1.Chen Yulu sums up policy concerns
Vice governor of the central bank Chen Yulu issued a statement at the 39th meeting of the IMF’s International Monetary and Financial Committee over the weekend.
The statement didn’t break any new ground. But it did summarize well the key issues that financial and economic officials in China are thinking about these days.
First off, the global economy isn’t doing so hot:
- “Downside risks facing the global economy have recently intensified.”
- “The build-up of financial sector vulnerabilities and sharp tightening of financial conditions could intensify vulnerabilities in countries.”
China’s economy is slowing, and authorities will continue to rely primarily on fiscal policy to respond:
- “Prudent monetary policy will be neutral in general…China will pursue a proactive fiscal policy with greater intensity.”
Chinese officials still aren’t happy with the US:
- “The protectionism of some countries has harmed mutual trust among countries, limited the scope for multilateral cooperation, and impeded the willingness to achieve it.”
Get smart: From Beijing to Washington, Chinese policymakers are staying on message.
Get smarter: A weak global economy will weigh on Chinese growth this year. Despite the solid credit print on Friday (see Friday’s Tip Sheet), the economy still has plenty of vulnerabilities.
IMF: Statement at the Ministerial Meeting of the 39th meeting of the International Monetary and Financial Committee
Reuters: China denounces protectionism in swipe at U.S. trade policy
Bloomberg: China to Maintain Prudent Monetary Policy, PBOC’s Chen Says
2.China’s growing global internet clout
Bloomberg is out with an excellent piecethat highlightsthe growing number of countriesfollowing China’s lead by stepping up internet censorship and data localization policies.
A bunch of those countries are in Southeast Asia:
- “Vietnam’s controversial version [of data control] went into effect Jan. 1 — a law BSA/The Software Alliance, which counts Apple Inc. and Microsoft Corp. among its members — called chilling and ineffectual.”
- “Indonesia, the region’s largest economy, already requires data be stored locally.”
- “The Philippines has stepped up what critics call a media crackdown, arrested the head of media outlet Rappler Inc. after it grew critical of President Rodrigo Duterte.”
- “And last year, the government of former Malaysian Prime Minister Najib Razak introduced a fake news law used to probe his chief opponent, though the current government may yet repeal it.”
- “Thailand…passed a cyber security bill modeled on China’s that grants the government the right to seize data and electronic equipment without a court order in the interests of national security.”
Get smart: The China model for internet governance is gaining steam just as Western models are being increasingly questioned.
Go deeper: Click on the link below.
Bloomberg: China Wins Allies for Web Vision in Ideological Battle With U.S.
3.Legislature to review revised Securities Law
The chairpersons of the National People’s Congress (NPC) met on Friday to decide the agenda for the legislature’s next session.
Mark you calendars: The next session gets underway Saturday, April 20, and ends on Tuesday, April 23.
On the agenda: Legislators will review amendments to four laws:
- Securities Law
- Judges Law
- Procurators Law
- Drug Administration Law
They will also review (Xinhua):
- “a new draft law on vaccine administration and two draft sections on property and personality rights of the civil code.”
That’s not all:
- The legislature will also review amendments to nine laws submitted by the State Council.
- These amendments are to facilitate the implementation of the new Foreign Investment Law, which was passed on March 15 and is scheduled to come into effect on January 1, 2020.
But this is what we are most interested in:
- “The chairpersons’ meeting approved a plan on the NPC Standing Committee’s major tasks, legislation, and supervision work for 2019.”
What to watch: The 2019 legislative plan will be revealed at the end of the upcoming session.
CPC People: 栗战书主持召开第二十八次委员长会议
Xinhua: China’s top legislature schedules bi-monthly session
4.China cuts price on Malaysian BRI project
Last year, newly-elected Malaysian Prime Minister Mahathir Mohamad cancelled a high-profile Chinese railway project.
That was a big deal, because the project was seen as a key part of Xi Jinping’s signature Belt and Road Initiative.
Some context (SCMP):
- “The project, part of China’s “Belt and Road Initiative”, was approved by Malaysia’s former prime minister Najib Razak.”
