DRIVING THE DAY
1. Xi to world: “You can count on me”
On the last day of the BRICS summit, Xi Jinping chaired a Dialogue of Emerging Market and Developing Countries.
He pointed out that the international situation is tense:
- “Multilateral trade negotiations are stalled, and the implementation of the Paris Agreement on Climate Change is encountering resistance. “
- “Some countries have become more inward-looking and less inclined to engage in international development cooperation, and spillovers of their policy adjustment are deepening.”
Get smart: He’s not so subtly referencing the United States and its abrogation of world leadership under President Trump.
Xi’s solution: Forget the US.
- “Given the new circumstances, emerging market and developing countries need to pull together and work hand in hand more confidently.”
- “We need to advocate an open world economy, firmly support the multilateral trading regime, oppose protectionism, and rebalance economic globalization to make it more inclusive and equitable.”
- “We need to strengthen coordination on positions . . . and provide direction to the multilateral trading regime.”
Get smart: Previous Chinese leaders shunned world leadership. Xi Jinping embraces it.
- CPC: 习近平主持新兴市场国家与发展中国家对话会并发表重要讲话
- Xinhua: Full text of President Xi’s remarks at Dialogue of Emerging Market and Developing Countries
FINANCE & ECONOMICS
2. Financial regulation and personal accountability
Changing behavior is all about personal responsibility. The banking regulator (CBRC) is coming to understand that.
The latest data from the CBRC shows that the amount of banking fines jumped last month. August fines stood at RMB 47.7 million – up 33% from July’s RMB 36 million.
That was the third largest monthly amount this year, with the biggest penalties coming in May and June when the regulatory crackdown first kicked off.
Some detail: Regulators are going deep, with a good chunk of the fines occurring at very small lenders. Sichuan Zhoukou Credit Cooperative, for example, got dinged to the tune of RMB 300 thousand for illegal lending.
But most importantly: Its chief management officer, Du Kui, also received RMB 80 thousand in individual fines – the largest personal fine issued in August.
Why it matters: Increasing penalties for banking violations could be a strong disincentive for bank employees to skirt the rules. But only if the new fines are consistently applied for a sustained period.
- The Paper: 银监会下手更重了：8月罚单数量降22%，罚款金额升33%
FINANCE & ECONOMICS
3. Is Hubei province steeling for a property crash?
We’ve explained before that the big policy push on real estate is to develop the rental market. But effects of the policy will be slow to manifest.
Hubei’s SOE regulator apparently disagrees. Yesterday, ist sent a warning shot to provincial SOEs, saying:
- All provincial SOEs must cease new real estate investment as of September 5th. (They later toned this down from “cease” to “exercise caution”.)
- For existing investments, both construction and sales should be accelerated.
Some context: Property construction is a capital-intensive business. Developers pony up a lot of money to start a project, and most of it is usually borrowed.
The reaction: Local markets were concerned that the Hubei government was anticipating an all-out property market crash.
Get smart: The move was really about playing ball with Xi Jinping’s recent directive to try to control SOE debt. It’s no secret – regulators said as much. The thinking is that local prices could start to ease thanks to the push into rental units, which would worsen financial positions at local state-owned developers.
- Bloomberg: China’s Hubei Province Halts Some New Property Investments, Sources Say
- HBGZW: 省政府国资委关于谨慎投资房地产的通知
- HBGZW: 湖北省政府国资委召开降杠杆减负债防风险工作会议
POLITICS & POLICY
4. Environmental protection meets the property market
The SOE regulator (SASAC) isn’t the only government agency setting its sights on the property market.
The environmental watchdog (MEP) is also getting involved.
The Tianjin MEP bureau recently issued a plan to reduce air pollution this fall and winter (link below).
One key element of the plan is to shut down all construction sites for six months (October to March) to reduce dust in the city.
The reality: Both government officials and industry folks have acknowledged that cold weather effectively shuts down construction for four months during that period – so the plan is not quite as disruptive as it first seems.
Nevertheless, the new measures show an increasing level of seriousness for environmental protection, especially in Beijing, Tianjin and Hebei.
Get smart: Environment protection is a major policy priority. Its effect on business and the economy will be as significant as the push to cut capacity in upstream sectors.
POLITICS & POLICY
5. Wang Qishan is back
After more than a month out of the public eye, Wang Qishan reappeared this week. He went on inspection tour to Hunan.
Wang’s prolonged public absence had engendered all sorts of speculation.Some said he had cancer. Some said he had fallen afoul of Xi Jinping. Others said he was plotting his next big move.
Get smart: Wang’s job as head of the discipline commission is supposed to be low-profile. We track top leaders’ public appearances, and Wang is often out of sight for weeks at a time.
The takeaway: We are in silly season. As the 19th Party Congress approaches, the rumors are going to be flying fast and furious. Don’t believe the hype.
POLITICS & POLICY
6. Is the CCP on the verge of collapse?
“This could all fall apart.”
That was essentially Wang Qishan’s message when he met with local officials in Hunan.
Wang is a historian by training. He has said that he is looking for a way to break free from China’s historical pattern of dynastic collapse.
Wang’s solution: More effective supervision of the Party.
Get smart: Wang has spearheaded the anti-corruption drive. That campaign has produced results, but there is still a long way to go before corruption is genuinely brought to heel (let alone eliminated).
What to watch: Next year will see the establishment of the National Supervisory Commission. That body is supposed to institutionalize the anti-corruption campaign. We’ll be waiting to see how, exactly, it does that in practice.