Driving the Day
1. Sacrificial Lam
Early this morning, the FT scooped that Hong Kong Chief Executive Carrie Lam’s days might be numbered:
- “The Chinese government is drawing up a plan to replace Carrie Lam, Hong Kong’s leader, with an ‘interim’ chief executive…according to people briefed on the deliberations.”
- “The people said that if Xi Jinping, China’s president, decided to go ahead, Ms Lam’s successor would be installed by March.”
Hong Kong legislator Michael Tien confirms that there have been talks about Lam stepping down (Guardian):
- “Tien said he had not been part of any briefings about Lam’s stepping down but has been aware of discussions of the possibility since August.”
Who might succeed Ms. Lam? FT:
- “Leading candidates to succeed Ms Lam include Norman Chan, former head of the Hong Kong Monetary Authority, and Henry Tang, son of a textile magnate who has also served as the territory’s financial secretary.”
- “Chinese officials want the situation to stabilise before making a final decision on whether to proceed with a leadership change, as they don’t want to be seen to be giving in to violence, according to the people briefed on the discussions.”
Get smart: Nobody is happy with Lam. Beijing is looking for a stronger leader that can de-escalate the situation.
2.I see a bad bank a-rising, I see reshuffles on the way
Put on some music folks. It’s time for another round of finance sector musical chairs.
On Tuesday, Caixin reported that Chen Xiaozhou would be stepping down as president of China Cinda Asset Management Co. Ltd., one of China’s “Big Four” state-run bad debt managers.
Chen’s been effectively demoted:
- He’s taking over as vice president of China Construction Bank University.
Filling Chen’s vacant post is finance veteran Zhang Weidong, latterly the president of China Trust Protection Fund Co. Ltd.
But who’s replacing Zhang?
- Why, that would be Bai Weiqun, chief supervisor of China Central Depository Clearing
But who’s taking Bai’s job?
- None other than Ma Zhongfu who resigned from his post as chairman of the board of supervisors at Huarong Asset Management, China’s largest bad debt manager
But who could possibly fill the gaping void left by Ma’s departure?
- Leave it to Hu Jianzhong, the current chairman of China Orient Asset Management Co. Ltd.
Get smart: Beijing often rotates executives among its top financial firms so that they gain broad experience.
Get smarter: When it comes to finance, Chinese leaders want to make sure the left hand knows what the right is doing.
3. Fourth Plenum preview
The long-awaited Fourth Plenum is just around the corner. We expect things to get underway on Sunday or Monday.
Tip Sheet readers know that this year’s plenum is focusing on a big topic (see September 2 Tip Sheet):
- How to uphold and improve the system of socialism with Chinese characteristics and make progress in modernizing China’s governance system and capacity for governance.
According to Xi, it basically encompasses everything:
- He has said that China’sgovernance system includes the interconnected economic, political, cultural, social, environmental, and Party-building mechanisms under the Party’s leadership.
The goal: To “basically modernize” the entire system by 2035.
What this all means in practice is unclear.
Xi, speaking in 2014, was clear what it doesn’t mean (China Reform):
- “Modernizing our national governance system and capabilities does not mean Westernization.”
Get smart: Xi wants to make sure that China’s one-party political system can deliver good governance outcomes.
The big question: Will we see any new reforms coming out of the plenum? Or will it simply be a reiteration of the same reforms that Xi has been pushing since late 2013?
4.Chinaplans an energy revolution
On Tuesday, Vice Premier Han Zheng travelled to Shanxi to attend the opening of the 2019 Taiyuan Energy Low Carbon Development Forum.
Some context: The forum was founded in 2016 as a high-profile dialogue platform between government and industry.
Han addressed the forum, saying (Gov.cn):
- “As the world’s largest energy producer and consumer, China will continue to push forward the energy revolution… and provide a solid guarantee for sustainable and healthy economic and social development.”
More context: In December 2016, the government published the Strategy for an Energy Production and Consumption Revolution (2016-2030).
To achieve this “energy revolution,” Han said that China will:
- Improve independent innovation in key technologies
- Speed up integration of energy and modern information technology
- Accelerate energy marketization
- Promote diversification of energy investment
- Deepen reform of power and oil and gas systems
- Improve energy pricing mechanisms
Get smart: China is committed to changing its energy structure to include more renewable and low-carbon energy. That’s because doing so could help to ameliorate China’s horrific air pollution. But even more importantly – it will help to ensure China’s energy security by lessening the country’s dependence on imported oil and gas.
5.Door opens to American soybeans
Trade war, trade war, trade war.
Today’s big news (Reuters):
- “Beijing on Tuesday offered major Chinese and international soybean processors waivers that would exempt the companies from steep tariffs on imports of up to 10 million tonnes of U.S. soybeans, according to two people briefed on the matter.”
It looks like everybody got an exemption:
- “The quota to import U.S. soybeans was offered to state-owned crushers, privately owned crushers and major international trading houses with crushing plants in China at a meeting called by the state planner.”
- “The waivers were for U.S. shipments through March, two U.S. export sources said.”
But…the moves did not lead to a flood (or even a trickle) of purchases:
- “The waivers, however, failed to unleash a flood of immediate buying on Tuesday as U.S. prices remained too high, according to U.S. export traders.”
Get smart: The waivers will lead to more imports of American soybeans. But it is not at all clear that China will purchase the USD 50-60 billion that the US president is promising.