1. Whither the debt load
Over the past six months, China’s macroeconomic policymakers have been trying to thread a needle between:
- Providing enough policy support to keep the economy from completely stalling out
- Keeping policy support sufficiently restrained, as to not completely blow out the debt burden
According to the latest report from the National Balance Sheet Research Center (yeah, it’s a thing), policymakers seem to be doing a decent job on both fronts.
To the numbers:
- The center estimates that China’s nationwide debt levels increased by 21 percentage points in the first half of 2020 – to 266.4% of GDP now, from 245.4% at the end of 2019.
That ain’t too bad, especially given a big chunk of the rise in Q1 was thanks to the fact that GDP shrank.
- What’s more, the center estimates that the overall ratio will fall in the second half of 2020.
Get smart: After years of rapid debt accumulation after the Global Financial Crisis, policymakers are now fully convinced of the dangers of a high and growing debt load.
Go deeper: For more analysis on debt and the growth outlook, check out today’s China Markets Dispatch.
2. New State Council body for high-quality trade
Hold on to your hats: Yesterday, the General Office of the State Council issued a document that willestablishan inter-ministerial joint conference system to enable”high-quality trade development.”
Some context: The body is being set up to implementguidelines issued by the Party Central Committee andState Council in November last year, aimed at deepening China’s trade relationships with…well…pretty much everyone(see November 29, 2019 Tip Sheet).
The new body will be tasked withsetting the framework for trade development by (Gov.cn 1):
- Coordinating policies and responsibilities among various agencies
- Studying related work plans
- Proposing important policies
It will be headed by none other than our favorite underdog Vice Premier, Hu Chunhua.
And did we say the word”inter-ministerial”? You bet we did.
- The joint conference will consist of 30 different ministries and departments – including the National Development and Reform Commission, the People’s Bank of China, and the State Administration of Foreign Exchange.
- It will be headquartered at the Ministry of Commerce.
Get smart: Decoupling chatter aside, Beijing actually wants more globalization – not less.
Get smarter: The creation of a huge new bureaucratic entity may not be the best way to achieve that goal. But who are we to judge?
3. Beijing legal
If you thought the new trade conference (see previous entry)wasthe only inter-ministerial headlineout of the State Council’s General Office on Monday, you’d be sorely mistaken, dear reader.
The body also issued a document calling for a fancy new inter-ministerial joint conference system for public legal services.
Sounds very cool…what does it mean?
- Like pro-bono legal services in the Western tradition, public legal services are provided to Chinese citizens of limited financial means.
According to the document (Gov.cn 1):
- “The joint conference consists of 12 departments, including the Ministry of Justice, the National Development and Reform Commission and the State Taxation Administration.”
Some context: The document follows on a set of opinions by the State Council and Party Central Committee on upping China’s legal services game (Gov.cn 3):
- “Promoting the construction of public legal service system is of great significance to better meet the growing needs of the people…and to improve the modernization of the national governance system.”
- “We should lower the threshold for legal aid, expand the scope of legal aid, [and] strengthen the construction of public legal service platforms.”
Get smart: As with other aspects of its governance structure, China’s economic growth has waaaayyyyyyy outstripped the development of its legal system.
- This policy push is aimed at fixing that, at least to a small degree.
4. (No) new model of fair competition regulation?
On Friday, Hainan’s provincial market regulator published draft regulations on fair competition in the Hainan Free Trade Port (FTP).
Some context: Following the Party center’s plan to build the Hainan FTP, released in June, the provincial government was authorized to trial regulations aimed at building a better business environment on the island (see June 2 Tip Sheet).
More context: The strong political capital that has been put behind this new FTP had previously made us hopeful that it would be an attractive place for foreign companies to set up shop.
But while these regs came out fast, we’re not impressed.
The draft leaves a lotof options to limit competition in areas related to:
- Economic security
- Culture security
- Technology security
- Data flow security
What’s more, the draft documentfails to provide actionableremediesfor businesses to pursue if the government wrongfully limits fair competition.
Our take: These new regs contain about zero breakthroughs for fair competition.
Get smart: The Hainan government wasted a great opportunity here. Instead of coming out strong on this issue, setting the tone for foreign investment, they came up with a whole bunch of nothing.
5. Back to April
This morning, the National Health Commission (NHC) dropped the latest COVID-19 numbers.
On Monday, China reported 68 newly confirmed cases – up from 61 on Sunday (NHC):
- Only four of which were imported from abroad.
- 57 were domestically transmitted in Urumqi, Xinjiang.
- Six were domestically transmitted in Dalian, Liaoning.
- One was domestically transmitted in Beijing.
Some context: That is the highest single-day growth of new confirmed and domestic cases in 105 days – since April 13.
More context: The case in Beijing is linked to infections in Dalian. It’s not a resurgence of the Xinfadi outbreak in June.
In addition (NHC):
- China reported 34 new asymptomatic cases on Monday.
- Six of which were imported from abroad.
Get smart: Despite the record growth in new cases, the general sentiment toward the virus situation has not changed. Thepublic appears to remainconfident in authorities’ abilityto quickly get local outbreaks under control.
The bottom line: Efforts to fully resume economic activitywill march on.