Crucial choices

driving the day

1. Xi pushes DCS in market-oriented direction

On Tuesday, Xi Jinping chaired a meeting of the Central Committee for Comprehensively Deepening Reform (CCCDR).

Some context: The CCCDR was established as part of the MASSIVE Party-state restructuring in March 2018. It is the Party’s most important policymaking body.

Top of the agenda: The dual circulation strategy (DCS).

A quick refresher: DCS is a new framework to guide economic policy introduced in May (seeMay 15 Tip Sheet). The overarching goal of DCS is to make the economy less vulnerable to external shocks (seeAugust 25 Tip Sheet).

Don’t get too excited. The readout from the meeting is characteristically terse. But there are a few important signals.

Xi said:

“We must accelerate reforms that help to improve the efficiency of resource allocation, and improve the quality and benefits of development.”

What that means:

Broadly speaking, this signals support for further market-oriented reforms.
In particular, this places Vice Premier Liu He’s push to make the allocation of factors of production more market-orientedat the heart of the DCS (seeApril 10 Tip Sheet).

The details of DCS are still being hashed out.That’s why on Tuesday, Xi also said:

“We must strengthen forward-looking research on reform.”

Get smart: Liu He is attempting to use the introduction of DCS to push forwardlong-stalled marketizing reforms.

Get smarter: The debate over DCS is starting to heat up. It is way too early for Liu to claim victory.

2. CCCDR promotes foreign trade

Tuesday’s CCCDR meeting wasn’t all about the dual circulation strategy (DCS) (see previous entry).

The commission also approved five documents on:

Promoting the innovative development of foreign trade
Improving higher education in central and western China
Standardizing private compulsory education
Standardizing healthcare practices
Promoting garbage sorting

Regarding the promotion of foreign trade, the readout said:

“We must stand on the right side of history, and unswervingly promote wider opening to the outside world.”

Get smart:Some conservatives are attempting to use the new debate over DCS to promote a more closed economy. But Xi and other top leaders have been clear that China will not close its doors to foreign trade and investment.

What to watch:What the CCCDR discusses today becomes policy tomorrow. Stay tuned.

politics policy

3. New MIIT boss visits manufacturing companies

On Sunday, Xiao Yaqing, the new boss of the Ministry of Industry and Information Technology (MIIT), headed off on a three-day visit to check out some companies in Shanghai.

Some context:Xiaowas tapped to headMIIT at the end of July (see August 3 Tip Sheet).

This was Xiao’s first visit to companies since taking over the ministry.

Xiao visited:

The Commercial Aircraft Corporation of China (COMAC) – a state-owned aircraft manufacturer
AECC Commercial Aircraft Engine – a state-owned turbofan maker
An unnamed semiconductor manufacturer

Get smart: Xiao’s visits were an indication of industrial policy priorities.

Xiao explained (MIIT):

“Manufacturing is the lifeblood of our economy.”
“[We must] accelerate the pace of innovation and advance the manufacturing of aircrafts, aerospace engines, and integrated circuits.”

Get smarter:Becoming self-reliant in key technologies is now the driving force in economic policy.

4. Zhejiang and Liaoning get new Party chiefs

Yesterday was a busy day on the personnel front.

The latest: Yuan Jiajun is taking over as Party boss of Zhejiang.

A little about Yuan:

Yuan has a PhD in aerospace engineering.
Yuan has spent the majority of his career in the space industry, including as vice president of China Aerospace Science and Technology Corporation (CASC), one of China’s largest missile manufacturers, from 2007-2012.
At CASC, Yuan was involved in the Chinese lunar mission and the joint Chinese-Russian Mars exploration program.
Yuan’s been serving as Zhejiang governor since April 2017.

But that’s not all.

Liaoning also got a new Party boss – Zhang Guoqing.

A little about Zhang:

Zhang has a PhD in Economics from Tsinghua University.
Zhang worked for over 25 years at state-owned defense manufacturer Norinco, ultimately serving as president from 2008-2013.
Zhang also served for four and a half years in Chongqing, first as deputy Party secretary and then as mayor (April 2013 to December 2017).
Most recently, Zhang served as mayor of Tianjin for the past two and a half years; prior to that, he was mayor of Chongqing for a year.
At 56, Zhang is currently the youngest of China’s provincial Party bosses.

Get smart: China’s military-industrial complex is playing a more important role in politics under Xi Jinping.

What to watch: Getting promoted at this stage of the political cycle often signals a rising star. Both Yuan and Zhang are now in the running for the promotion to the Politburo in 2022.

5. Wang Yi’s diplomatic fail

Xi Jinping’s telephonic world tour continued on Wednesday when he spoke with:

Indonesian President Joko Widodo
Moroccan King Mohammed VI

Some context:Over the past few months, top Chinese leaders have made dozens of calls to foreign heads of state, touting support, solidarity, and the importance of increasing cooperation as the world continues to battle COVID-19.

Xi’s comments to Widodo were in line with his standard message(Xinhua 1):

“Currently, China and Indonesia have been actively engaged in vaccine cooperation, which has become a new highlight in bilateral cooperation against the epidemic, he said.”

Meanwhile, foreign minister Wang Yi was trying to make nice in Europe.

At a press conference in Germany on Tuesday, Wang called on Europeans to reject US President Donald Trump (Xinhua 3):

“Today’s world is faced with three crucial choices – between multilateralism and unilateralism, between openness and seclusion, and between cooperation and confrontation.”

And he warned Europe against following America’s lead on the de-coupling front:

“The pandemic has already caused an impact on the global industrial and supply chain, while so-called ‘de-coupling’ and ‘de-globalization’ will only weaken the momentum of a global economic recovery, he said.”

Get smart:Xi’s calls were likely well received. But Wang’s European tour has done little to repair China’s tattered image on the continent.

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