang lists the possible basis for Abe's goodwill towards China, including
a hardline stance wins less approval than before; a domestic focus is more welcome
power is best displayed by reacting to North Korea
antagonising North Korea and China at the same time is not in Japan's interests
warming Sino-Japanese ties are positive for Abe's legacy
Abe's goodwill, Zhang however suggests, may be no more than a pre-election delaying tactic. More evaluation is needed of Abe's intentions, not neglecting the opportunities available to him, both dynamically and strategically.
China should seize any passing opportunity, Zhang concludes, to improve Sino-Japanese relations, as
it cannot afford to wait for a pro-China Japanese prime minister
this is more profitable than attempting to guess Abe's intentions
tying good Sino-Japanese relations to benefits in Japanese politics will build a strong foundation for long-term bilateral relations
such a move will allow for continuity and predictability, even when Abe is no longer prime minister
improved intergovernmental relations is beneficial to the region
finance
PBoC vice-governor on macro intervention framework in Party Congress work report
Securities Times | 19 October
On 19 October, the central-level financial system delegation of the 19th Party Congress held a discussion. Yi Gang 易纲 People's Bank of China (PBoC) vice-governor shared his interpretation of the macro intervention framework, which combines monetary policy and macro prudential management.
The dual-structure framework aims to tackle the drawbacks of relying solely on monetary policy for financial stability, says Yi, evident in the mainstream policy framework's focus on monetary policy and stable prices failing to prevent asset bubbles before the global financial crisis. The traditional framework failed because risk is built into the pro-cyclicality of the financial system and cross-market contagion, adds Yi.
The dual structure has two targets, according to Yi
maintaining a stable RMB
maintaining stability in the financial system
The macro prudential management framework has had three major developments since its setup in 2016
the macro prudential assessment (MPA) framework has incorporated more financial activity and behaviours into regulation and has provided discipline for financial institutions from seven aspects
cross-border capital flow has been included in MPA
macro prudential management for the real estate market has been enhanced, with credit policy that differs by city
agriculture
agtech experts on 19th Party Congress work report
China National Radio | 22 October
A press conference at the 19th Party Congress news center convened experts from China Academy of Agricultural Sciences (CAAS) and Ministry of Agriculture (MoA) to discuss implications of agricultural technology innovation goals mentioned in Xi Jinping's report to the 19th Party Congress.
Shen Yujun 沈玉君 Ministry of Agriculture Institute of Planning and Design Rural Energy and Environmental Protection Research Institute vice-director called attention to the high priority on green agriculture and inclusion of agricultural non-point source pollution in the report. Shen notes
Central Committee has prioritised agricultural non-point source pollution since 2015
MoA kicked off five sustainable agriculture campaigns spring 2017
a first batch of 40 national sustainable agriculture demonstration areas was announced 19 October 2017
Central Committee and State Council's 'Opinions on innovation to promote green agriculture' will drive investment, technology R&D and commercialisation of green agriculture in coming years
zero growth targets in pesticide and fertiliser will continue to be a top priority
technical breakthroughs on utilisation of livestock waste are improving environmental impacts
livestock manure utilisation rate now above 60 percent
crop straw utilisation rate now above 80 percent
Responding to questions from journalists on barriers to green agriculture, Shen pointed out that
administrative coordination between crop farming and livestock production are separated, making coordination difficult
organic content in soil is falling continuously, reflecting degrading soil quality
livestock and poultry farms are producing 3.8 bn tonnes of manure annually
40 percent of this is not utilised as fertiliser or biogas, instead becoming pollution
policy support is needed to break through barriers to organic fertiliser use
a number of success cases cited
Tang Huajun 唐华俊 China Academy of Agricultural Sciences president noted progress since the 18th Party Congress including
increased contribution rate of agricultural technology
mechanized tillage, seeding and harvesting rate now exceeds 65 percent
over 96 percent of crops planted are now 'improved' varieties
independent innovation capacity, original innovation and basic research
quality of key varieties like 'super rice'
naming potatoes as a staple crop
3D printing foods with potato flour
adoption of new facilities and technologies such as indoor and vertical farming
improvements to key laboratory system including
42 new comprehensive national labs
300 new specialized or regional-level labs
270 new research stations
setup of State Agtech Innovation Union
He Zhonghu 何中虎 CAAS crop sciences researcher and Wheat Improvement Centre director discussed advancements in wheat over the past five years, including
winter wheat yield has reached 355 kilograms per mu, 60 percent higher than world average
annual wheat production has reached 128 million tonnes, 17 percent of world total
improvements to breeding including
adoption of genomics and gene editing techniques
approval of over 100 new wheat varieties, six of which are now cultivated on over 10 million mu annually
adoption of new varieties and irrigation techniques reducing water use by two to three times in water-scarce areas of north China
Wei Lingling 魏灵玲 CAAS Agricultural Environment and Sustainable Development Research Institute discussed advancements in indoor agriculture, including
4.1 million hectares of greenhouse and hothouse area
annual production value over C¥980 bn
over 40 million employed
indoor agriculture is a means of poverty alleviation
breakthroughs in technology
smart environments and equipment
plant factory models
LED lighting
hydroponics and aquaponics technology
energy-saving facilities, adoption of new energy in the 'protected horticulture' sector
need to speed up innovation and better connect farmers with new technologies for agriculture
society
rural revitalisation strategy key to 'three rurals'
Economic Observer | 20 October
In his report to the 19th Party Congress, Xi Jinping 习近平 outlined a rural revitalisation strategy focused on progressing rural land rights reform by supporting farm upscaling with an agricultural service system, reports Economic Observer. It aims to ensure the agriculture industry is addressing poverty alleviation at enterprise level, it adds.
