China Tip Sheet May 17: Xi meets with North Koreans…Liu He’s right hand man…government services go online…WMP sales take a hit…and much much more!

DRIVING THE DAY

1. Xi meets with North Koreans

Budding US-DPRK relations are on the rocks after North Korean leader Kim Jong-un threatened to pull out of a proposed summit with US President Donald Trump.

But Sino-DPRK relations look just fine.

On Wednesday, Xi met with a delegation of visiting North Korean officials.

Some context: This is the latest in a series of high-level contacts between the two countries, including two meetings between Xi and Kim.

Get smart: China and North Korea are sending a message that they are still tight. That serves each countrry’s interest. It give the Chinese leverage in trade talks with the US. And gives the North Koreans leverage in peace/denuclearization talks with South Korea and the US.

FINANCE and ECONOMICS

2. Asset management rules already making waves

New asset management rules only came out on April 27. And asset managers are not required to be fully compliant until 2020.

But banks and other issuers of wealth management products (WMPs) are already changing behavior, and doing so abruptly (Caixin):

“Fewer than 100 new WMPs were sold in the three days following the release of the Guidelines on Standardizing Asset Management Businesses of Financial Institutions on April 27, according to a monthly report by online financial service platform Rong360.com.”
“In contrast, ‘several hundred’ products were issued daily before the publication of the rules, the report said.”

The slowdown late in the month led overall monthly issuance to fall substantially:

“The number of new wealth management products declined by 20.4% in April from the month earlier, declining by 7% year-on-year.”

The month-to-month drop is largely thanks to seasonal issues (April is always a slow month for issuance overall).

But that doesn’t explain the year-on-year fall off.

What to watch: The new asset management rules are sweeping and important. We’ll be watching closely to see how WMP issuers react, and if there are unintended consequences for Chinese financial flows.

FINANCE and ECONOMICS

3. Liu He’s right-hand man

If there is one consistent knock on Vice Premier Liu He, it’s that he is more of a thinker and strategist than a policy implementer.

Throughout his career, Liu has worked behind the scenes to draft China’s five-year plans and other high-level documents. He’s not been a nuts-and-bolts guy.

So what’s the best way to fix that? Give him a capable deputy.

Liu’s number two at the general office of the Central Financial and Economic Affairs Commission is a guy called Liao Min (Caixin):

“Liao, 49, has extensive regulatory experience in the banking sector.”
“Liao was appointed deputy director of the general office of the China Banking Regulatory Commission (CBRC) right after it was established in Beijing in 2003, and later promoted to office director. He moved to Shanghai in early 2011, where he served as the head of the CBRC’s local branch.”
“Before joining the CBRC, Liao occupied positions at the Bank of China, one of the Big Four state-owned commercial banks; China Everbright Group… and at the central bank.”

Get smart: That’s a solid resume, with lots of “real world” experience.

Get smarter: Some people say China doesn’t have a deep bench of capable financial regulators. They’re wrong.

POLITICS AND POLICY

4. Xi wants a high-tech military

Xi visited the People’s Liberation Army (PLA) Academy of Military Science Wednesday.

Some context: The Academy of Military Science is basically the armed forces’ in-house think tank. It’s heavily involved in shaping defense policy.

Xi’s message:

“Relevant research should be combat-oriented.”

Get smart: China is not looking to fight any wars. But Xi has made it a point to get the PLA more combat ready.

POLITICS AND POLICY

5. Li Keqiang’s small government agenda

Li Keqiang is on a mission to make government more efficient.

One way to do that: Make more services available online.

Here’s what Li said at a State Council meeting Wednesday:

“Government services are to serve the public, and hence must be universally accessible.”
“Current technologies have made it possible to have many things done online.”

What they will do in practice:

“Concrete measures were… adopted… to establish a uniform e-platform for accessing government services and see that things requiring a personal appearance will get done in one place, without the need for a second trip.”
“An e-platform for accessing interconnected government services at the national, provincial and city levels will be established.”
“Standardized procedures will be laid out, and a list of the items requiring appearance in person will be released.”
“At least 90 percent of the service items offered by provincial-level authorities and 70 percent by city and county-level authorities will be made accessible online before the end of 2019.”

Get smart: China is hardly a great place to do business. But it is getting better.

POLITICS AND POLICY

6. Foreigners can register businesses online

Foreign businesses are also going to benefit from simplified procedures.

According to the State Council meeting:

“It was decided at the meeting that a single form and one-stop services will be introduced for the business filing and registration of foreign-invested enterprises.”
“The whole process will be conducted online and free of charge, without the need for paperwork or appearance in person.“

This is set to happen soon:

“This… will take effect from June 30.”

Get smart: The government is sincere about its desire to increase foreign investment. It’s not because they truly want to help out foreign companies – its because they want balanced capital flows.

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