Setting up shop - China Tip Sheet July 6, 2020 - Trivium China - Policy insights driving brilliant China strategies

driving the day

1. Beijing outbreak is “under control”

This morning, the National Health Commission (NHC) released the latest nationwide COVID-19 numbers.

On July 5, China reported four new COVID-19 cases (NHC):

One was a domestically transmitted case in Beijing.
Three other confirmed cases were imported from abroad.

In Beijing, the recent resurgence of COVID-19 stemming from an outbreak linked to the Xinfadi wholesale market on June 11 seems to be tapering off.

Sunday was the 8th consecutive day that the number of new COVID-19 cases in Beijing grew by only single digits.

Beijing’s secret to getting the outbreak under control: Testing (Beijing Gov 1).

As of the end of July 2, Beijing had collected samples from a total of 10.414 million people and tested 10.059 million of them.
52% (172) of the total 331 confirmed cases were identified through testing.

As the outbreak wanes, travel restrictions have begun to ease.

As of July 4, Beijing residents from low-risk neighborhoods no longer need negative nucleic acid test results to travel out of the city.

Get smart: Beijing’s success in limiting the outbreak’s spread demonstrates that a potential second wave can be effectively managed.

finance economics

2. Guo Shuqing tells financial institutions to improve corporate governance

Last Friday, Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission (CBIRC), published an op-ed in the Economic Daily, with a message for financial institutions.

That message: Get it together re: corporate governance.

In the op-ed, Guo highlighted deficiencies with the state of corporate governance, saying (Economic Daily):

Current corporate governance practices among financial institutions are unfit for the increasing complexity of China’s financial system, especially as it continues to open to the outside world.
Major shortcomings include illegal conduct by shareholders, lack of transparency in shareholder structures, and ineffective oversight.

To address this sad state of affairs, Guo called for:

Strengthening accountability of financial institutions
Setting corporate governance as a regulatory priority
Expanding Party-building within financial institutions
Reforming shareholder structures for small regional banks
Coordinating monitoring efforts among market participants

Get smart: Regulators see improving corporate governance as a key part of Beijing’s years-long financial de-risking campaign.

Our take: It will take time and effort to correct decades worth of bad corporate governance habits. Good luck, dude.

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Economic Daily:完善公司治理是金融企业改革的重中之重

3. CBIRC namesand shames

On Saturday, just one day after China Banking and Insurance Regulatory Commission (CBIRC) chairman Guo Shuqing published an op-ed telling financial institutions to straighten up and fly right on corporate governance issues (see previous entry), the CBIRC put corporate rulebreakers on blast.

The regulator published a list of 38 shareholders of banking and insurance institutions that:

Violated rules on related party transactions or conflicts of interest
Provided false materials to regulators
Held ownership stakes that exceed regulatory limits
Made use of equity capital whose sources do not comply with regulatory requirements
Had an actual controlling person who was involved in criminal activities

The offenders appear to have gotten whacked for their connections with Baoshang Bank, Chengdu Rural Commercial Bank, Ningbo Donghai Bank, Haikou Rural Commercial Bank, Anbang Insurance Group, and Kunlun Health Insurance.

The CBIRC said that punishments would include:

Restricting shareholder rights
Being banned from investing in banks or insurers
Being forced to sell stakes in banks or insurers

The regulator also laid out next steps for better industry supervision, including more transparency in information disclosure, greater scrutiny of corporate governance practices, and, of course, more blacklists.

Get smart: That’s 38 down, hundreds to go.

politics policy

4. Beijing sets up national security apparatus in Hong Kong

Beijing has wasted no time in setting up the apparatus to enforce the newly passed Hong Kong national security law.

On Friday, the Hong Kong government established its new Committee for Safeguarding National Security.

The committee is chaired by Hong Kong Chief Executive Carrie Lam.
But the more important member of the committee is Beijing’s man in Hong Kong – Liaison Office head Luo Huining, who will serve as “adviser” to the committee.

Beijing has also set up the new Office for Safeguarding National Security of the Central People’s Government in the Hong Kong Special Administrative Region.

Zheng Yanxiong, secretary-general of the Guangdong Party Committee, will head the new office (Beijing Daily).
Zheng’s deputies come from the PRC’s security services.

Zheng’s office has a wide remit (SCMP 1):

“The national security office… has the power to supervise how the Hong Kong government implements the national security law as well as gather intelligence and handle cases directly at its discretion.”
“It is also charged with working with other central and local government agencies to tighten control over foreign non-government organisations and media in Hong Kong.”

Get smart: Beijing is sending a clear message that it is now in charge in Hong Kong.

5. Government pushes for greater transparency

Last Friday, the General Office of the State Council released the key points of its 2020 government transparency initiative.

Some context: The State Council has published an annual transparency initiative for the past eightyears.

According to the document, various levels of government will have a few things to deliver on by the end of 2020.

Central government agencies need to compile all rules and regulations currently in effect and publish them in a centralized place.
District level governments need to standardize and catalogue all items to be made publicly available and develop a procedure for their publication.
All government departments need to set up an online portal to publish all items which are required by law to be publicly available.

There’s something new on the agenda this year:

The government will require some public sector companies such as public utilities, hospitals, schools, and transport companies to make more information publicly available.

Get smart: Lack of transparency not only creates barriers to good policymaking, it reduces trust in the government among ordinary citizens.

Get smarter: The Party wants to foster a more open information environment…within very specific limits.

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Gov.cn:国务院办公厅关于印发2020年政务公开工作要点的通知

6. The pretty prince of Parties

We know it’s hard for our readers when the Tip Sheet goes on vacation.

Especially since being deprived of news about Xi Jinping’s communications with foreign leaders sends them into withdrawal.

Fear not. Today the Tip Sheet is back with a diplomatic triple header.

Between July 3-5, Xi sent messages to:

Cambodian Prime Minister Hun Sen
Ghanaian President Nana Akufo-Addo
Mongolian Prime Minister Ukhnaagiin Khürelsükh

Xi’s missives to all three leaders lauded cooperation in the face of COVID-19 as exemplified by his message to Hun Sen (Xinhua 1):

“[Xi] said…that China and Cambodia have demonstrated through their concrete efforts in jointly fighting the COVID-19 epidemic that the China-Cambodia community with a shared future is unbreakable.”

Then, speaking in his capacity as General Secretary of the Chinese Communist Party (CCP), Xi thanked Hun and Khürelsükh for their congratulations on the 99th anniversary of the CCP’s founding.

Xi also called for strengthened cooperation between the CCP and the respective ruling parties of Cambodia and Mongolia.

Get smart: Though it doesn’t get much press, party-to-party relations are an important aspect of China’s foreign policy, especially with other socialist or left-leaning political parties.

Setting up shop — China Tip Sheet July 6, 2020

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