DRIVING THE DAY
1. Xi remakes Marx
On Friday, Xi gave a big speech at a Party confab to celebrate Karl Marx’s 200thbirthday.
He was effusive in his praise (CPC):
- “Marx…is the greatest thinker in modern times.”
Xi went on (Xinhua):
- “The most valuable and influential spiritual asset that Marx left to us is the scientific theory [our emphasis] named after him – Marxism.”
Why that matters: Xi cares a lot about Marxism, so it is important to understand what he means by the term. As the above statement shows, Xi does not see Marxism as an ideology, but as more of a methodology. Marxism doesn’t give you the answers. It gives you the tools to find the answers.
Xi goes on:
- “Marxism is a constantly developing… theory.”
- “Marxism is not a religious dogma, but rather a guide for action.”
Get smart: This is not your parents’ Marxism. This is Marxism with Xi Jinping characteristics. That means a state-led economy, increasingly conservative political culture, and a more assertive China on the world stage.
DRIVING THE DAY CONT’D
2. Turning the youth on to Marx
Chris Buckley of the New York Times has a great article on how propaganda officials are trying to turn kids onto Marx.
- “’Marx Got It Right,’ [is] a slickly produced program that is part talk show, part indoctrination session — and a vivid illustration of the quirky efforts that the Communist Party under Xi Jinping is making to win over… millennials… absorbed in their smartphones rather than The Communist Manifesto.”
How it works:
- “The show uses cartoons and folksy examples to argue that Marx discovered fundamental truths about how societies evolve, and that China remains shaped by Marx’s egalitarian ideals.”
It’s all part of a larger propaganda push aimed at young people:
- “Last year, officials in southern China produced a series called ‘Socialism Is a Bit Hip,’ which tried to mimic the zany garishness of pop culture.”
- “Party-backed rap groups have also made patriotic songs with lyrics so profane they should require parental guidance warnings.”
Get smart: The Party is trying to innovate how it reaches younger generations. A lot of the propaganda falls flat, but there is no question that there has been progress in seeding doubts about Western political systems.
Get more: Click the CCTV link for all five episodes of “Marx Got It Right.”
NYT: On This Chinese TV Show, Participants Have Nothing to Lose but Their Chains
FINANCE and ECONOMICS
3. Yi Gang on financial opening
Central Bank Governor Yi Gang sat down for an extended interview with Caixin recently.
Yi has been on the job just over one month, so any public comments he makes are of keen interest.
One of the main topics the Caixin interveiw: Why is China’s financial opening happening now?
- The service sector is increasingly key to China’s economy. Within that, financial services have a big impact on the economy.
- The conditions for opening are ripe, and the government feels confident it has a good handle on controlling risks that opening will entail.
Yi played down the competition between domestic and foreign financial institutions (FIs) after the opening, arguing that foreign players and domestic financial institutions each have their own comparative advantages:
- Domestic banks are dominant in market share and customer base, while foreign banks have better risk management, compliance, IT systems and product development.
- Domestic securities companies know the A-share market well, while foreign players excel in cross-border asset management
- Domestic insurers are good at traditional services, like retail insurance products, while the foreign companies are experienced in specialized products.
The theme? Domestic companies will do the bulk of traditional financial business. Foreign companies can play in more niche areas.
FINANCE and ECONOMICS
4. China posts a rare current account deficit
China released its first quarter current account data on Friday.
There were some surprises:
- “China saw a current account deficit of $28.2 billion in the first quarter this year, the first quarterly deficit since the second quarter of 2001.”
- “The goods trade still ran a surplus of $53.4 billion, but that was down 35% from a year ago.”
- “The service trade posted a deficit of $76.2 billion, the biggest quarterly deficit since 1998, the data showed.”
Some context: The current account balance is like the trade balance but with more items added in, like spending on services.
More context: While China runs a large surplus in the trade of goods (which is what the US administration is mad about), the country runs a large deficit in the services trade.
