Driving the Day
1.Public criticismshows policy is in flux
We’ve noticed that there seems to be a lot of public griping about policy at this year’s Two Sessions (see March 8 Tip Sheet).
So, apparently, has the SCMP, which rounds up some of the more notable examples:
- “Ye Dabo, a former diplomat…questioned whether it was accurate for Premier Li Keqiang to say in his government work report that the ‘Belt and Road Initiative’had made ‘important progress’last year.”
- “Kong Quan, a former assistant minister of foreign affairs, said trade disputes with the US should not have been given a prominent mention in the work report.”
- Made in China 2025… was slammed by Lou Jiwei, the former minister of finance and now a CPPCC member, as ‘a waste of taxpayers’ money.’”
- “The Thousand Talents Plan, a high-profile campaign to lure top Chinese talent home from abroad, has been criticised for being ‘overpromoted’ by a political adviser at another open session.”
What it means: Policy is in flux in many areas, meaning thatthere is no clear Party line. Once that line is established, it will be strictly enforced, and public debate will cease.
2.Housing policy on a steady course
Minister of Housing and Urban-Rural Development Wang Menghui discussed housing policy at the Two Sessions on Wednesday.
His main points:
- There won’t be a major relaxation of housing policy.
- Cities will have more freedom to design policy in accordance with local circumstances.
To the former point, Wang reiterated Xi Jinping’s key idea on property policy over the past year, saying:
- “We should adhere to the orientation of ‘houses are used for living, not for speculation.’”
The big takeaway: It’s steady as she goes when it comes to property policy in 2019.
That may seem like non-news.
But it matters because lots of analysts noted that Premier Li Keqiang’s speech last week did not contain the line about housing not being for speculation – and concluded that policy loosening was imminent.
But Wang’s comments point out that policy settings haven’t changed.
Get smart: Listening to what government officials are saying is incredibly important to understand the direction of policy, but it also pays not to over-interpret things.
Get smarter: Lots of investors and analysts really want China to stimulate the economy. That’s imbuing lots of policy analysis with wishful thinking.
3. First big data dump of 2019 comes tomorrow
It’s a slow news day on the econ front.
But tomorrow won’t be. That’s when we’ll get the first real clues as to how the economy has performed so far this year.
Some context: The stats bureau doesn’t release most of the numbers for January since Chinese New Year always causes distortions to the data. Instead they release Jan-Feb data together in March.
Our expectation: We aren’t exactly going out on a limb on this one – we think the data will show that the economy slowed further in the first two months of 2019.
If you’re anything like us, you’ll be awaitingthe numbers withbated breath.
Bloomberg:China Data Dump to Show Investment Recovery Continuing in 2019
4.Unhappy officials leaving the bureaucracy
Yesterday, we pointed out that new Party regulations to loosen burdens on grassroots officials signala problem – the Party is not functioning well.
A great piece from Bloomberg offers more evidence that all is not well within officialdom:
- “Interviews with eight officials in China’s ministries and regional governments show growing dissatisfaction.”
Under Xi Jinping, many cadres are overworked, underpaid, and heavily scrutinized. And that is leaving many an official to leave the bureaucracy:
- “One senior government official in his early 50s decided to apply for early retirement because his heavy workload sometimes required him to sleep in his office on the tiled floor amid crawling cockroaches, using newspapers for sheets.”
- “A 29-year-old civil servant in a provincial capital is rethinking his career as housing prices soar beyond what he can hope to afford on his $522 monthly salary.”
- “And another official quit to join a private company after 10 years of service, disillusioned by increasing scrutiny from the party’s disciplinary watchdog.”
Get smart: This certainly accords with our experience. Ever since the anti-corruption campaign picked up in 2013, we’ve seen a noticeable uptick in officials looking to leave the public sector.
The bigger picture: Thisexodus means that the overall quality of China’s corps of officials is likely todeteriorate.
Bloomberg: Disillusioned Bureaucrats Are Fleeing China’s Ministries
5.State Council promises to listen more
This year’s Government Work Report was all about helping businesses.
In the latest sign of the government’s pro-business agenda, today, the State Council General Office released new opinions on improving businesses’ ability to input into policymaking.
This is important: The opinions make it clear that regulatorswant to do a better job of seekingthe opinions of small and private businesses, in particular.
And officialswill try to create multiple platforms for input (gov.cn):
- “Authorities should use the internet and media to collect public opinions, and build advice soliciting platforms on their official web portals.”
- “Measures such as holding symposiums, conducting surveys and field visits are encouraged, according to the notice.”
Get smart: While there is a long way to go, the government is making a genuine push to improve the business environment.
Our thought: The biggest problem hampering private businesses is not officials’ lack of understanding about the problems that private businesses face. It is the institutional incentives that favor the state-owned sector.
We’re notsure a new web portal for opinions will fix those…