Driving the Day
1. Xi tells cadres to prepare for struggle
On Tuesday, Xi Jinping addressed young cadres taking part in a training session at the Central Party School.
The speech was pretty dark.
According to Xi, the Party is facing challenges on all fronts (CPC People):
- “Our country’s development has entered a period when all sorts of risks and challenges are accumulating and concentrating.”
- “The struggles [we] will face will not be few.”
- “[There will be struggles] in the realms of the economy; politics; culture; society; constructing ecological civilization; national defense and building the armed forces; Hong Kong, Macau, and Taiwan work; diplomatic work; and Party-building.”
- “[These struggles] will become increasingly complex.”
And the challenges are not going away:
- “The struggles we face are not short-term, but long-term.”
Xi told officials to set aside their differences:
- “We should unite all forces that can be united, … strive for unity in struggle, [and] seek cooperation in struggle.”
Get smart: With a slowing economy, a raging trade war, and protests in Hong Kong, Xi’s job is not an easy one these days. He is trying to leverage these challenges to his advantage – both to increase his power and to push through his political program.
The big question: As challenges mount, will there start to be more prominent grumblings about Xi’s leadership?
Xinhua:Xi Focus: Xi emphasizes “struggles” to achieve national rejuvenation
2.Keeping up local government bond issuance
Central government officials are looking to keep local government bond issuance from nose diving.
As part of that effort, they will once again announce next year’s bond quota ahead of the usual schedule.
Some context: In December 2018, the legislature (NPC) gave the okayto temporarily start announcing initial annual bond quotas in December – instead of waiting until the NPC session in March.
Local governments have already been asked to submit calculations for how much funding they will need next year, based on available investment projects.
And Beijing is specifically encouraging provincial authorities to focus on strategic infrastructure projects.
More context: In June, the NDRC relaxed restrictions that had previously kept certain strategic infrastructure projects form being funded completely by borrowed money.
- The rule change didn’t really affect project financing in 2019, as funding was already secured, but it should help to support local infrastructure investment in 2020.
Get smart: Weak local government investment has been a key driver of the economic slowdown that started in mid-2018.
Get smarter: Central authorities are looking to perk such investment up – without adding another huge round of debt to local governments’ books.
What to watch: Expect spending to stabilize in 2020, but not come roaring back.
21st Cent Biz:监管部门摸底2020年重大专项债项目资金需求情况
3. Bank of Jinzhou lays its problems bare
Bank of Jinzhou is finally copping to some of its deep-seated problems – by releasing its long-delayed annual statement for2018.
Caixin has the skinny:
- “The embattled regional bank swung to a 4.54 billion yuan ($632.6 million) net loss in 2018 from a 9.1 billion yuan profit the previous year as it took a 23.7 billion yuan charge related to a decrease in the value of its assets.”
Oof. For those keeping score at home, that’s an RMB 13.6 billion swing from profit to loss. But there’s more:
- “The bank’s non-performing loan (NPL) ratio surged to 4.99% from 1.04% a year earlier.”
Because of the woes, the bank will stop paying dividends:
- “Bank of Jinzhou announced a proposal on Sunday to cancel dividend payments on its offshore preference shares from October 2018 to October 2019.”
The proximate cause for the bank’s troubles?
- “The deterioration in the bank’s performance in 2018 was a result of a surge in impairment losses partly stemming from tighter regulations on classifying and recognizing non-performing loans which started to be implemented last year.”
Get smart: These regulations didn’t truly cause the loan impairment. They simply made the bank recognize the bad assets it was already holding.
Get smarter: Bank of Jinzhou is not alone here.
Caixin:Troubled Bank of Jinzhou Reveals All in Long-Delayed Report
4.Li Keqiang wants more focus on basic research
On Monday, Premier Li Keqiang presided over a forum on the work of the National Science Fund for Distinguished Young Scholars (NSFDYS).
Some context: The NSFDYS aims to increase the talent pool of young scientists, encourage the return of overseas Chinese scholars, and catapult Chinese academics to the forefront of global science and technology (ST) research.
At the meeting, Li touted the importance of basic research (Gov.cn):
- “Basic research determines the depth and breadth of the nation’s technological innovation – and weak basic research is the main constraining factor.”
And he called on governments at all levels to:
- “… help create a more favorable and freer environment for young scientists to explore and innovate.”
Li said the NSFDYS is an “irreplaceable” channel for domestic talent cultivation and scientific advances.
But it needs some tweaking. The forum suggested:
- Using the NSFDYS as a national “venture capital fund” to encourage breakthroughs in ST
- Streamlining administrative approvals for research
- Giving researchers a bigger say in how to spend their funding
Get smart: One strength of China’s statist system is that it should be able to rally government resources for public goods like basic research. Li is trying to make full use of this advantage.
5.Beijing looks to weaken protesters’ support base
Yesterday, the State Council’s Hong Kong and Macau Affairs Office (HKMAO) held a press conference on the situation in Hong Kong.
Officials took the opportunity to reiterate some familiar points, including:
- The protests are backed by foreign forces seeking to destabilize Hong Kong.
- One country, two systems is a bottom line that must not be crossed.
- The Hong Kong government has Beijing’s full support, but the military could still be called in case of emergency.
They also outlined four steps to get Hong Kong back on track:
- Violent protesters must be brought to justice and all branches of government must take the lead in restoring order.
- Peaceful rallies should be allowed under one country, two systems, and should be separated from violent protests.
- The Hong Kong government must address the city’s deep-seated social issues, including the housing crisis.
- Beijing will support constructive dialogue between protesters and the Hong Kong government.
The latest development: Late on Wednesday, news reports indicated that CarrieLamwill formally withdraw the extradition bill, meeting one of the protesters’ key demands.
Get smart: This is a new tack. Beijing is trying to isolate the more extreme protesters, while addressing the genuine economic and social concerns of the broader Hong Kong populace.
SCMP:As it happened: All branches of government, including judiciary, must help stop violence and restore order, says Beijing’s top Hong Kong office
SCMP: Hong Kong leader Carrie Lam to announce formal withdrawal of the extradition bill, meeting at least one key demand of protesters