Warm welcome all!
Let’s look at September… October is shaping up to be a big one. Grab a mooncake and enjoy our month in focus.
Philippa
A lengthy public holiday kicks in today, 29 September. Mid-autumn festival and National Day together mean an eight-day break. Beijing hopes October gets a consumer-led boost. Services will likely benefit most as tourists take to the road.
The October BRI International Cooperation Summit will see representatives from more than 130 countries, including Putin, gather in Beijing. More details on the much-anticipated summit dropped. With the heyday of big infrastructure over, three high-level forums on connectivity, green development and the digital economy were announced. The services trade is another much-touted future BRI focus.
Summer 2023 saw global opinion on Xi Jinping’s third administration harden. Meanwhile, his pledge to become a tech superpower offers a silver lining at home. Western media recycle talk of failure on the economic and diplomatic fronts, with the Evergrande and Country Gardens bond defaults matched by the implausible disappearance of Defence Minister Li Shangfu 李尚服 following that of Foreign Minister Qin Gang 秦刚 in June.
Tension in the Taiwan Strait eased somewhat with increased PRC-US contacts, notably of Commerce Secretary Gina Raimondo in early September. The EU Trade Commissioner visited Beijing later in the month. In a turnaround, economic and financial working groups have followed with both major powers. Release of a new Huawei smartphone, the Mate 60, sporting a touted super chip (see below), seemed timed to discomfort Raimondo but stayed in the realm of business as usual.
Stimulus remained a tacit policy emphasis in September, with the central bank boosting liquidity by reducing the reserve requirement ratio for a second time in 2023. Support for housing demand came as banks slashed established home interest and deposit rates; Guangzhou led first-tier cities in relaxing home purchasing restrictions, following similar easing in the second tier. More easing in the first tier is on the horizon, but according to the Economic Observer, the centre has not yet allowed open slather. If it did, the bulk of unsold homes in less desirable locations would stand far less chance of being sold.
Private enterprise was given a boost, with the NDRC (National Development and Reform Commission) setting up a new private economy development bureau. As a quick fix to get some central support up and running, the bureau does not, as yet, have the capacity to make much impact on the private sector’s woes.
‘New-quality forces of production’ has risen as a buzzword. Xi Jinping 习近平 used the term on a September inspection tour of Heilongjiang. It calls attention to a way of thinking about productivity in the New Era and underlines the central role of ‘emerging’ and ‘future’ industries.
While heading downward, trade slumps eased in September. A possible sign of stabilisation, support measures are, report commentators, taking effect; more aid may be expected. Initiatives were announced to boost trade ties with Nicaragua and Indonesia.
To expand domestic consumer spending and imports, work is speeding up to create a barrier-free internal market. MofCOM has upgraded priorities, first integrating markets on a regional level by linking supply chains, logistics and trade rules in the Yangtze River Delta. Home renovation season was kickstarted to promote the sale of large household items. 'Buy a new fridge!' whether you need it or not.
We now have the five-year legislative plan from the 14th NPC (National People's Congress) Standing Committee. It tables more legislative projects, not least ‘first-class’ ones, than the 13th. The economy (e.g. upgrading regulation of state-owned assets and bidding) and ensuring national defence security are high priorities. Despite expert drafts, legislators are cautious about developing codes of law; the Ecological and Environmental Code seems most likely to move forward.
Basic rules governing power spot markets nationwide were issued by NDRC (National Development and Reform Commission) and NEA (National Energy Agency). This is a step to unify national power markets: spot markets should enable the power sector to respond quickly to supply/demand fluctuations. Such flexibility will help ease the integration of renewables into the power grid.
Huawei's Mate 60 Pro, the new flagship smartphone, sparked talk of serious advances in domestic chipmaking. Its Kirin 9000s processor, reportedly manufactured by SMIC (Semiconductor Manufacturing International Corporation) and achieving 7nm technology, passes a milestone once thought years off. Yet industry insiders caution that details about the chip remain sparse, making it difficult to assess long-term implications; rumours persist of its reliance on older foreign tech.
Rural revitalisation, ambitiously promoting mass infrastructure and business projects in the countryside, faces mounting village-level debt. The total owed by 700,000 administrative villages across the country reached C¥900 bn, averaging some C¥1.3 million per village. Central relief is deemed unlikely. Forced to find solutions on their own, localities are reluctant to take on new projects.
The autumn harvest has started. 2023 has been another year full of extreme weather. Beijing expects, as ever, a near-bumper crop.
A new ‘flagship’ biodiversity strategy was approved by the Ministry of Ecology and Environment, seeking to build on the Kunming-Montreal Global Biodiversity Framework. This set a global target of protecting 30 percent of all land, inland water bodies and coastal seas by 2030.
In the lead-up to COP28 in Dubai, Beijing is supporting global targets for tripling renewable energy capacity and boosting climate adaptation. Lead climate envoy Xie Zhenhua 解振华 renewed calls for ‘building bridges’ with US and EU counterparts while describing a complete phasing out of fossil fuels as unrealistic.
Meanwhile, regulators gained greater control over the use of carbon emissions allowances, with a new requirement to mark the date each allowance is issued. This implies eliminating surplus allowances issued early in the scheme’s history, preventing market distortion.
The National Healthcare Security Administration listed crackdowns and upgrades to insurance at its first press conference. Along with a public statement from the National Health Commission, it signalled that, despite a rumoured slowdown, anti-corruption campaigns in the health sector are not over. Launch of a second rare disease catalogue five years after the first shows progress.
Attention to vocational education keeps rising. While the commercial sector thrives, secondary vocational schools face falling enrolments and shutdowns. Inspired by international models, experts propose making the field over with comprehensive high schools combining general and vocational studies. Standardising exams is a rising topic, allowing vocational school students pathways to higher education. The Ministry of Education is organising training sessions for vocational school leaders to improve their teaching, helping vocational education out of its, at best, patchy reputation.
The final brief in our China Executive Briefing series with Asia Society Australia. Alongside gloomy outlooks and tightening budgets, the policy wheels of the new administration keep turning. Some sectors find a silver lining in new funding, subsidies, tax breaks and the like. In the past, the economy was only stable at turbo speed. The New Era will need to find new sources of both stability and growth. Our briefing examines these challenges from technology to ageing.
download the brief: looking for post-COVID stability and check out the whole series