driving the day
1. Hands off the cash!
Finance Minister Liu Kun has a message for China’s provinces:
- Keep your hands off of stimulus funds!
According to comments carried by the Daily Economic News, Liu said:
- Provinces cannot keep for themselves funds the central government gives to them to distribute to lower levels of government.
Liu also warned the provinces to keep outflows steady:
- “The scale of transfer payments to counties must be increased and cannot be reduced below last year’s level.”
Some context: Liu made the comments in a speech on June 8, which was only published on the ministry’s website on Friday.
Get smarter: The fact that Liu felt that he needed to tell provinces to stop pilfering funds likely signals it has (once again!) become a problem.
Go deeper: For more, check outtoday’s China Markets Dispatch.
2. Han Zheng talksreal estate tightening
Last Friday, Executive Vice Premier Han Zheng chaired a rare symposium dedicated to the real estate market.
Some context: Han is the highest level official to have made statements about the property market in recent months.
In addition to representatives from central-level government agencies, the symposium was attended by officials from the housing department, the central bank’s local offices, and the natural resource departments of 10 cities:
Han reiterated the usual real estate talking points, including that:
- Housing is for living in, not for speculating
- The real estate market will not be used to stimulate short term economic growth
Get smart: By holding the symposium, Han is signaling that regulatory actions to keep the real estate market – and real estate prices – in check will ramp up in H2.
Go deeper: For more on the outlook for China’s property market, check outtoday’s China Markets Dispatch.
3. Xi concludes Jilin tour
Last Friday, Xi Jinping concluded his Jilin tour by sitting down with local officials.
Xi told the assembled that high-quality development and economic competitiveness were top of mind(Xinhua 1):
- “Efforts should be made to promote changes in the quality, efficiency, and strength of economic development, so as to enhance economic competitiveness, innovation, and risk resistance.”
Xi then reiterated the pro-business message that he set forth at the big meeting he held with members of the business community last week (see July 22 Tip Sheet).
- “It is necessary to accelerate the transformation of government functions and cultivate a market-oriented, rule-based international business environment.”
- “We should deepen the reform of state-owned enterprises [and] support the development of private enterprises.”
By Friday, it had become clear that Xi was using the Jilin tour to get input on the 14th five-year plan (FYP), which will run from 2021-2025.
Get smart: The Party will approve an outline of 14th FYP this autumn. That outline will be the skeleton of the full 14th FYP document to be approved in March 2021.
What to watch: Xi is expected to discuss the FYP with more local officials in the next few weeks.
4. Shut down for what
Last week, we told you China had vowed retaliation over Washington’s demand that it shut down its Houston consulate (see July 23 Tip Sheet).
Retribution was swift, but proportional (MoFA):
- On Friday, China ordered the US to close its Chengdu consulate by Monday, calling the move “a legitimate and necessary response to the unreasonable acts of the US side.”
In the days leading up to the closure, the streets around the consulate were thronged with onlookers (The Paper):
- Some of the assembled onlookers chanted slogans and sang patriotic songs, but were quickly asked to move along by the police.
- Police later restricted access to the streets surrounding the consulate.
Get smart: In previous geopolitical disputes, the Chinese government has allowed and even encouraged patriotic furor. The crowd management techniques deployed by the Chengdu police suggest that higher-ups are not interested in sparking off a hard-to-control nationalist firestorm.
Meanwhile in Texas (SCMP):
- US law enforcement reportedly forced its way into the Chinese consulate in Houston after the eviction deadline had passed, prompting angry complaints from the Chinese side.
Get smarter: Beijing wants to put a floor under deteriorating relations…Washington, not so much.
5. (Protracted, weary sigh)
Between Friday and Sunday, China’s National Health Commission (NHC) reported:
- 141 newly confirmed cases – only 20 of which were imported from abroad.
- 186 new asymptomatic cases – only 11 of which were imported from abroad.
We know what you’re thinking:
- What in the name of all that is green happened?
Over the last three days:
- Liaoning reported 36 new confirmed cases and 53 new asymptomatic cases.
- Xinjiang reported 83 new confirmed cases and 114 new asymptomatic cases.
And this is bad:
- Over the weekend, the local outbreak that began last week in Dalian, Liaoning,has spread to three other provinces:
- Neighboring Jilin and Heilongjiang
- The coastal province of Fujian
Some context: The origin of the Dalian outbreak has been traced back to a seafood processing company, which is linked to nearly 80% of the confirmed cases since July 22.
Get smart: Despite local governments’ swift imposition of limited lockdown measures and ramped-up testing capabilities, the local outbreaks in Dalian and Xinjiang are set to get worse before they get better.
Get smarter: These resurgences pose yet another test for policymakers as the economy continues to crawl toward full resumption.