1.Government cuts taxes again, to uncertain effect
The Chinese government is pushing through yet more tax cuts – this time on imports of personal goods.
The SCMP has the skinny:
- “The government will trim the ‘tax on baggage and articles accompanying incoming passengers and personal postal articles’, a three-in-one tax consisting of value-added tax, consumption tax and import duties on Tuesday.”
That’s according to a notice issued by the finance ministry Monday, which further elaborated that:
- “The tax rate on products including computers, foodstuffs, gold and silverware, furniture and medicines will be lowered to 13 per cent from 15 per cent.”
- “The rate for commodities including textiles, electric appliances and bicycles will be cut to 20 per cent from 25 per cent.”
More luxury-type items didn’t make the cut:
- “The tax rate for wine, cigarettes, jewellery, golf equipment, luxury watches and high-grade cosmetics will be kept at 50 per cent.”
Get smart: Cuts like this are probably positive at the margin, but they won’t move the needle for either consumer sentiment or consumption more broadly.
What to watch: March econ data will start coming out later this week. We expect the numbers to be disappointing.
2.Top leaders plant trees
There was not a lot political news coming out of China on Monday.
That’s probably because top leaders were all in Tongzhou planting trees (Xinhua):
- “Chinese President Xi Jinping on Monday stressed efforts to carry forward the Chinese nation’s tradition of loving, planting and protecting trees, and to involve the whole society in promoting afforestation.”
- “He made the remarks while attending a tree-planting activity in east Beijing’s Tongzhou District and planting saplings of different types of trees.”
- “Other Party and state leaders, including Li Zhanshu, Wang Yang, Wang Huning, Zhao Leji, Han Zheng and Wang Qishan, also attended the activity.”
Get smart: This is an annual activity. It’s a photo-op to show that top leaders still get their hands dirty.
Have fun: If it is was a photo-op, it’s not clear to us that Wang Huning benefited. The wan ideology czar looks a little shaky with his shovel.
Have more fun: Executive Vice Premier Han Zheng decided to wear some neon green kicks for the occasion. Very cool.
Xinhua: Xi stresses wide participation in promoting afforestation
3.A peek into online censorship
In case you didn’t know, there are a lot of people live-streaming in China:
- “As of the end of last year, almost 400 million people in China had…live-streamed their activities on the internet.”
A lot of that live-streaming happened on Inke, one of China’s largest live-streaming apps.
Recently, the company allowed the SCMP a peek inside how it complies with China’s stringent content regulations.
- It employs 1,200 content moderators.
Here’s how they decide what needs to go:
- “The content moderators work to detailed regulations on what is allowed and what has to be removed.”
- “Based on guidelines published by the China Association of Performing Arts, the training manual is updated weekly to take in the latest cases, making it a living document of what China deems objectionable content.”
Politically sensitive speech, nudity, and violence are all banned. But that’s not all:
- “The most-censored activity on Inke’s live-streaming platform, though, is smoking, which is not allowed because the authorities see it as promoting an unhealthy lifestyle.”
- “Showing excessive tattoos is also a no-no.”
Our thought: Tattoos and smoking seems like a bridge too far. This level of nanny-state is not going to endear citizens to the Party.
4.NDRC doubles down on industrial policy
China’s macro-planner (NDRC) released a draft version of its new industrial restructuring catalogue yesterday.
Some context: The draft updates the 2013 version of the catalogue. It’s open for public comment until May 7.
More context: The catalogue guides overall industrial restructuring plans by grouping industries into encouraged, restricted, and prohibited categories.
Why it matters: Sectors in the encouraged category will receive preferential industrial policies like tax breaks, subsidized land, and cheap financing.
What’s changed: We looked through all 131 pages of the catalogue. We reckon about 80% of the items remained unchanged from the previous version.
The big changes come – unsurprisingly – in high-tech sectors. The new version adds the following to the encouraged category:
- High-efficiency hydrogen production and transport
- High-density hydrogen storage technology and hydrogen refueling stations
- Smart cars
- Industrial internet hardware and software
And of course…There’s also an entirely new section on AI. We don’t know if you know this, but Chinese industrial planners are a bit obsessed with AI.
Get smart: The new catalogue doesn’t usher in new policies so much as sum up what is already happening.
The bigger picture: China has no intention of ditching its industrial policy.
NDRC: 关于就《产业结构调整指导目录（2019年本， 征求意见稿）》公开征求意见的公告
5. More fallout from the Jiangsu chemical blast
Right before the Qingming holiday, the Yancheng city government in Jiangsu announced that it is shutting down the industrial park where a deadly chemical blast took placeon March 21 (see March 22 Tip Sheet).
The provincial government is also scrambling to clean up the industry.
According to a leaked document, the provincial government sent a draft cleanup plan to city-level officialsand somefolks in provincial departments–askingthem to give feedback within 24 hours.
Key details of the plan include (Sohu):
- Cutting the number of chemical manufacturers down to 2,000 by the end of 2020 (from over 4,000 currently)
- Reducing the number of manufacturers down to no more than 1,000 by the end of 2022
- Requiring companies to meet a long list of safety and environmental criteria
Ummm… issuing quotas for the number of companies is not the subtlest way to regulate an industry.
Get smart: Some legitimate chemical companies will be collateral damage of this move.
Get smarter: Given thatchemicals are a crucialinput formany industries, the sudden closure of plants coulddisruptsupply chains in a host of sectors.