1. Li Keqiang touts free trade
On Thursday, leaders of six major multilateral organizations met with Premier Li Keqiang in Beijing for the fourth “1+6” Roundtable.
The six organizations:
- The World Bank
- The International Monetary Fund
- The World Trade Organization
- The International Labor Organization
- The Organization for Economic Cooperation and Development
- The Financial Stability Board
Li used the roundtable to reiterate key talking points.
- Li restated China’s commitment to multilateralism and free trade.
- He called for inclusive global development.
- He urged reform of multilateral economic organizations.
World Bank President David Malpass had a few asks of his own, urging China to:
- Continue economic opening
- Reduce state subsidies
- Remove barriers to competition
- Improve the rule of law
- Allow the market to play a more decisive role in allocating resources and investment
Get smart: China is trying to positionitself as a defender of the multilateral order and free trade, as a counterpoint to an increasingly protectionist United States.
Get smarter: China’s penchant for state subsidies and non-tariff barriers make all thefree trade rhetoric ring hollow.
SCMP:China needs ‘vital’ economic reforms, World Bank chief David Malpass tells Premier Li Keqiang
Reuters:China needs to ensure policies boost economy, lower real rates: Premier Li
2.Read Li’s lips, no new stimulus
Hate to say we told you so…
During the 1+6 Roundtable (see previous entry), Premier Li Keqiang definitively ruled out large-scale stimulus or drastic easing measures as a means of goosing economic growth in the short-term.
Here’s what Li said (China Daily 1):
- “China will maintain the stability and consistency of its macroeconomic policy next year, and continue with a proactive fiscal policy and prudent monetary policy to stabilize market expectations.”
Li emphasized the importance of:
- Enhancing the effectiveness of fiscal policies
- Tailoring monetary policy to the needs of the real economy
- Maintaining adequate levels of liquidity in the financial sector
- Reducing real interest rates
- Unleashing the potential of domestic consumption
Get smart: Li’s statement is yet another sign that China’s leadership is committed to completing the painful but necessary transition to a more sustainable long-term growth model.
Get smarter: This means the short-term outlook for China’s economy is bleak. We’ve not yet hit rock bottom.
China Daily:Li: Country to further level playing field for all firms
China Daily:Li: China to ensure stable, consistent macroeconomic policy
3. Government gets proactive on aging
China’s population is aging. Fast.
That’s why, yesterday, the Central Committee and the State Council jointly released a medium- to long-term plan to proactively tackle the issue.
Some context: China’s elderly population is expected to reach 487 million by 2050. That’s a whopping 35% of the total population (see February 28, 2018 Tip Sheet).
The plan’s high-level goals:
- Establish a basic institutional framework by 2022
- Finalize institutional arrangements by 2050
The plan also details five main tasks for the government:
- Improvingthe national income distribution system by steadily increasing pension reserves and creating a more equitable social security system
- Improving the labor force,in part by establishing an educationalsystem for senior citizens
- Building a high-quality healthcaresystem for the elderly
- Strengthening the application of technology in assistingsenior citizens
- Fostering a social environment with filial piety, respect, and support for society’s elderly
Get smart: China’s rapidly aging population is itslargest hurdle to sustained economic growth.
4.NDRC and MofCom shorten negative list
On Friday, the National Development and Reform Commission (NDRC) and the Ministry of Commerce (MofCom) released the 2019 edition of the Negative List for Market Access.
Pay attention: This is not the negative list governing foreign investment (see July 1 Tip Sheet). This negative list applies to all companies – both foreign and domestic.
How it works: Areas not explicitly listed on the negative list are open for market entry without administrative approvals.
The 2019 negative list contains 131 items – 20 items fewer than the 2018 list.
Industries no longer on the list include:
- Fire-fighting technology services
- Examinationsfor professional skills verification
- Elderly care services
- Social welfare services
The updated negative list also has a major practical improvement from a year ago.
- For each item on the list, it names the government agency responsible for market entry approval.
The central government is also trying to unify investment regulations across the country.
- The 2019 national negative listsaw 23 local negative lists folded into it.
Get smart: Despite Xi Jinping’s centralization of power and decision making, local protectionism is still a major headache for officials in Beijing.
5.China fuming over US Hong Kong bill
On Tuesday, the US Senate unanimously passed the Hong Kong Human Rights and Democracy Act.
Some context: The US House of Representatives also unanimously passed its version of the bill back in October.
The two most important planks of the proposed legislation require that:
- The State Department assess annuallywhether Hong Kong has sufficient autonomy to warrant favorable trading terms with the US
- Individuals responsible for the suppression or violation of basic freedoms in Hong Kong have their US assets frozen and be denied entry into the US
The response from China has been predictably apoplectic.
Foreign Ministry spokesman Geng Shuang had some harsh words (FMPRC):
- “This act neglects facts and truth, applies double standards and blatantly interferes in…China’s…internal affairs.”
- “The aim is to bolster anti-China, extremist,and violent radicals who attempt to disrupt Hong Kong[and] damage Hong Kong’s prosperity and stability.”
Get smart: Anti-China sentiment is essentiallythe only bi-partisan issue in Washington these days.
Get smarter:In case it wasn’t clear, the growing rift between the US and China goes well beyond economic disputes.
All that said, Chinese officials want to keep trade issues separate from these broader areas of contention. So despite China’s ire, the Hong Kong bill is unlikely to scuttle trade talks.
SCMP:Donald Trump set to have final say on Hong Kong democracy act as Senate passes it
FMPRC:Foreign Ministry Spokesperson Geng Shuang’s Remarks on US Senate Passing Hong Kong Human Rights and Democracy Act
Time:Legislation Aimed at Protecting Human Rights in Hong Kong Is Heading to the White House. Here’s What to Know