driving the day
1. Consulate kerfuffle continues
Chinese officials in Houston are still scrambling to close the Chinese consulate there by Friday.
Some context:On Tuesday, US officials told the consulate that it must shut down and vacate the premises within 72 hours (see yesterday’s Tip Sheet).
On Wednesday, the US gave more insight into the reasons behind the closure (WSJ):
- “Assistant Secretary of State David Stilwell…called the order to close the Houston consulate ‘long overdue’ and said it followed a series of malign activities including visa fraud and research theft—trends he said have accelerated since the coronavirus pandemic.”
But that’s not all:
- “U.S. officials said that FBI investigations into allegations of economic espionage and influence operations often led back to the Houston consulate.”
So what’s next? Officials from the Chinese foreign ministry have vowed to retaliate, but so far given no details.
- The latest reporting indicates the US consulate in Chengdu might be in the crosshairs (SCMP).
- But nationalist rag Global Times says the US consulate in Hong Kong may also be under consideration.
Get smart: This decision is high stakes. Closing the Chengdu consulate would be a restrained, like-for-like move. Closing the Hong Kong consulate would up the ante.
- Our money is on the former.
What to watch: It looks like China will wait until after the 72-hour period is up to announce its retaliation – in hopes the Trump administration will reverse the decision.
- That ain’t gonna happen.
Source:U.S. Orders China to Close Houston Consulate
Source:Beijing denies Covid-19 is behind consulate row: ‘China helped US return to its Wuhan office after outbreak’
Source:Update: China’s countermeasures to cause the US real pain over closure order of Chinese Consulate General in Houston
2. Gotta keep it urban…
Yesterday, the State Council did its thing, holding its weekly executive meeting.
Top of the agenda: New urbanization.
Some context: This year marks the end of the New Urbanization Plan (2014-2020), which combines efforts to improve the ecological environment and urbanization quality, expand domestic demand, and increase rural-urban coordination.
At the meeting, Premier Li touted the positives of new urbanization (Xinhua):
- “Promoting a new kind of urbanization that puts people first is where the greatest potential of domestic demand lies.”
- “It will help keep the fundamentals of the economy stable.”
The councilors pushed efforts to:
- Improve the public health system and strengthen related infrastructure to build better capacity for cities to prevent and respond to epidemics and natural disasters
- Accelerate the renovation of old urban residential communities
- Improve rural public facilities and build housing to meet the demands of rural residents
- Introduce diversified investment to support the construction of the new urbanization model
- Develop labor-intensive industries so rural residents can seek employment in places close to their homes
Get smart: For decades, the Party has encouraged urbanization to solve China’s economic woes. Now officials are incentivizing people to stay where they are.
3. …gotta keep it flexible
Wait, there’s more!
At yesterday’s meeting (see previous entry), Premier Li also talked about one of his favorite subjects – boosting employment.
Acknowledging that the job market is in a bit of a tough place right now, Li had a top tip for struggling job seekers:
- Be flexible
For instance, why not consider being your own boss (Gov.cn):
- “It was decided at the meeting that self-employed businesses will be encouraged. All relief policies introduced must be effectively implemented.”
- “Key populations…who engage in self-employed business will receive start-up subsidies, guaranteed loans, tax relief and other support, according to regulations.”
Or just work part-time (Gov.cn):
- “Part-time employment will be supported.”
- “Social insurance subsidies will be extended to those having difficulty finding jobs or college graduates yet to be employed two years after graduation when they engage in part-time work.”
Get smart: Li is telling people to do whatever they can to find, or create, a job. It’s good advice, if a little unhelpful.
Get smarter: The employment situation is very bleak. It’ll take more than a few subsidies to satisfy people’s employment needs.
4. Xi looksinward
At Tuesday’s meeting with the business community (see yesterday’s Tip Sheet), Xi explained everybody’s favorite new economic policy framework:
- The “dual circulation” strategy.
Some context: The Politburo Standing Committee introduced the dual circulation concept in May (see May 15 Tip Sheet). It represents an important new framework for economic policy.
Quick refresher: The “dual circulation” concept is all about ensuring “development security,” which means making the economy less vulnerable to external shocks.
Here is Xi’s rationale (Xinhua):
- “In the current external environment of rising protectionism, downturn in the world economy, and shrinking global markets, we must give full play to the advantages of the domestic super-large market, and add impetus to my country’s economic development by prospering the domestic economy and smoothing the domestic economic circulation.”
- “It is [also] necessary to enhance the modernization level of the industrial chain and supply chain, vigorously promote technological innovation, accelerate the research on key core technologies.”
In plain English: Xi is saying that the economy needs to become more self-reliant.
But don’t worry.
That does NOT mean the end of opening-up:
- “It is by no means to close [China’s] door.”
- “[We] are better connecting the domestic market with the international market by realizing the potential of domestic demand.”
Get smart: Becoming self-reliant in key technologies is now the driving force in economic policy.
5. Xi checks out black soil in Jilin
On Wednesday, Xi Jinping headed up to Jilin to check out what is going on over there.
Reporting thus far is sparse. Here is what we know so far:
- Xi visited an agricultural collective in Lishu County.
- He also visited a memorial to the Battle of Siping, a 1946 battle in the Chinese Civil War.
In Lishu County, Xi learned about (Xinhua 2):
- Grain production
- Protection and use of black soil
- Mechanized and large-scale farming
And…that’s about all we know for now. We should get more information on Xi’s trip in the coming day.
Get smart: “Rural revitalization” is one of Xi’s signature policy initiatives. The purpose of visits like these is to get an on-the-ground look at how such initiatives are progressing.
What to watch: Will Xi allude to the escalating tensions with the US once he makes public comments in Jilin?
6. Importing infection
This morning, the National Health Commission (NHC) dropped the latest COVID-19 numbers.
On Wednesday, China reported 22 newly confirmed cases – up from 14 the day before (NHC):
- Three were imported from abroad.
- 18 were domestically transmitted in Urumqi, Xinjiang – up from nine on Tuesday.
- A new domestic case was discovered in Dalian, Liaoning.
The case in Dalian emerged after 111 days of reporting no infections in the city – and it’s already spreading:
- On Thursday, Dalian authorities confirmed two additional cases and 12 new asymptomatic cases through screening close contacts of the first case.
Possible infection source:
- The first reported case in Dalian works at a meat processing factory for imported seafood.
- Some environmental samples taken from the Dalian facility have already tested positive for COVID-19.
Some context: This is not the first time imported meat products have carried COVID-19 into China (see July 10 Tip Sheet).
On Thursday, the National Health Commission (NHC) released guidelines for preventing COVID-19 risks at meat processing facilities.
- The guidelines require imported meat to pass COVID-19 tests before getting processed at domestic meat facilities.
Get smart: The Dalian outbreak will likely be contained quickly, but the implications for meat imports willbe long-lasting.