1. CSRC offers greater liquidity support
The CSRC is seeking public comments on new rules that would allow the government to bail out securities companies facing “significant liquidity risk.”
The measures also determine what forms of liquidity assistance securities firms can pursue.
Some context: Funding has been tight ever since the seizure of Baoshang Bank by authorities back in May.
The CSRC’s rationale:
- “Though China’s securities industry has not faced major liquidity risks, brokerages still lack steady and long-term supporting measures compared with overseas financial institutions.”
Get smart: De-risking is still the name of the game. The government is determined to make sure that the reverberations from the Baoshang saga don’t harm the financial system more broadly.
Required listening: For a deep-dive on the state of China’s banking sector, listen to Trivium Chief Economist Andrew Polk discuss the latest banking industry developments on Technode’s China Tech Investor podcast (link below).
Bloomberg: China Drafts Rules on Liquidity Support for Securities Firms
Reuters: China to provide liquidity support to brokerages in event of major risks
Technode: China Tech Investor 30: A peek inside China’s banking industry with Trivium China’s Andrew Polk
2.SAFE remains cautious on FX opening
Xi Jinping’s “Stay true to the Party’s founding mission” study campaign has mobilized the entire Party-state (see May 31 Tip Sheet).
The foreign exchange regulator (SAFE) has been holding its requisite study sessions. They summed up their efforts in a readout Sunday.
SAFE leadershipused the sessions to reinforce commitment to foreign exchange reform:
- “The Party Committee of SAFE will … resolutely deepen foreign exchange reforms [and]expand opening of the foreign exchange market.”
But leadership was also quick to point out that the agency remains focused on risks:
- “[We will] prevent cross-border capital flow risksand strengthen the crackdown on foreign exchange-related violations and illegal behaviors.”
Get smart: Financial sector opening continues to march forward. But we are still a long way off from capitalaccount convertibility.
3. Party-state restructuring continues
On Friday, the Politburo Standing Committee (PBSC) called in senior officials from across the country.
The reason: To review progress of the MASSIVE Party-state reorganization.
Some context: Xi initiated a restructuring of the bureaucracy in March 2018. Refresh your memory with our infographic.
More context: This is the first time that top leaders have ever publicly reviewed a Party-state restructuring.
We told you this is MASSIVE: The reorganization has affected over 1.8 million officials – and that’s only at the central level.
Overall, the reorganization has served to shrink the bureaucracy. Centrally, there are now:
- 15.4% fewer internal departments
- 10.8% fewer directors-general
- 3.1% fewer cadres overall
There has been resistance to some of the proposed changes. But Big Daddy’s got it under control:
- “Under the strong leadership of General Secretary Xi Jinping, the Coordination Small Group for Institutional Reform …. has resolved over 180 major issues and disagreements.”
According to Xi, the ability to carry out such a large undertaking shows the superiority of China’s system (Xinhua 3):
- “[The re-org] showed the political advantages originating in the Party’s centralized and unified leadership and the country’s socialist system.”
The bigger picture: Xi has strengthened the Party at the expense of state institutions.
People.cn: 习近平：巩固党和国家机构改革成果 推进国家治理体系和治理能力现代化
Xinhua: China Focus: Party and state institution reform helps China modernize governance
Xinhua: Xi Focus-Commentary: Party, state institution reform paves way for future development
Xinhua: Xi Focus: Xi stresses consolidating achievements in reform of Party, state institutions
4.How local government helped spreadAfrican Swine Fever
Last week, the Ministry for Agriculture and Rural Affairs reported that the number of new outbreaks of African Swine Fever had slowed significantly – with only 10 confirmed cases last month.
But something is not adding up: Only one “official” case has been registered in Shandong since the start of the epidemic. But…the pig stock in the province is down 23% compared to last year.
An investigative piece by Caixin reveals that the situation in Shandong is far from an isolated incident.
Local governments across the country have refused to acknowledge suspected casesin order to avoid paying associated subsidies.
Unable to get help, pig farmers panicked:
- “Potentially infected pigs were approved for sale to slaughterhouses, sometimes in different provinces, at rock-bottom prices.”
- “They became the perfect vector for the spread of the virus.”
Get smart: Despite a MASSIVE re-organization (see previous entry), the Party-state apparatus still lacks sufficient oversight.
Caixin Global:In Depth: How Secrecy and Loopholes Fueled China’s Swine Fever Crisis
5.Police and protestors clash in Hong Kong
On Sunday night, tensions flaired again in Hong Kong.
Protestors and police officers squared off in a violent confrontation in the Mong Kok neighborhood, where a peaceful protest had taken place earlier in the day.
After the protest wrapped up, some participants stayed behind and engaged in a standoff with police.
By midnight, the police had mostly subdued the area and six protestors were under arrest.
What’s Beijing’s take? For now, Beijing continues to opt for a light touch, while monitoring the situation closely (see Thursday’s Tip Sheet).
Get smart: By allowing Hong Kong authorities to handle the crisis on their own, Beijing can distance itself from the extradition bill furor.
The big question: How much is the central government willing to tolerate from Hong Kong before it takes sterner action?