What services do Chinese spend the most on abroad? Travel. In fact, 85% of the Q1 services deficit was thanks to Chinese people travelling abroad – largely during Chinese New Year.
Why it matters: China wants (and needs) more money coming into the country than going out. So, while a quarterly deficit here or there is not a problem, the last thing financial regulators want is a sustained current account deficit.
Caixin: China Sees First Quarterly Current Account Deficit in Nearly 17 Years
FINANCE and ECONOMICS
5. China’s push into global standards
The US and others are focused on what they see as China’s unfair trade and industrial policy practices.
But there is another area where China is quietly starting to spread its influence to other countries, at the expense of Western companies.
What’s that? It’s the establishment of international standards – in everything from construction, to finance, to data management.
We think it’s a big deal, and not enough people are paying attention. And that’s just what we argued in Bloomberg this morning:
- “This push into global standards-setting has gone largely unnoticed. That’s partly because it’s boring.”
- “But it’s also partly by design.”
Why it matters:
- “Developing countries tend to voluntarily adopt standards set by high-income economies. But China’s government has taken a much more proactive role.”
- “Instead of trying to influence the likes of Pakistan, Thailand, and Myanmar by changing hearts and minds, it wants to convince them to change their nuts and bolts — and their data-management practices to boot.”
- “Billions of dollars in equipment sales and patent royalties are up for grabs in this competition.”
Go deeper: Click below to read our whole argument.
Bloomberg: China Is Quietly Setting Global Standards
POLITICS and POLICY
6. Xi’s telephone diplomacy – Korea
On Friday, Xi Jinping spoke by phone with South Korean president Moon Jae-in.
The purpose: getting a de-brief from Moon on his meeting with Kim Jong-un on April 27.
This call should have come a week ago (Hankyoreh):
- “Some observers speculated that the telephone conversation with Xi may have been delayed over Beijing’s annoyance with the declaration’s wording about ‘trilateral meetings involving the two Koreas and the United States.’”
But all seems to have gone well Friday:
- “Speaking about the ‘35-minute conversation’ between President Moon and Xi, a key Blue House official said, ‘There was no need for the conversation to go on for very long because there was almost nothing the two leaders disagreed about.’”
Xi said he was willing to help (Xinhua):
- “Xi… said that China is ready to… promote the political solution of the Korean Peninsula issue.”
Get smart: Chinese diplomacy has been in overdrive of late. Dynamics in Northeast Asia are changing quickly, and China wants to make sure that it has maximum influence over any changes.
Related: Director of the Office of the Party Foreign Affairs Commission Yang Jiechi spoke on Sunday to US Secretary of State Mike Pompeo (CPC).
Hankyorehi: President Moon Jae-in talks with Xi Jinping to complete rounds of “telephone diplomacy” with leaders of US, China, Japan and Russia
Xinhua: Xi, Moon talk about bilateral ties, Korean Peninsula issues over phone
POLITICS and POLICY
7. Xi’s telephone diplomacy – Japan
Xi also spoke to Japanese Prime Minister Shinzo Abe on Friday.
The readouts paint a rosy picture:
- “China and Japan should properly manage their contradictions and differences to bring bilateral relations back on track and strive for new developments, Chinese President Xi Jinping said Friday in a telephone conversation with Japanese Prime Minister Shinzo Abe.”
- “For a period of time, Japan has released positive signals and taken positive actions on bilateral relations and China welcomes what Japan has done, Xi said during the conversation.”
Some context: The fact that the two leaders are talking at all is remarkable – this is the first time that they talked on the phone since they both came to power in 2012.
And this is just the beginning, according to the SCMP:
- “A Japanese diplomat, who spoke on the condition of anonymity, confirmed that Tokyo was working to arrange… reciprocal visits by Abe and Xi in the coming months after Li’s Japan trip.”
What to watch: Premier Li Keqiang will make his first visit to Japan from Tuesday to Friday. We’ll be watching for concrete confirmation of warming ties.