finance economics
1.PBoC spreads its monetary message – again
Stable. Flexible. Moderate.
That’s how Sun Guofeng, head of the monetary policy department at the People’s Bank of China (PBoC), summarized current monetary policy.
Some context:That’s a slight variation on the “flexible and targeted” mantraregulators were promoting earlier in the month, but the basic message was still the same.
Speaking Monday at a press conference attended by a number of financial regulators, Sun said that, given the uncertainties thrown up by the pandemic, monetary policy needs greater certainty to help calm market sentiment.
Specifically, he said that (PBoC):
- “The direction of sound monetary policy won’t change.”
- “[The central bank will]ensure the market is neither short of money, nor overflowing with it.”
Sun also explained why monetary policy can remain normal:That’s because China’s hasn’t engaged in unconventional policies that need to be unwound.
Get smart:China’s financial sector officials are making the same point at every opportunity–don’t expect stimulus from monetary policy.
Go deeper: We’ve got more on Sun’s and other regulators’ comments in today’s China Markets Dispatch.
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Source name:国务院政策例行吹风会“金融机构支持实体经济政策落实情况”文字实录
politics policy
2.More insight into the trade deal review
Yesterday, we told you that Vice Premier Liu He had a phone call with US Trade Representative Robert Lighthizer and US Treasury Secretary Steve Mnuchin to review the progress of the phase one trade deal (seeyesterday’s China Markets Dispatch).
The official statements didn’t offer much in the way of detail.
Have no fear:Taoran Notes is here.
Some context:Taoran Notes is aWeChat account written by a reporter known to be close to Liu and his team.
Apparently, the call was a fairly pleasant affair:
- “According to people familiar with the talks, the atmosphere of the talks was harmonious and the exchanges [related to] agriculture and finance were relatively smooth.”
The article also said that US claims that the talks scheduled for the 15th had been “cancelled” were misleading, since the two sides hadn’t yet nailed down a firm date.
Finally, the piece called for the separation of political and economic issues in the US-China relationship:
- “A trade agreement is a trade agreement. The implementation of trade agreements need not and should not involve other matters.”
- “For the sake of [the election], some people in the United States have intentionally or unintentionally linked [the phase one trade deal] with other matters. This is not a wise approach and will not produce good results.”
Get smart:There’s not too much that’s new here. Both sides appear to remain committed to the success of the deal.
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Source name:陶然笔记：中美经贸会谈氛围融洽 在农业、金融等方面交流比较顺畅
3. State Council wants better social assistance
On Tuesday, the General Office of the State Council released a new directive on how to reform the country’s social assistance program.
Some context:The program, also known as dibao, was first rolled out in 1993 in Shanghai to help citizens with low incomes meet basic living costs. Dibao was then rolled out to the rest of urban China in 1999, and to rural areas in 2007.
Xinhuasummarizesof the new policy’s overarching goals:
- “The document aims to build a tiered and classified social assistance system with Chinese characteristics for both urban and rural areas in about two years.”
- “It stresses promoting basic living assistance, calling for improving the subsistence allowances system as well as the mechanisms for adjusting basic living assistance standards.”
- “Social assistance for special purposes, such as healthcare, education, housing, and employment, are underscored in the document.”
- “It also highlights the need for the improvement of social assistance in emergencies and disasters.”
Get smart:Xi Jinping’s new economic framework – the dual circulation strategy – is all about rejigging the economy to be driven more by domestic demand (see yesterday’s Tip Sheet).Building out the social safety net is key to achieving that aim.
Our question:With government budgets already under heavy strain, how are they going to fund this?
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Gov.cn:中共中央办公厅 国务院办公厅印发《关于改革完善社会救助制度的意见》
Xinhua:China issues directive on improving social assistance system
SupChina:China’s poverty-shaming social assistance system and the urgent need for reform
4. Government adviser discusses Monday’s big meeting
Want to know more about Xi Jinping’s meeting on Monday to discuss the economy (seeyesterday’s Tip Sheet)?
Us too.
So we were pretty pumped when we saw an interview with Lu Ming on Tuesday.
- Lu, aprofessor atShanghai Jiao Tong University, attended Monday’s meeting and presented suggestions to Xi and other top leaders.
What Lu took away from the meeting (Sina):
- “I think [the policymaking circle] sent a clear signal that [the country will continue to open up].”
An expert on labor and development economics, Lu also offered some advice.
He said that China is lagging behind:
- “Compared with other countries at the same stage of development in the world, our country’s urbanization rate is about 10% lower.”
The problem:Migrants without urban residence permits (hukou).
- Lu argued that this group is one of the major drags on consumption, as they lack access to public services, thus having to retain more of their savings for emergency use.
- Consumption by migrants without hukous is 16-20% less than local residents.
Lu’s prescription:Speed up the building of big city clusters and push for more hukou reform.
- Specifically, Lu wants hukou restrictions relaxedin cities with more than five million people.
Get smart:Under the umbrella of the dual circulation strategy, we’ve already started to see a push for improving economic efficiency by allowing key factors and resources to circulate domestically.
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5. Thesocial cost of Xinjiang’s lockdown
This morning, the National Health Commission dropped the latest COVID-19 numbers.
On Tuesday, China saw (NHC):
- Nodomestically transmitted cases – for the10thconsecutive day.
- Nodomestically transmitted asymptomatic cases – for thefifthconsecutive day.
- 15 imported cases – up from 14 on Monday.
- 14 imported asymptomatic cases – down from 16 on Monday.
Xinjiang looks to be in the clear.
- Xinjiang hasn’t reported any local infections since August 15, after a local outbreak started in Urumqi on July 15.
But despite having effectively contained the outbreak, Xinjiang officials seem reluctant to relax restrictions (NYT):
- “Xinjiang residents have in recent days circulated videos showing residents handcuffed to metal posts, purportedly for violating quarantine rules.”
- “Some residents have said that the authorities have forced them to drink traditional Chinese medicine.”
- “Another widely circulated video showed residents in Urumqi… yelling from their homes in despair.”
Get smart:The optics here are… not great. It looks like Xinjiang officials are leveraging the outbreak to further tighten control over the populace.
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NYT:China Locks Down Xinjiang to Fight Covid-19, Angering Residents