Li Guoxiang 李国祥 Chinese Academy of Social Sciences Rural development institute researcher describes the new strategy as building upon the Party's successful approach to 'three rural' issues with a new and innovative approach. It signals the rural sector is an ongoing priority which will continue to receive attention and resources from the top, he says. The 30-year extension of the second round of farmland contracts reassures farming households, new agribusiness operators, and investors in the agriculture sector, of long-term development direction.
At a press conference on 19 October 2017, Zhang Hongyu 张红宇 Ministry of Agriculture (MoA) Rural economic management system office director noted two paths towards agricultural modernisation, which includes upscaling, standardisation, professionalisation and intensification: land transfer and service models.
Ongoing land reforms are needed to ensure land held by rural migrant workers can be managed while they are in cities, says the piece. Other notable inclusions in the report are
references to vertical integration and rural entrepreneurship, aiming to expanding business activity in rural areas
support for new agribusiness operators—the piece characterises this as a key approach to poverty alleviation, citing a 16 October 2017 MoA press conference
governance
Supreme People's Court judges barred from joining law firms shortly after resignation
Caixin | 11 October
Supreme People's Court judges and assistant judges at the division level and above have been barred from joining law firms for three years following resignation; other judicial assistants are prohibited from joining firms for two to three years depending on rank, reports Caixin.
These rules were laid out in ‘Implementation opinions on standards for behaviour of public officials post resignation’, which aims to implement stricter Party management, enhance judicial credibility and improve restrictions on judicial power.
The Supreme People's Court may be trying to stem loss of talent, as the judiciary suffers from case overload and few judges, says Xu Shenjian 许身健 China University of Political Science and Law. Ex-judges may use their connections and impact judicial fairness, so the Supreme Court’s decision is understandable, he adds.
But while these restrictions may stymie corruption, Xu continues, they also depress the attractiveness of the profession. While the policy only targets the Supreme Court, adds Wu Hongqi 吴洪淇 China University of Political Science and Law Institute of Evidence Law and Forensic Science associate professor, local judges may resign preemptively with judicial reform set to continue.
As reform deepens and emphasis is laid on judicial responsibility, judges face greater pressure. For those that have accumulated experience at court, they gain much more by leaving—from their perspective, they are only pursuing their interests and trying to avoid risks.
More important than money is status, concludes Xu: reform should build a sense of honour and status in the judiciary; then more people will want to become judges.
trade
'Trump trap' should alarm all countries
Coast Online | 18 October
While the US government's ‘Section 301' investigation strains Sino–US relations, says Su Qingyi 苏庆义 Chinese Academy of Social Sciences research fellow, the underlying 'Trump trap' should alarm countries around the world.
For Trump, globalisation does not give other countries chances to improve on their own terms, argues Su, but is a means to force them to adopt US standards. 'Fair trade' becomes 'equal trade', contends Su, in the sense that US regulations and concepts have to be imitated by all other states. If the US protects IPR, so must all states. If the US has low taxes, so must all states. Implying Trump's sole concern with keeping jobs in the US and narrowing its trade deficit, the 'Trump trap' epitomises trends that conflict with the logic of multilateral trade.
This should alarm not only China, but all countries with a stake in the current system; particularly those 40 states which had a trade surplus with the US in 2016, urges Su.
The US has continuously had a trade deficit since 1976, and it has grown by 80 percent since the turn of the century. While many economists argue the implications of China–US trade surplus have been exaggerated, says Su, this does not always find a sympathetic ear among US politicians.
China has had a trade surplus with the US since 1993, which has settled at several hundred billion USD since 2005. In 2016, the surplus amounted to US$253 bn, accounting for 44.23 percent of China’s total trade surplus. These figures show that China–US economic and trade relations are the most significant bilateral relations of their kind globally, says Su.
