1. FSDC talks SMEs
On Tuesday, Vice Premier Liu He chaired the latest meeting of the State Council’s Financial Stability and Development Committee (FSDC).
Some context: This was the FSDC’s 14th meeting since its creation in 2017. The committee’s purpose is to help coordinate policy across the various financial regulatory bodies.
The topic of the meeting was a familiar one – getting more credit to SMEs.
That said, there weren’t exactly a lot of specifics on what new measures the FSDC might take to accomplish this goal.
Instead, policymakers mostly used the occasion to reaffirm their support for SMEs (Gov.cn):
- “The meeting pointed out that small and medium-sized enterprises are an important foundation for building a modern economic system and promoting high-quality economic development.”
- “[They] play an important role in supporting employment, stabilizing growth, and improving people’s livelihoods.”
- “We should…fully understand the importance of financial support for development of SMEs [and] continue to increase support.”
Get smart: Financial authorities are committed to their new policy approach – which favors efforts to address the economy’s medium-term economic weaknesses over the old focus on stimulating short-term growth.
Get smarter: Meetings like this are light on detail, but they serve asimportant signaling devices.
2.PBoC pushes QR code integration
China’s central bank (PBoC) is looking to strong arm the country’s tech giants.
- Specifically, the PBoC wants to create an integrated QR code system – so that all mobile payment options in China are compatible.
- That will help the PBoC’s UnionPay system compete with the mobile payment giants of Alibaba and Tencent.
Caixin has the details:
- “Tencent, which runs the ubiquitous messaging app WeChat, has agreed to work with UnionPay to integrate the QR code systems in their mobile payment platforms.”
- “The change would, for example, allow a merchant to accept payment from one customer using WeChat Pay and another using UnionPay’s QuickPass by presenting both with the same scannable code.”
- “Currently, merchants in most places have to offer different codes for each payment service.”
- “Systems integration is key to the central bank’s plans to develop China’s fintech industry.”
But Tencent and Alibaba won’t exactly be willing partners:
- “’QuickPass could start to disrupt the duopoly of Alipay and WeChat Pay once its number of registered users reaches somewhere between 400 and 500 million,’ a UnionPay employee told Caixin.”
- “We expect it to happen sometime in 2020.”
Get smart: China’s big tech companies will increasingly be called upon to accomplish government goals in the financial sector.
3. Going against the grain (quota increase)
Recent weeks have seen significant progress on trade war negotiations (see Monday’s Tip Sheet).
Which means we were overdue for a big, fat wrench to get thrown into the gears.
On Tuesday, Caixin scooped that China would not raise its grain import quotas in order to facilitate imports from the United States.
That’s according to Han Jun, vice minister of agriculture and a member of the team negotiating the trade deal (Caixin):
- “They are quotas for the whole world. We will not change them just for one country.”
In case you forgot: China’s promise to purchase some USD 80 billion of US agricultural products over the next two years is one of the key planks of the trade deal.
- The ag purchases were already a big ask by the US. Without raising its grain import quota, China will struggle even more to meet this commitment.
- Either China won’t make good on it’s promises to the US…
- …or it will drastically reduce imports from other countries to compensate.
Get smart: Beijing is concerned about ag imports depressing grain prices for farmers.
Get smarter: We still expect the phase one deal signing to go ahead…probably.
Caixin:China Won’t Raise Grain Import Quotas For U.S., Official Says
Reuters: China won’t hike grain import quotas for U.S. trade deal: Caixin
SCMP:Trade war: China’s refusal to lift grain quotas make Trump’s phase one import demands ‘more difficult’
4.Xi keeps tabs on top Party-state organs
On Tuesday, the Politburo Standing Committee (PBSC) convened a meeting to hear work reports from the Party’s Central Secretariat, as well as Party groups from the:
- State Council
- National People’s Congress
- Chinese People’s Political Consultative Conference
- Supreme People’s Court
- Supreme People’s Procuratorate
Some context:These annual reports to the PBSC were begun in 2015. Xi then had them enshrined in Party law at the 19th Party Congress in October 2017 (see October 30, 2017 Tip Sheet).
This year’s overall message was a familiar one (CPC People):
- “[We must] firmly uphold the authority of the Party Central Committee and centralized and unified leadership.”
This caught our eye:
- “In recent years, in the face of severe and complex domestic and foreign situations and various risks and challenges, we have been able to move forward firmly.”
Why that’s notable:It’s a muchmore upbeat assessment of the Party’s work than last year’s gloomier review.
Get smart: Xi is the most powerful leader since Mao. But that power also makes him vulnerable, as he bears the responsibility for any policy missteps. So it’s no wonder he wants to keep close tabs on all Party workvia these reports.
CPC People:中共中央政治局常务委员会召开会议 中共中央总书记习近平主持会议
5.Government looks to protect migrant workers
On Tuesday, the State Council approved new rules to guarantee migrant worker wages.
Some context: The Ministry of Human Resources and Social Security (MoHRSS) drafted these rules over the summer and solicited public feedback in August.
The highlights (Gov.cn):
- “Itis clearly stated in the regulation that wage payment must be made by bank transfers or cash, instead of material objects or marketable securities.”
- “Employers are required to pay wages in full in accordance with payment term and specific payment dates, and make ledgers in written form which should be kept for at least three years.”
- “It clarified responsibilities of employers for paying off arrears to migrant workers. Funds for government-related projects should be pledged and construction units shall not undertake construction without being paid, according to the regulation.”
- “Supervision should be strengthened to ensure wage payment.”
The regulations will go into effect on May 1, 2020.
Get smart: The government, led by MoHRSS, has been making a concerted push in recent years to ensure that migrant workers get paid. These new rules are part of that imitative.
Gov.cn:Govt releases regulation on guaranteeing wages for migrant workers
6.Party strengthens role in SOEs
On Sunday, the Party issuednew rules governing Party groups instate-owned enterprises (SOEs).
Some context (SCMP):
- “It is the first time that the Central Committee of China’s ruling Communist Party has issued a specific document articulating how a party unit, which answers only to an upper level Communist Party organ and generally cannot be held accountable by courts or regulators, should operate within a company that is exclusively or majority owned by the state.”
Article 15 is a doozy. It is explicit that the Party should be guiding all major company decisions (Gov.cn):
- “Important operating and management issues must be discussed by the Party committee (Party group), and only after be decided on by the board of directors or management.”
Get smart: In general, government policy aims to make SOEs more market-oriented. But at the same time, the Party is looking to strengthen its presence in SOEs.
Get smarter: The approach to the private sector is largely the same.