Driving the Day
1. No news is good news?
Are you champing at the bit to know how the phase one trade deal will restore perfect harmony to the global trading order?
Well keep champing.
At this point, we don’t know much more than the outline of the deal that was leaked yesterday (see yesterday’s Tip Sheet).
- China will purchase USD 200 billion more American goods per year.
- Washington will halve the 15% tariff currently in place on USD 120 billion of Chinese goods.
But both sides are keeping furtherdetails under wraps.
So why all the secrecy?
We won’t speculate on Washington’s motives, but the Chinese side may be reluctant to publicize a deal that looks increasingly unfavorable to Beijing.
Get smart: We will know more tomorrow, once the deal is done.
But don’t get too excited: Even after the deal is signed, we probably still won’t know the details of which American goods the Chinese side will buy.
The bigger picture: This deal does not end the trade war. And it’s not a genuine truce. It’s an agreement to de-escalate, but only slightly.
2.FSDC sets up shop in the provinces
Yesterday, the State Council’s Financial Stability and Development Committee (FSDC) announced that it will set up a mechanism to coordinate with local governments.
Some context: The FSDC was created in 2017 to help coordinate financial and economic policy. It’s led by Xi Jinping’s right-hand man on the economy, Vice Premier Liu He.
More context: China’s central bank (PBoC) houses the FSDC’s office and is responsible for carrying out the agency’s daily operations.
Here’s the deets:
- The provincial branches of the PBoC will carry out the work of the FSDC in their jurisdictions.
- This means they’ll be empowered to coordinate operations between provincial branches of financial regulators, other local financial authorities, provincial reform and development departments, and provincial finance departments.
The goal here is to:
- Coordinate the implementation of central government policies
- Strengthen financial regulation
- Improve financial information sharing
Get smart: The central government is looking for ways to hold local governments accountable for doing a poor job in implementing the financial de-risking campaign, as well asother central initiatives.
3. Li Keqiang aims to start the year strong
Li Keqiang convened a full meeting of the State Council on Tuesday. The purpose was to discuss a draft of the Government Work Report that will be approved by the legislature in March.
Some context:The Government Work Report sets the major policy goals and economic targets for the coming year.
Li stressed that officials should not wait until March to get to work (Gov.cn 2):
- “As economic performance in the first quarter steers whole-year growth trends and market expectations, the Premier said, government departments in all regions should make preparations for a good start in social and economic development.”
The policy prescription was a familiar one:
- “To further reduce financing costs for firms, the reserve requirement ratio cuts at the start of the year should be used to inject liquidity in the market, and financial institutions should be guided to offer greater financial support to the manufacturing sector as well as private businesses and micro, small and medium-sized enterprises, the Premier said.”
Get smart: The Government Work Report is unlikely to announce a new direction for macro policy. What you see is what you get.
Gov.cn:State Council discusses drafts of govt work report
4.Xi meetswith non-Party people
Yesterday, Xi Jinping met with representatives from the eight democratic parties of China,personnel with noparty affiliations, andindividuals from the China Federation of Industry and Commerce
Non-Party? What’s that about? These meetings are a way for Xi to touch base with a broadcross-section of society.
Xi’s a big fan of the setup (Xinhua):
- “The multi-party cooperation and political consultation system under the leadership of the CCP is a system developed from the soil of China.”
- “It has played a unique role in building consensus, optimizing decision-making, coordinating relations, and maintaining stability.”
Professor Lü Jian represented people without party affiliation. But he sounded a lot like a loyal Party member:
- “In 2019, the CCP Central Committee with comrade Xi Jinping as its core fearlessly steered the ship… and led the country to great achievements that have caught the world’s attention.”
- “In 2020, United Front members will unite even more closely around the CCP Central Committee with comrade Xi Jinping as the core.”
Get smart:These meetings aren’t designed as policy inputs. It’s really just a forum for Xi to wish some non-CCP members a Happy Spring Festival.
5.Han Zheng pushes small government agenda
On Tuesday, Executive Vice Premier Han Zheng chaired a meeting of the Coordinating Small Group on Promoting the Transformation of Government Functions and Reforms to Delegate Power, Streamline Administration, and Optimize Government Services.
Those in the know call it the CSGoPtToGFaRtDPSAaOGS.
Our suggestion: Create a coordinating small group to streamline government agency names. (Zing!)
Han’s main piece of advice (Gov.cn):
- “Persist in letting the market play the decisive role in resource allocation…[and] reduce direct government intervention in microeconomic activities.”
More specifically, Han promised to push forward with the following reforms:
- Widening market access
- Simplifying licenses and approvals
- Creating a more efficient and transparent customs process
Get smart: Premier Li Keqiang has focused on shrinking the state since he took over the government in 2013. This moves are part and parcel of Li’s broader efforts.
Get smarter: While Li shrinks the state, Xi Jinping is expanding the Party.