- “It was plunged into uncertainty after Najib was ousted by Mahathir Mohamad, who decided to renegotiate the deal, saying the terms were unfair.”
At the time, Mahathir warned against Chinese “colonialism” (see August 21 Tip Sheet).
If Mahathir was just trying to get a better deal, it worked. China has slashed the price for the project:
- “Building the first two phases of the rail link will now cost 44 billion ringgit (US$10.7 billion), down from the original cost of 65.5 billion ringgit.”
- “The length of the railway will also be reduced by 40km to 648km.”
Get smart: After a rocky year for the Belt and Road, Chinese officials are keen to make the initiative a success – even if it means taking haircuts on some projects.
What to watch: The second Belt and Road forum will be held in Beijing later this month.
5.China holds economic dialogue with Japan
On Sunday, China and Japan held the China-Japan High-level Dialogue in Beijing.
The meeting was chaired by State Councilor Wang Yi on the Chinese side and Foreign Minister Taro Kono on the Japanese side.
Some context: The dialogue was begun in 2007 but was suspended in 2010 amid growing bilateral tensions. It resumed last April.
What they discussed (SCMP 1):
- “In a press briefing late on Sunday, Japanese foreign ministry spokesman Takeshi Osuga said Japan’s delegation had raised issues including forced technology transfers, intellectual property and data protection and Chinese industrial subsidies.”
- “He said Beijing, meanwhile, raised the issue of Huawei, expressing concerns over the Chinese tech giant’s activities in Japan being affected by Tokyo’s 5G policy.”
- “Both sides also agreed to work towards lifting a Chinese ban on food imports from 10 Japanese prefectures that has been in place since the Fukushima nuclear disaster in 2011.”
There have been other signs of warming ties of late (SCMP 2):
- “In a sign of China’s new willingness to discuss…issues that have long been seen as off the table, Beijing and Tokyo held their first bilateral meeting on intellectual property protection earlier this month.”
Get smart: Amid rising tensions with the US and Europe, China is keen to have more stable relations with Japan – and the rest of Asia (see previous entry).
What to watch: Xi Jinping is scheduled to travel to Japan in June for a G20 summit. If ties with Japan continue to improve, he will also likely make his first state visit.
6.Li Keqiang lays out economic policy
On Friday, Li Keqiang wrapped up his five-day tour ofEurope.
The big news: As expected, Greece officially joined the China-Central and Eastern European Countries (CEEC) grouping, becoming the 17th European member of the group.
Before heading back to Beijing, Li delivered a speech to the China-CEEC Business Forum.
As usual in such a forum, he called for more economic cooperation (Xinhua):
- “We need to further unlock the trade potential, improve the trade mix, and expand areas in trade cooperation.”
- “We need to deepen investment and industrial capacity cooperation.”
Li also gave an overview of the government’s economic policy plan:
- “First, we will take steps to energize market entities and improve the business environment.”
- “Second, we will take steps to pursue innovation-driven development and strengthen new growth drivers.”
- “Third, we will take steps to promote all-round opening-up and build an open economy at a higher level.”
Get smart: This isn’t anything new – it’s what Li laid out at last month’s Two Sessions.
7.A shakeup for China’s natural resource market?
On Sunday, the general offices of the Party’s Central Committee and the State Council released guidelines to shake up the way China’s natural resources are governed.
In particular, the government is looking to clarify who, exactly, has the right to use China’s natural resources – and at what price.
The government is introducing more market elements:
- “It is necessary to improve the price formation mechanism and expand [the scope for] the competitive transfer [of the right to use natural resources].”
But it will be far from a fully free market (surprise!):
- “The quota system will allow the government to better play its role of controlling [natural resources.]”
Environmental standards are becoming more important for companies to win rights to tap into China’s natural resource base:
- “We will…make…ecological protection requirements an important factor in selectingrights holders, and incorporate [those requirements] into transfer contracts.”
Get smart: These changes are big deal for the mining and oil and gas sectors.
Get smarter: A more efficient system for transferring mining and exploration rights could facilitate more private sector involvement.