Finance Economics
1.Don’t believe the hype on March’s PMIs
Given that the “China is stabilizing” narrative is building, and the outperformance of Monday’s PMI readings is feeding into that mentality, we thought it would be worthwhile to take a stroll down memory lane.
Reuters in March 2018:
- “Growth in China’s manufacturing sector picked up more than expected in March.”
- “The official Purchasing Managers’ Index (PMI) released on Saturday rose to 51.5 in March.”
- “Analysts surveyed by Reuters had forecast the reading would pick up only slightly to 50.5.”
CNBC in March 2017:
- “Activity in China’s manufacturing sector expanded at a faster pace than expected in March, adding to evidence that the world’s second-largest economy is gaining momentum early in the year.”
- “The official Purchasing Managers’ Index (PMI) rose to 51.8 in March.”
- “Analysts polled by Reuters had predicted a reading of 51.6”
CNBC in March 2016:
- “Manufacturing activity improved in China in March…helping ease concerns over the health of the world’s second-largest economy.”
- “China’s official manufacturing PMI came in at 50.2 for March, above a forecast of 49.3 from a Reuters poll.”
Business Insider in March 2015:
- “Factories in China expanded their activity in March, beating expectations by market economists for a fall.”
- “The PMI rose in March to 50.1, just into expansion territory.”
Notice apattern?
Again, we just don’t think it’s wise to read too much in to this data point.
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Reuters: China March factory growth stronger than expected: official PMI
CNBC: China March official manufacturing PMI rises to 51.8, beats forecasts
CNBC: China’s PMI surveys show recovery in manufacturing
Business Insider: China PMI: Factories returned to expansion in March
Politics Policy
2.Xi tells civil affairs officials to alleviate poverty
On Tuesday, the annual National Civil Affairs Conference took place in Beijing.
This year’s conference got morelove than usual from the Party’s leaders.
- Xi Jinping sent instructions to the conference.
- Premier Li Keqiang attended the conference, as did State Councilors Wang Yong and Xiao Jie and National Development and Reform Commission Chairman He Lifeng.
So what did Xi and other leaders have to say to China’s civil affairs officials?
Focus on poverty alleviation.
Get smart: Xi has less than two years to go to fulfill his pledge to eliminate poverty by 2020. There are still over 10 million people living in poverty, and they will be the most difficult to help. Expect the pressure on officials to increase on this front over the coming 20 months.
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CPC People: 习近平对民政工作作出重要指示
Politics Policy
3.NPC focused on business environment
This year’s Two Sessions made clear that 2019 will be all about improving the business environment (see March 5 Tip Sheet).
The legislature (NPC) is promising to do its part (CPC):
- “The Standing Committee of the National People’s Congress (NPC) has launched an inspection on the enforcement of the Law on Promoting Small and Medium-Sized Enterprises (SMEs) in a bid to improve the legal and business environment.”
Here’s how the inspections will work, per NPC head Li Zhanshu:
- “NPC inspection teams will be sent to six provincial regions, in addition to inspections carried out by entrusted local legislative authorities in eight other regions.”
- “The inspection is designed to facilitate implementation of the law among various government agencies.”
- “Those agencies are required to protect the legitimate rights and interests of SMEs and private entrepreneurs, and provide guidance to the healthy development of SMEs.”
Get smart: Under Xi Jinping, the NPC has been much more active in law enforcement.
Get smarter: This is just further proof that the whole Party-state apparatus is being called on to improve the business environment.
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CPC People: 栗战书：营造良好法治环境和营商环境 促进民营经济和中小企业健康发展
Politics Policy
4.Corruption adapts to anti-corruption campaign
Sichuan provincial Party and state discipline inspectors (CCDI NSC) conducted surveys and interviews with local private businesses to better understand business-government relations.
The CCDI recently published their findings.
They found that the methods for demanding bribeshave become more subtle and sophisticated. Instead of suitcases full of cash, officials are now more likely to ask for equity options in the company.
Inspectors also found a much bigger problem: Local officials just won’t do their jobs.
- Inspectors found multiples cases where local officials would not grant necessary approvals to move projects forward.
The problem was that the local officials were afraid of taking responsibility, in case anything went wrong.
Get smart: One of the unintended consequences of the anti-corruption campaign has been its paralyzing effect on cadres throughout the system.
Get smarter: The authorities could help to alleviate this problem by making fewer activities subject to government approval.
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CCDI: 政商关系向亲清 七大隐忧待消除
Politics Policy
5.Patent Law revision hits speedbumps
Officials are hotly debating revisions to the Patent Law.
Some context: Initial efforts to revise the law started way back in 2011. The process has been catalyzed by US and EU demands for better IPR protection.
More context: The legislature deliberated draft revisions in December and is expected to undertake a second round of deliberations soon.
One big unresolved issue:Should government or the courts beresponsible for enforcing protection rights?
The government’s IPR protection agency (CNIPA) has succeeded ininsertinglanguage into the most recent draft that authorizes CNIPA to have more power in deciding IPR disputes.
That’s a big concern for some officials (Caixin):
- “When the Patent Law was enacted in 1985, relying on administrative power to resolve patent disputes was done mainly because the courts did not have the requisite expertise at that time.”
- “However, as reform of China’s market economy gradually deepens, the rule of law should be strengthened, and such disputes should be decided by the courts instead of the administration.”
What to watch: The Supreme Court strongly opposes CNIPA’s attempted power grab. Will the court succeed in clawing back power when the final version of the law is passed?
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Caixin: 加强知识产权保护 专利法应该怎么改？