Driving the Day
1. It’s a done deal
As we head into the weekend, the big US-China buzz is still all about the signing of the phase one trade deal set to take place next week.
- Vice Premier Liu He and company should be wheels down in DC on Monday – and set for the signing ceremony on Wednesday.
The latest news is that companies are getting in on the festivities (Bloomberg):
- “Corporate executives will be part of the ceremony to show support.”
Some further details:
- “On Thursday, China highlighted a pledge to fully open up its oil and gas exploration sector.”
- “The day before, it announced American Express Co. had cleared a key hurdle to accessing its $27 trillion payments market.”
But hold up a second:
- “The U.S. and China have a history of announcing headline-grabbing deals that don’t pan out as promised.”
- “During Trump’s 2017 visit to Beijing, the two countries announced $250 billion in deals — many of which turned out to be more show than substance.”
- “’It’s common to make the announcement, get the headline, and then let things fizzle,’ said Andrew Polk, co-founder of research firm Trivium China in Beijing.”
We could do without the hype, but getting this deal signed is certainly positive.
Bloomberg:U.S., China Dust Off Corporate Deals Before Trade Pact Signing
2.Breakthrough in oil and gas sector opening? Not yet
On Thursday, the Ministry of Natural Resources (MNR) released a key new document meant to open up oil and gas exploration.
The most important part (MNR 2):
- “All companies registered in the PRCwith net assets of not less than RMB 300 million are eligible to obtain oil and gas mining rights in accordance with regulations.”
- “This includes foreign-funded enterprises and private enterprises.”
That’s a big deal: It officially breaks the decades-long monopoly held by the national oil companies (NOCs).
But according to MNR sources, caveats abound (Caixin):
- First, it’s a looong shot to start exploring blank oilfields in China, due to their general poor quality.
- Second, the NOCs have so far ignored demands to disclose geological data of oilfields, where preliminary exploration has already been conducted.
What it means: It will be difficult for any newcomers to get their hands on oilfields with good exploration prospects.
Get smart: At this point, thisis really just a market opening on paper.
The big picture: Increasing onshore supply to improve the country’s energy security is a top priority for Beijing. Problem is, China’s oil and gas deposits just aren’t that big. Introducing private and foreign competition to try and boost production won’t go very far.
3. Financial reformer promoted in Guangzhou
Get excited. Guangdong has a new vice governor – rising financial star Zhang Xin.
A little about Zhang:
- He has a PhD in Economics from Colombia Business School.
- In 1997-2001, Zhang worked as a senior economist at the World Bank.
- In 2001, he returned to China to work at the China Securities Regulatory Commission.
- In 2004, he was promoted to People’s Bank of China (PBoC) where he worked until 2017.
- For the past three years, he was vice director of the State Administration of Foreign Exchange.
Zhang has a reputation as a financial reformer, which is due to a penchant for deregulation, as well as the company he keeps:
- He is a known associate of former PBoC Governor Zhou Xiaochun – a key voice forreform within China’s financialsystem.
Get smart: It’s not unusual for Guangdong to have at least one finance veteran as vice governor.
Get smarter: Guangdong is the home base of the Greater Bay Area project, which seeks to make the province into an international financial center.
4.Vice Premier stresses improvements to elderly care industry
On Thursday, Vice Premier Sun Chunlan surveyed nursing homes in Beijing’s Changping district.
During her visit, Sun urged more efforts to:
- Integrate healthcare and elderly-care services
- Improve financial assistance, government insurance, and pricing policies
- Harmonize elderly care standards
Sun envisions a national elderly-care system that is:
- Based onhomes, reliant on communities, and supplemented by institutions
Some context: Sun wears another hat as director of the National Working Commission on Aging, a State Council coordinating body created in 1999.
More context: China has 166 million seniors aged 65 and above, and 25% of the population is expected to be over 60 by 2030.
Sun is advocating for more private investment in elderly care.
The only problem? Private nursing homes are too expensive for mostseniors(FT):
- The average private nursing home in Beijing costs a fifth more than a retiree’s pension or other earnings.
That means that many are losing money.
- A 2017 Peking University census found that two-thirds of surveyed private nursing homes in Beijing were running at a loss and that half of their beds were empty.
Get smart: The challenge of dealing with China’s fast-aging population becomes more pressing by the day.
5.Xi and Li hand out science awards
On Friday, Xi Jinping attended China’s annual awards ceremony for scientific achievement.
Xi wasn’t flying solo: Eight other Politburo members were in attendance – including Premier Li Keqiang, Executive Vice Premier Han Zheng, and Vice Premier Liu He.
The top awards went to (Xinhua 2):
- Huang Xuhua – chief designer of China’s first-generation nuclear submarines.
- Zeng Qingcun – a famous meteorologist from the Institute of Atmospheric Physics under the Chinese Academy of Sciences (CAS).
Speaking at the event, Premier Li promised more government support in building an ecosystem of innovation:
- “[We will] give full play to the role of enterprises as the mainstay of technological innovation, implement tax and fee reduction policies…, respect and protect intellectual property rights, and improve the ability and willingness of enterprises to innovate.”
Get smart: The annual high-level ceremony is meant to signal support for the scientific community.
Get smarter: With the China-US tech competition gaining steam, the government is increasing its efforts to incentivizethe domestic scientific community.
The problem: The policy measures to support “an ecosystem of innovation” that Li listed above, sound a lot like the same package of policies meant to support economic growth over the past year – which haven’t really worked.
Xinhua:Xi honors two academicians with China’s top science award