Finance Economics
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.
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SCMP: China cuts controversial tax on personal items bought overseas in move to boost consumption
Politics Policy
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.
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Xinhua: Xi stresses wide participation in promoting afforestation
Politics Policy
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.
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SCMP: No smoking, no tattoos, no bikinis: Inside China’s war to ‘clean up’ the internet
Politics Policy
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
- Fintech
- 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.
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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
Politics Policy
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.
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Xinhua: 盐城彻底关闭响水化工园区 我国化工业转型升级势在必行
Sohu: 关于征求《江苏省化工行业整治提升方案 （征求意见稿）》意见的紧急通知
The Paper: 江苏：历史全面辩证地看待化工产业，系统推进整治提升工作