science and innovation
Made in China 2025 policy will speed up digitalising the manufacturing industry
Xinhua Net | 19 October
China is now a global manufacturing and internet powerhouse, said Miao Wei 苗圩 Ministry of Industry and Information Technology (MIIT) minister in a press conference on 19th Party Congress. Miao highlighted
upgrades in the innovation system, including
improving synergy between enterprises, research institutes, market, indcustry, and universities
breakthroughs in aerospace, advanced equipments, high-performance computing, and new generation telecommunication technologies
accelerating civil–military integration
progress with supply-side reform, clearing the way for
new and emerging industries
transforming and upgrading traditional industries
strengthening investments in innovation
informatisation–industrialisation integration, fuelling
growth in the smart manufacturing industry
a booming mass entrepreneurship and innovation (E&I) spaces, parks and incubators
broadband internet coverage and 5G pre-commercialisation
a mature internet economy
On Made in China 2025, Miao mentioned that since 2015 the state
released 11 supporting implementation documents
launched five core schemes, in
innovation centres for the manufacturing industry
smart manufacturing
industry enhancement
green manufacturing
advanced equipment manufacturing innovation
31 pilot demonstration zones in
Ningbo and 12 other cities
Sunan and four other clusters
34 differentiated guidelines to 34 provincial governments based on their comparative advantages
improved brand image and quality of manufacturing products, through
industry design
large-scale tailoring
flexible manufacturing
advanced quality management
adoption of international quality and safety standard systems
industry and environment
updates on supply-side structural reform and steel industry de-capacity
Xinhua Net | 19 October
Minister of Industry and Information Technology Miao Wei 苗圩 explained how ongoing supply-side structural reform will help resolve the new social contradiction between growing living standards and unequal and imbalanced development, mentioned by President Xi at the 19th Party Congress. Economic development and improving living standards give rise to more diversified demands, he says. Producers must then try to satisfy different consumers. Specifically, supply-side reform should include
transformation and upgrade of traditional industries
strengthening investment in technological innovation
De-capacity does not equal restricting production, said Miao, in answer to foreign media speculation on production of steel increasing alongside de-capacity efforts. Steel supply and demand are completely determined by the market, he added. The steel industry is fully competitive. Production increases are driven by market mechanisms—during January to September, crude steel production reached 639 million tonnes, a 6.3 percent y-o-y growth.
Miao detailed progress of de-capacity efforts in steel industry
de-capacity objectives: remove 100 to 150 million tonnes of production capacity by 2020; the goal for 2017 is to clean up 50 million tonnes production capacity, which is already complete
elimination of substandard steel: over 600 enterprises were disqualified and 100 million tonnes of substandard steel disposed of since last year
profitability of the steel industry improved: the industry saw C¥20.35 billion in profits, a 106.9 percent y-o-y increase
industrial transformation and upgrade: encourage technological innovation and R&D to satisfy high-end market demand
china policy in the media
mentions of our work elsewhere
echoes of Mao: China Communist Party fawns over 'Xi Jinping Thought'
AFP | 20 October
Xi is already expected to use the congress to stack the top echelons of party leadership with loyalists. But adding his name to the party's commandments would show that "he has turned the page" on Chinese history, said David Kelly, director of research at Beijing-based consultancy China Policy. "It's his assertion that 'on my watch, we became a major power,' which is something Mao could not claim," he said.
war of words shakes China's policy circles over response to possible Korean war
Asia Times | 17 October
A debate inside Chinese policy circles about how Beijing should respond to a possible war on the Korean peninsula has grown fierce since North Korea’s sixth nuclear test in September. China Policy (CP), a respected China policy analysis website, reports that disagreements on the issue between “leftists” and “rightists” in China have “exploded into character assassinations and insults.”
renewed policy incentives to keep Chinese carmakers afloat
SCMP | 12 October
The new scheme will require individual carmakers to produce a minimum number of EVs. Those failing to meet the minimum production targets will have to buy credits from competitors with surplus credits. Vehicles that meet range, or distance, targets will also earn credits.“ The government decided to cut subsidies gradually to allow the industry to stand on its own, as it was heavily reliant on subsidies previously,” said Cao Nanxin, a senior industry analyst at research advisory China Policy, headquartered in Beijing.
China's Communist leaders seek to bend business to Party will
VoA | 11 October
There is a growing consensus among analysts that the upcoming party Congress will do little to advance the process of economic reforms that Communist leaders have been promising for a long time. Instead, the party may opt to dilute and perhaps reverse some of the aspects of its reform agenda, they said. "The reform agenda that will be announced at the 19th Party Congress will be a modified reform agenda and will not be very closely related to the high watermark of reforms which was promised in the (party's) Third Plenum," David Kelly said.
thinking the unthinkable in China: abandoning North Korea
AFP | 12 October
David Kelly, director of research at Beijing-based consultancy China Policy, said the thinking among Chinese academics was: 'We could do better without them, a unified Korea would be incredibly good for China, the northeast would boom'.
UBS report says Chinese unicorns are on the rise
The Australian | 9 October
Analyst Jeroen Groenewegen, with Beijing based research company China Policy, told The Australian that the core issue in assessing China’s likely success at innovation was “whether you believe such top-down planning can generate innovation, and if so, what kind”. The Chinese state is indeed investing heavily, both economically and politically, he said, and had been for more than a decade. Because its returns had been comparatively modest, he said, the state was adjusting its support to incentivise the kind of indices that UBS highlights in its report, especially patents, scientific publications and university programs.
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