driving the day
1. No time to celebrate
This morning, the National Health Commission (NHC) released the latest nationwide COVID-19 numbers.
On Tuesday, China reported seven new COVID-19 cases (NHC):
- All were imported from abroad.
- That’s down from the eight imported cases reported on Monday.
Meanwhile, the Beijing outbreak is stabilizing (Beijing NHC):
- Beijing reported no new confirmed, asymptomatic, or suspected cases on Tuesday.
- That’s the second consecutive day of zero new confirmed cases in the city.
Beijing also discharged 13 COVID-19 patients from the hospital on Tuesday (Xinhua 1):
- Experts from the National Health Commission said on Tuesday that about 95% of COVID-19 patients can be cured and that cured patients are no longer infectious.
Despite the rosy news all around, Beijing officials reminded everyone at a press conference on Tuesday not to get cocky, saying (Xinhua 2 and 3):
- Zero new cases does not equal zero risk and that new cases may crop up in the coming weeks.
- Beijing is beginning a new phase of regular epidemic prevention and control. Testing will become a regular feature of the “new normal.”
Get smart: Beijing’s success in containing its local outbreak may serve as a blueprint for other cities on how to keep the virus in check without sacrificing economic recovery.
2. Xiao Gang talks financial competition
On Tuesday, Xiao Gang, former chairman of the China Securities Regulatory Commission (CSRC), spoke at a financial forum in Shanghaiabout the development of China’s capital markets.
He had a message from the bigwigs in Beijing (Sina):
- “The Party has never attached so much importance to capital markets as it does today.”
In Xiao’s view, finance and technology stand at the heart of the economic competition between China and the US.
He observed that the development of capital markets is indicative of a nation’s economic power.
An apt analysis, to be sure.
To achieve financial competitiveness, Xiao called for reforms in the areas of:
- The registration-based IPO system
- Corporate governance
- Financial opening
- The legal system
- Fintech development
Get smart: China’s strategy for expanding its global financial influence essentially consists of two parallel sets of reforms — building a rules-based, market-oriented financial system and opening up financial markets.
Get smarter: As US-China relations continue to crash and burn, it has never been more imperative for Beijing to get its financial house in order. The pace of China’s financial reforms will continue to accelerate.
3. Banks struggle to get WMPs in order
On Tuesday, the China Fortune Management 50 Forum and the Tsinghua University PBC School of Finance, supervised by former central bank vice president Wu Xiaoling, published a report urging regulators to give banks more time to get it together re: asset management.
Some context: In April 2018 financial regulators published rules barring banks from making guarantees of principal and interest on wealth management products (WMPs) and imposing liquidity requirements on banks’ non-standard assets. Banks were given until December 2020 to comply.
But that’s proved easier said than done:
- Since the rules were first announced, banks have made little progress in bringing their WMPs into compliance mainly due to their large volume of nonstandard credit assets with long maturities.
- By January 2020, Caixin estimated that banks had completed less than a quarter of the overall transition.
Apart from advocating extending the grace period to 2022, the report calls for (21st Century Biz):
- Clarifying regulatory standards for all kinds of WMPs
- Allowing individual banks to consult independently with regulatory authorities on the disposal and compression of WMPs
Get smart: Getting WMPs under control is a key plank of China’s broader financial de-risking campaign…it hasn’t gone particularly smoothly.
4. Li Keqiang promotes new infrastructure
Premier Li Keqiang continued his travels in Guizhou on Tuesday (see yesterday’s Tip Sheet).
The highlight of his Tuesday itinerary was a visit to Tencent’s Qixing Data Center in the hills outside provincial capital Guiyang.
Some context: The newly completed center is built into the mountains. It has over 30,000 square meters of tunnels and is reported to house tens of thousands of servers.
More context: Since 2014, Guizhou has released a series of policies to support the big data industry.
Premier Li’s visit was all about promoting the government’s “new infrastructure” push (Gov.cn 3):
- “Construction of new infrastructure, new urbanization, and major projects remain the priority for China in expanding effective investment this year, Premier Li said.”
- “He asked related departments to increase support for the construction of new infrastructure facilities, and back up the big data industry and other new-emerging industries.”
Get smart: Tencent recently promised to invest RMB 500 billion in “new infrastructure” over the next five years. Premier Li’s visit is meant to show that the government took notice – and is pleased.
Get smarter: China’s big tech companies know that their success depends on staying in the government’s good graces.
5. NPC publishes draft Export Control Law
Continuing its flurry of legislative activity (see yesterday’s Tip Sheet), China’s legislature (NPC) released another noteworthy draft law for comment Friday: the Export Control Law (ECL).
Some context: The Ministry of Commerce (MofCom) drafted the law in 2017 and will be the main agency responsible for enforcing it. The NPC released an earlier draft for comment in January.
The main purpose of the ECL, similar to the US’s export control regime, is to restrict the export ofgoods, technologies, and services that could be used for military applications.
Key revisions from the January version include:
- Explicitly prohibiting companies from knowingly providing services for the illegal export of sensitive goods, including financial services and transportation services.
- Stipulating that overseas entities will be held liable under the law if they undermine China’s national security and interests.
- Getting rid of a 45-day timeline for processing export permit applications for dual-use items; in the new draft there is no timeline.
Get smart: The ECL will be enforced strategically against the backdrop of a broader “technology war” with theUS.