1. Data dump – government revenue
The Ministry of Finance dropped government revenue numbers for July on Wednesday.
Our takeaway: Things are looking up!
Overall government revenues grew for the second consecutive month, increasing 4.3% y/y after rising 3.2% in June.
Butrevenues for the year-to-date are still in a hole:
- Total fiscal revenues for Jan-Augwere RMB 11.47 trillion – down 8.7% y/y.
- Tax revenue weighed in at RMB 9.85 trillion – down 8.8% compared to the same period last year.
- Non-tax revenue (which includes things like fees, fines, and profit transfers from state firms) was RMB 1.62 trillion – down 7.7% compared to the same period last year.
Tax revenues might be down, but local governments still have plenty of money to spend by the end of the year – as long as it goes toward public works.
- As of July 30, local governments had spent RMB 2 trillion worth of funds raised from the sale of special purpose bonds.
- That leaves RMB 1.75 trillion to be spent by year-end.
Get smart: It’s a long, slow road back to economic normality, but China’s fiscal numbers areheading in the right direction.
4. Xi visits state-owned steel behemoth
On Wednesday, Xi Jinping continued his trip to Anhui (see yesterday’s Tip Sheet).
The Big Man visited:
- The Xuejiawa ecological park in Ma’anshan
- A dam in Feidong county to inspect flood control efforts
- A memorial hall in Hefei marking the PLA’s campaign to cross the Yangtze River during the Chinese Civil War
- The Anhui Innovation Center
Get smart: These visits weren’t chosen at random. Each one signals a policy priority.
But here is the visitwe were most interested in(Xinhua 2):
- “He…visited Magang Group of China Baowu Steel Group to learn about the situation of business resumption and operation.”
Some context: Magang is one of China’s largest and most storied steelmakers. It was merged with China’s largest steelmaker, Baowu, last year. The new company is the second largest steelmaker in the world, and one of China’s largest state-owned enterprises.
Why it matters: Policymakers are formulating the next five-year plan. Xi’s visit signals that he wants SOEs to continue playing a leading role in China’s economy, and drafters of the plan are sure to take notice.
What to watch: Will Xi pay a visit to a semiconductor company in the provincial capital of Hefei – one of China’s biggest semiconductor production bases?
3. Cui calls for calm (again)
Today, the Chinese embassy in Washington, DC, published a keynote speech delivered by Cui Tiankai, Beijing’s ambassador to the United States, at a webinar hosted by the Brookings Institution last Thursday.
Cui’s comments neatly summarized Beijing’s official thinking on the state of Sino-American ties (China Embassy 2):
- “Today, the China-US relationship is going in the wrong direction.”
Cui said that the future of US-China relations comes down to tolerance:
- “[T]he fundamental question for the China-US relationship is:…is the United States ready to…live with a country with a different history, culture and system?”
Cui then raised the possibility of a fresh start:
- “China and United States [sic] should…play a positive role for a ‘post-pandemic’ world order and global governance system, and build a more forward-looking, stronger and more stable relationship.”
And this caught our eye:
- “[S]ome people believe that China is just waiting for the result of the US presidential election in November. Let me make it very clear here, we are not waiting for anything.”
Get smart: That last comment suggests that Beijing realizes that anti-China sentiment is now a bipartisan issue in Washington, and that tensions need tobe dialed back no matter who wins in November.
Get smarter: Beijing is still pushing for reconciliation. Washington remains on the (metaphorical) warpath.
4. Han Zheng pushes PipeChina to expand
On Tuesday, Executive Vice Premier Han Zheng headed over to the headquarters of PipeChina – the newly formed state-owned pipeline giant.
Some context: The company was officially established in December 2019 (see December 10 Tip Sheet) and was created to take over and consolidate the pipeline assets from China’s three national oil companies (NOCs).
More context: Creating PipeChina has not been easy – the NOCs are loath to give up their assets. So far, only a small percentage of the NOCs’ pipeline assets have actually been transferred to PipeChina.
Han made reference to the problems (Xinhua):
- “PipeChina should tackle prominent problems in its formation and operation.”
Healso urged the company to build its own pipelines (Gov.cn):
- “[PipeChina] must…accelerate the construction of major pipeline projects.”
Get smart: PipeChina should be able to leverage an increased focus on energy security (see April 21 Tip Sheet) and liberalizing of production factors (see April 10 Tip Sheet) to push through its expansion plans.
The bigger question: Will PipeChina treat all third-party producers equally? Or will it give sweetheart deals to the NOCs?
5. China rules out a second wave
This morning, the National Health Commission (NHC) dropped the latest COVID-19 numbers.
On Wednesday, China reported no new domestically transmitted cases for the fourth day in a row (NHC):
- There were seven new imported cases – down from 17 on Tuesday.
- There were also 22 new asymptomatic cases – 21 of which were imported from abroad.
- The one domestically transmitted asymptomatic case was reported in Shenzhen, Guangdong.
Not to worry: The asymptomatic case in Shenzhen was discovered among people already housed under centralized quarantine.
What it means: The local infections found in Guangdong on August 14 seem to have been contained before turning into a real outbreak (see August 17 Tip Sheet).
Wu Zunyou – the top virologist at the Chinese Center for Disease Control and Prevention – hailed China’s achievements in responding to local outbreaks at a State Council press conference on Wednesday, saying(Xinhua):
- “After gaining experience for more than half a year, we have the confidence to control the COVID-19 epidemic.”
- “The epidemic will not get as severe as it did during the beginning of this year in China again.”
Get smart: Chinese authorities are effectively ruling out the potential for a second wave – after successfully containing the first one.
Get smarter: That’s a strong signal to businesses to march on with economic resumption.