Driving the Day
1. Tsai wins Taiwan presidential election in landslide
On Saturday, sitting president Tsai Ing-wen won a landslide victory in the Taiwanese presidential election.
- Tsai garnered over 57% of the vote.
- KMT challenger Han Kuo-yu got only 38% of the vote.
Why this election was interesting: Most Taiwanese elections focus on domestic issues. But relations with Beijing were front and center this year.
In her victory speech, Tsai explicitly rejected Beijing’s approach to Taiwan (Reuters):
- “Beijing needs to understand the will of Taiwan’s people, and that only Taiwan’s people can decide its future, she added, repeating her firm opposition to ‘one country, two systems.’”
Unsurprisingly, Beijing wasn’t thrilled. The mainland’s Taiwan Affairs Office said they have no plans to change tack (Gov.cn):
- “Our policy towards Taiwan is clear and consistent.”
- “We adhere to the basic principle of ‘peaceful reunification, one country, two systems,’the one China principle… and resolutely oppose any form of ‘Taiwan independence.’”
Get smart: 2019 was a tough year for Xi Jinping. If theoutcome of the Taiwanese election is anything to go by,2020 isn’t looking much better.
Reuters:Taiwan president wins landslide victory in stark rebuke to China
Xinhua: China urges countries to abide by one-China principle after Taiwan leadership election
Focus Taiwan:Full text of Taiwan President Tsai Ing-wen’s acceptance speech
On Saturday, the China Banking and Insurance Regulatory Commission (CBIRC) released the readout ofits annual conference on Banking and InsuranceSupervision and Management.
Sad you weren’t invited?
- Don’t be. We’ve got all the steamy regulatory details right here.
First, the assembled masses reviewed the CBIRC’s wins from 2019, including:
- Disposing of RMB 2 trillion worth of non-performing loans
- Reducing the size of the shadow banking sector byRMB 16 trillion,from its historical high in 2016
- The orderly unwinding of “problematic” financial institutions
- A significant reduction of online lending risks
And there’s going to be more where that came from in 2020.
The conference identified the following goals for the coming year:
- Continue to dismantle the shadow banking industry
- Prevent real-estate speculation
- Better regulate the internet lending and insurance industries
- Work with local governments to reform state-owned enterprises and resolve hidden debt
- Effectively stress test banking and insurance institutions.
The meeting also emphasized a commitment to continued opening and called for increased foreign investment into the banking and insurance industries.
Get smart: The financial de-risking campaign is marching on into a new decade.
3. China preps public opinion for the trade deal
On Monday, state-affiliated social media account Taoran Notes published an op-ed commenting on the expected trade deal signing.
Some context: Vice Premier Liu He is expected to sign the phase one deal at the White House on Wednesday.
Taoran Notes attributed this positive development to China’s:
- Steady attitude
- Rational calculation of costs and benefits
- Calm judgement
- Concentrated efforts to get its own house in order
Taoran was keen to get ahead of any possible criticisms:
- “Some people will think continued opening up is made in the face of external pressure.”
- “Continued opening up was [in fact] designed at the highest-level six or seven years ago.”
We agree with Taoran (Bloomberg):
- “Andrew Polk, co-founder of research firm Trivium China [said,] ‘China is not opening its market because of the trade deal, but because it’s in its own interest, and is using the timing as a politically convenient tool in the trade negotiations.’”
Sina: 陶然笔记谈中美磋商：守住平常心 万事在人为
Bloomberg:U.S., China Dust Off Corporate Deals Before Trade Pact Signing
4.China wants to overhaul the pension system
Over the weekend, there was a high-level get-together offormer and current fiscal and financial officials.
On the agenda: How to fix the pension system as the population rapidly ages.
According to Chen Wenhui, vice chairman of the National Council for Social Security Fund (NCSCF), things don’t look too rosy (21st Century Biz):
- “China’s current pension reserve is about RMB 10.1 trillion.”
- “That only accounts for 11.4% of GDP – far from the average level of 50.7% in OECD countries.”
That puts pressure on the government:
- “The government has assumed most of the responsibilities forsupporting the elderly, and that has greatly increased the fiscal burden.”
That’s not a new problem, but recent revenue constraints on local governments have made things worse.
To get things back on an even keel, attendees proposed to:
- Further boost corporate annuity schemes through tax breaks
- Allow more competition from foreign pension fund managers
- Allow the government pension fund to hold more diversified and riskier portfolios to get higher yields
Some context: This topic is hot stuff – recently even Vice Premier Liu He weighed in on how to improve the pension system.
Get smart: Foreign asset managers will have a big role to play here.
5.Political advisors discuss personal data protection
On Friday, the Chinese People’s Political Consultative Confernce (CPPCC) got together to discuss how to better protect personal information.
Some context: The CPPCC acts as something akin to the House of Lords in the UK. It does not have any legislative authority, but does suggest policies and legislation to the government.
Regulators are having a tough time staying on top of new technologies (Xinhua):
- “Political advisors agreed that the traditional ways of protecting personal information did not keep up with the fast development of the internet and the digital industry.”
What to watch for:
- “Some advisors proposed advancing legislation concerning personal information protection and cracking down on the illegal collection, processing and use of personal information.”
- “They also suggested increasing the publicity of the knowledge and technologies to protect personal information and enhance public awareness of self-protection.”
Get smart: The CPPCC is an underappreciated component of China’s policymaking apparatus that helps tosetthe agenda for specific policy areas.
Get smarter: As we highlighted often in2019, it’s a fallacy that Chinese citizens and policymakers don’t care about data privacy.
Gov.cn: 全国政协召开网络议政远程协商会 汪洋主持
Xinhua:Political advisors call for personal info protection in big data era