FINANCE and ECONOMICS
1. Li Keqiang says no stimulus coming
“Read my lips. There will be no massive stimulus.”
That’s essentially what the readout from Wednesday’s State Council meeting said. Here’s the actual text:
- “The country will stick with prudent monetary policies and refrain from resorting to a deluge of strong stimulus policies, it was stressed at the meeting.”
Get smart: Officials could not be clearer. They understand that the economy is slowing. And they are going to take measures to address that. But they are not going back to the 2008 playboook of massive stimulus.
What to watch: Markets still seem to be over-estimating the size and impact of economic support measures. We expect growth and credit numbers to disappoint expectations when they are released in September and October.
Gov.cn: Tailored measures to help financing for SMEs
FINANCE and ECONOMICS
2. Comparing the US and China, state-by-province
It’s a slow news day on the economic front.
Markets and policymakers on both sides of the Pacific are waiting to see what comes out of the latest round of trade talks when they conclude on Thursday afternoon in Washington, DC.
While we’re waiting, Bloomberg has an interesting piece that examines the size of Chinese provincial GDP, as compared to those of US states. Some interesting findings include:
- “Guangdong, Jiangsu and Shandong each had gross domestic product of more than $1 trillion last year. That matches the number of U.S. economies exceeding that milestone: California, Texas and New York.”
- “In fact, the GDPs of the 20 largest economies in the two nations exceeded $500 billion in 2017. Eleven of the top 20 were American states and nine were Chinese provinces.”
Our take: The piece is a good reminder of the huge economic disparity within China. It’s also a reminder that understanding China requires a granular investigation into what is happening on the ground. The macro numbers cover up huge on-the-ground differences.
Oh, and by the way: The latest round of USD 16 billion in tariffs went into effect just after noon Beijing time.
POLITICS and POLICY
3. Xi stays the course on propaganda, amid grumbling
Xi Jinping wants China’s propaganda officials to up their game.
That’s what he said at the two-day National Propaganda and Ideology Work Conference, which concluded on Wednesday.
The big man started by addressing criticism that propaganda has gotten out of control recently (CPC):
- “Practice has proved that the decisions and deployment of propaganda and ideological work by the Party Central Committee are completely correct.”
In fact, Xi says it’s not just right, but necessary:
- “We must…illustrate China’s special characteristics, and effectively preserve our political security.”
To do so, Xi was clear that the authorities need to control the internet:
- “We must…improve our use of the internet, and make it…the biggest contributor to our project.”
Xi also wants artists to do a better job serving the cause:
- “[We] must…unceasingly release odes to the Party, odes to the motherland, odes to the people and odes to heroes…and write the new epic of the Chinese nation.”
And finally, Xi wants officials to do a better job of promoting China abroad:
- “[We] must…take the initiative and tell well the story of how the Chinese Communist Party governs the country…so that the world can better understand China.”
Get smart: Everything that Xi said points to an increasingly restrictive and controlled information environment.
CPC: 习近平：举旗帜聚民心育新人兴文化展形象 更好完成新形势下宣传思想工作使命任务
POLITICS and POLICY
4. The SME push pushes on
Wednesday’s State Council meeting focused on what is now a common refrain – getting financing to small businesses.
Here’s a recap of just some of the recent high-level meetings focused on this issue:
- August 20 – Liu He chairs meeting of the SME leading small group (see August 21 Tip Sheet)
- August 16 – State Council meeting focuses on getting funding to private business (see August 17 Tip Sheet)
- Early August – Financial Stability and Development Committee meeting focuses on getting financing to small businesses (see August 10 Tip Sheet)
- July 23 – State Council meeting promises to boost small business bonds (see July 24 Tip Sheet)
And we could go on…
Wednesday’s meeting reiterated much of what those previous meetings had discussed, including:
- “Shortening the time required for credit approval for small and micro businesses.”
- “Increasing the share of mid- and long-term loans.”
- “An incentive mechanism linking performance assessment…with the amount of loans they issue to small and micro businesses will be established.”
- “A more accommodating approach will be exercised over the loan-to-deposit ratio…to further motivate [banks] to better serve small businesses.”
Get smart: Regulators and officials can have all the meetings they want. The problem is that banks simply don’t want to lend to small businesses.
POLITICS and POLICY
5. Party runs the new Ministry of Agriculture
Xi Jinping has elevated the Party at the expense of the state – our readers know that.
Perhaps nothing reflects that reality more clearly than recent institutional changes at the Ministry of Agriculture and Rural Affairs (MoARA).
Some context: MoARA was created in March, when China announced its huge Party and government reorganization – it took over duties of the former Ministry of Agriculture and was further beefed up to run all rural policy.
A meeting on Monday outlined the ministry’s new organization plan.
Han Changfu, head of MoARA, told his colleagues to understand who they work for. (MoARA):
- “[We] shall strengthen the Party’s centralized and unified leadership over the work of ‘agriculture, rural areas and farmers.'”
To do that, the Party is setting up shop inside the ministry:
- The General Office of the Party’s Central Leading Small Group on Rural Affairs has been set up in MoARA and will take direct orders from its Party bosses.
- MoARA’s various departments will then do work, as designated by the General Office.
Why it matters: That General Office used to be a separate party advisory body, now it is in-house and calling the shots.
Get smart: Other ministries – like the Ministry of Justice and the National Audit Office – are seeing similar changes.