DRIVING THE DAY
1. Trump’s economic team in Beijing
The latest round of US-China trade talks kicked off today in Beijing.
There’s been lots of reporting in the run-up to this meeting. Everyone agrees that not much will come of it (Reuters):
- “A breakthrough deal to fundamentally change China’s economic policies is viewed as highly unlikely, though a package of short-term Chinese measures could delay a U.S. tariff decision.”
- “The discussions, led by U.S. Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He, are expected to cover a wide range of U.S. complaints about China’s trade practices, from allegations of forced technology transfers to state subsidies for technology development.”
- “’This is going to be a series of relatively brief meetings with little pre-meeting planning on either side,’ said Scott Kennedy, head of China studies at the Center for Strategic and International Studies in Washington.”
That’s our take, too.
Increasingly, people on both sides of the Pacific are realizing that the real disagreement comes down to technology, not trade (see US News link).
And no agreement this week is going to fundamentally alter the competition between the US and China to dominate the next generation of technology.
But at least the two sides are talking.
Reuters: Chances for U.S.-China trade breakthrough seen slim in Beijing talks
US News: Chip Wars: Tech Rivalry Underlies US-China Trade Conflict
FINANCE AND ECONOMICS
2. Foreigners jump into third-party payments
Foreign companies are starting to test the waters of China’s newly opened third-party payments market.
The first official entrant is a British company called WorldFirst (Caixin):
- “An official at the People’s Bank of China confirmed to Caixin that the central bank has received an application from WorldFirst for a payment business license in China.”
- “The central bank in March granted foreign companies access to its massive non-bank payment market as part of a national commitment to further open up its financial services market.”
But despite market opening, its going to be tough sledding.
Why? Because domestic companies are already so dominant:
- “Foreign players are expected to face strong rivals in China as domestic players have deep footholds at home while seeking to expand abroad to reach global users.”
- “Alipay, the dominant player, said it has 520 million active users nationwide and supports payments in 27 currencies across 30 countries.”
We’ve said it before, we’ll say it again: This is the blueprint for China’s market opening, especially in the finance sector. Foreign companies will be allowed to compete, but only after domestic players have essentially cornered the market.
Caixin Global: WorldFirst Moves to Tap China’s Payment Market
POLITICS AND POLICY
3. Marx for the people
The propaganda is heating up in preparation for Karl Marx’s 200th birthday on May 5th.
On Wednesday, the People’s Daily ran an 8,000+ character editorial by Ren Zhongping praising Marx and his thought on page one.
Some context: Ren Zhongping is a pseudonym used by the paper for important commentaries. It is a homophone for “important People’s Daily commentary.”
So what did the editorial say?
It offered a gentle, caring version of Marxism. Echoing Xi Jinping, it put “the people” first:
- “Today, we remember Marx in order to keep from forgetting our original purpose to ‘seek happiness for the people.’”
It also promised a strong China:
- “Today, we remember Marx in order to keep in mind our mission to ‘rejuvenate the nation.’”
But, it also promised a peaceful China:
- “Today, we remember Marx in order to stir our feelings for ‘creating the Great Community on earth.’”
Get smart: This is not your father’s Marxism. There will be no class struggle and no exporting revolution. Instead, the Party is turning Marxism into a philosophy that promotes prosperity and peace.
People’s Daily: 任仲平：他的英名和事业永世长存
POLITICS AND POLICY
4. China wants in on US-DPRK talks
State Councilor and Foreign Minister Wang Yi arrived in Pyongyang Wednesday (Xinhua).
Some context (AFP):
- “Wang is the first Chinese foreign minister to visit the North since 2007, a lapse that highlights the rough patch that relations between the allies have gone through in recent years.”
What Wang’s visit signals: Bilateral relations are improving quickly after Kim Jong-un’s visit to Beijing last month.
Why Wang is there: Things are happening rapidly on the Korean peninsula, and China wants to make sure that it is not left out of discussions amongst the DPRK, South Korea and the United States.
What to watch: There’s a lot of talk around Beijing of a possible Xi trip to Pyongyang.
POLITICS AND POLICY
5. State Council makes it easier to start companies
Li Keqiang has been a man on a mission over the past five years.
His goal? Cutting red tape for businesses.
Li’s efforts took a big step forward on Wednesday when the State Council promised to halve the amount of time it takes to register a business.
The details (gov.cn):
- “According to a decision at the meeting, the length of time required to start a business in municipalities, sub-provincial cities and provincial capitals will be reduced from an average of more than 20 workdays to 8.5 by the end of the year.”
That’s not all:
- “Measures to halve the time required for government approval of construction projects from the current average level of more than 200 workdays to 120 will be piloted in 15 cities.”
Li explains what’s going on:
- “Reducing government-imposed transaction costs will be the priority of the reform of government functions going forward, and there is still a great deal that can be done in this respect.
- “The government must continue to make determined efforts to cut red tape, enhance compliance oversight and provide better services.”
Get smart: Just because China’s economy is state-led doesn’t mean it has to be completely inefficient.
Gov.cn: 李克强主持召开国务院常务会 采取措施将企业开办和工程建设项目审批时间压减一半以上
POLITICS AND POLICY
6. Bridging the urban-rural divide
One of the biggest problems facing China is the wide gap in opportunities for its urban and rural citizens.
Part of the problem is a lack of educational resources for rural children.
The State Council is trying to ameliorate the issue:
- “The State Council has released a circular on guidelines to improve construction of schools in villages and towns, in an effort to balance public services and revitalize the countryside.”
The new document calls for more investment in equipment and facilities.
Critically, it also addresses one of the key stumbling blocks:
- “More incentives should be introduced to encourage high-quality teachers to pursue careers in rural areas.”
Get smart: Getting teachers to go to the countryside is TOUGH. And the new guidelines are not specific on how they intend to lure more teachers to rural areas. We remain skeptical.