Driving the Day
1. Beijing preps for the big party
For the second consecutive weekend, traffic was backed up throughout Beijing as the city prepped for the big parade set to take place on October 1.
For the uninitiated: October 1 is China’s National Day, which marks the founding of the PRC. And this year is particularly important – because it marks the 70th anniversary.
Helicopter and jet fighter formations could be seen overhead throughout the weekend – some even trailing various plumes of decorative smoke.
- These were particularly notable given that airspace over the capital is typically a no-fly zone.
What to watch: Xi Jinping and Co. are going all in for this anniversary. It’s going to be a real show.
It’s complicated: Despite the prevailing gloomy global narrative toward China, this will be a genuine celebration. WSJ reporter Ling Ling Wei put it well on Twitter:
- “China has a lot to celebrate on this coming Oct. 1. It also has a lot to reflect on. A grown-up country can do both.”
And while the festivities are certain to be impressive – we aren’t sticking around to find out. We’re going on vacation.
That’s why the Tip Sheet will be on holiday from September 24to October 7 – enjoy the spectacle and we’ll be back in your inbox on October 8.
2.Renewed optimism on the trade front
Both China and the US are looking to put a positive spin on the latest round of mid-level trade negotiations concluded late last week.
While the talks didn’t appear to have any concrete outcomes – given that they were meant to be prep for the next round of high-level talks slated to take place in October – the official line is that things went well (NYT):
- “China’s state-run Xinhua news agency said on Saturday that fairly senior negotiators had ‘conducted constructive discussions.’”
- “A separate statement from the United States trade representative in Washington [said,] ‘These discussions were productive, and the United States looks forward to welcoming a delegation from China for principal-level meetings in October.’”
That is actually one of the more positive takes we’ve seen out of the US Trade Representative office throughout this entire process.
Hold up: The budding optimism that the two sides can come to an interim agreement in the coming weeks was temporarily tamped down by the cancellation of a trip by a Chinese vice minister of agriculture to visit US farms.
But the ag ministry later indicated that the trip – and its cancellation – never had anything to do with trade talks.
Get smart: Expectations for a short-term interim deal are rising. We remain skeptical.
3. Big tech and Chinese pork
Mark this one under “headlines you don’t see every day” (Caixin):
- “Chinese Gaming Giant NetEase to Raise More Pigs”
- “Chinese tech giant NetEase Inc. will build its third pig farm as the government vows to boost domestic pork production in response to the African swine fever disaster.”
- “NetEase…signed a cooperation agreement with the municipal government of Shaoxing…to build a pig farm that will produce half a million hogs a year.”
- “NetEase founder and Chief Executive Ding Lei said the company’s biggest opportunity is to find a more suitable pig breeding solution that will industrialize the traditional industry.”
That is taking Corporate Social Responsibility to the next level.
But believe it or not, NetEase has actually been in the pork business for a while:
- “Ding announced NetEase’s entry into pig farming in 2009. It built its first pig farm in 2012 in Anji of Zhejiang province and a second in the southeastern province of Jiangxi.”
Get smart: As we’ve said before, regulators are pulling out all the stops to stabilize pork prices and ensure supply.
Get smarter: Authorities expect China’s big tech companies toplay a rolein a range of key policy goals.
Caixin:Chinese Gaming Giant NetEase to Raise More Pigs
4. Xilooksfor a consultation upgrade
On Friday, Xi Jinping spoke at the central conference on the work of the Chinese People’s Political Consultative Conference (CPPCC).
The topic: Promoting a greater exchange of ideas, a broader consultation in decision-making, and the need of finding consensus.
That may sound surprising, but Xi was all about hearing more constructive comments from his favorite advisors (Xinhua):
- “We should let everybody give opinions and criticism – even if they are harsh – and listen to them with a good attitude.”
Buuut… just don’t take it too far.
- “CPPCC members come from all walks of life and have different opinions on some issues, but our political positions cannot be vague and our political principles cannot waver.”
Wanna guess what political position that is?
- “We need to study and implement the Party line and constantly improve our… identification with the CCP and with socialism with Chinese characteristics.”
Get smart: Top leaders need good intel on what people are thinking in order to stay on top of the legitimacy game. Ensuring that advisory bodies can speak (somewhat) freely is part and parcel to that.
Get smarter: Advisors are going to need more than just a few reassuring words to dare to truly speak up.
5.Deadline for moving SOE equity to pension funds
On Friday, the Ministry of Finance and four other ministries jointly released a notice that setthe deadline for SOEs to transfer equity to the country’s pension fund.
The bottom line: It needs to be done by 2020.
Some context: In 2017, the State Council released a plan for hundreds of SOEs to transfer 10% of their shares to government pension funds (see the November 20, 2017 Tip Sheet).
More context: Progress on this front has been slow. By March this year, only a small amount of equity transfers had been completed.
And the slow pace is frustrating central authorities – that’s why they laid out this accelerated deadline.
The long-term plan: After the transfer deadline, the pension fund will primarily act as a financial investor – getting a slice of SOE dividend payments.
Get smart: The central government is looking to use SOE dividends to shore up the country’s inadequate pension fund.
Get smarter: Only a money-making state sector can help the government get the pension fund in order. That’s just another reason to expect SOE monopolies and oligopolies to stick aroundindefinitely.
6.Hangzhou businesses, meet your new GR rep
Government access for private companies in China can be…how should we say…scarce.
But things seem to be easing up – at least if you’re in Hangzhou.
- The Hangzhou municipal government just announced that it will send 100 cadres to 100 selected Hangzhou-based companies for one year, to act as their “government affairs representatives.”
According to a government-linked local newspaper, the representatives’ main job will be to help businesses deal with government affairs, including by:
- Communicating with different government departments
- Interpreting policies
- Trouble shooting
- Helping the company further their local investments
Two of the companies who “got lucky” include Alibaba and Geely Auto.
Our thinking: So many questions with this one. How will these companies manage relations with the government representative? How do they keep the rep happy? But also, how do they keep the rep’s hands off of critical business information and his or her nose out of important business decisions?
Our take: Maximizing this resource without having it backfire looks like quite the challenge.
Get smart: This is totally against the idea of building a fair business environment.
The bottom line: We don’t see this as something which will be rolled out nation-wide.
Qianjiang Evening News:杭州推出“新制造业计划