1. Monetary stimulus still not on the cards
Stop me if you’ve heard this before.
China intends to maintain a prudent monetary policy that is flexible and moderate.
That was what the State Council led with in the readout from its weekly meeting on Wednesday.
Missing were some of the other adjectives that have been in high rotation among senior officials over the past month – namely stable, targeted, and precise.
But the basic meaning is still the same:
- Don’t expect us to use monetary policy to stimulate growth.
The State Council also passed new rules on financial holding companies.
- Under the rules, individual persons and non-financial enterprises that control two or more financial institutions of different types, can set up a financial holding company.
- Total assets of the financial institutions must be above a certain size, but the statement didn’t specify how much.
What’s going on?Financial regulators’ overarching preoccupation this year has been to ensure that shareholders in financial institutions are behaving themselves.
- This appears to be the next salvo in that campaign.
Get smart: Financial holding companies will make it easier for regulators to track firms that exert influence over more than one financial institution – and to ensure that they’re not abusing that position.
2. State Council focuses on air pollution
Wednesday’s State Council meeting also focused on controlling air pollution.
Some context: In 2018, the State Council issued a three-year action plan for controlling air pollution.
Here are the State Council’s top priorities (Gov.cn 2):
- “It urged continued efforts to prevent and control air pollution, in particular effectively tackling industrial pollution, promoting clean substitutes for small-scale coal burning, and controlling diesel exhaust emissions and ammonia emissions in agriculture and animal husbandry.”
A big focus is restructuring the transport industry:
- “The railway shipment of commodities in multi-modal transportation and the use of new energy cargo vehicles in urban delivery services will be significantly increased.”
Get smart: Efforts to transport more freight via rail have largely been unsuccessful thus far (SCMP).
The meeting also approved two new nuclear power projects with a total investment of RMB 70 billion.
- Both projects will usedomestically developed Hualong One reactors.
Get smart: One of the upsides of the pandemic-induced downturn has been a noticeable decrease in air pollution. The question nowis whethereconomic considerations will trump environmental ones as officials focus on getting the economy humming again.
3. Out with the old and in with the new
After Zhang Guoqing left Tianjin for Liaoning on Tuesday (see yesterday’s Tip Sheet), things moved quickly.
Yesterday, Liao Guoxun was appointed new mayor of Tianjin.
A little about Liao:
- Liao belongs to the Tujia minority, one of China’s 55 ethnic minority groups.
- Liao spent the first 31 years of his career in his native Guizhou, ultimately being appointed secretary-general of Guizhou’s Party standing committee in July 2012.
- In April 2015, Liao was transferred out of Guizhou for the first time; he was appointed head of the Zhejiang Organization Department.
- Liao was promoted to Shanghai deputy Party secretary in late February 2020, one of the most prominent vice-ministerial posts in the country.
Fun fact: Liao likely met Xi Jinping as early as 2008, when Xi visited Yuping County in Tongren (where Liao worked as deputy Party secretary) to console victims after the catastrophic 2008 Chinese winter storms.
Get smart: This promotion will earn Liao a seat on the 20th Central Committee (2022-2027). After two or three years on the job, Liao looks set to be promoted onwards, most likely to a provincial Party secretary position.
4. Citi granted fund custody license
On Wednesday, the China Securities Regulatory Commission (CSRC) said it had granted Citigroup a fund custody license.
- That makes Citi just the second foreign bank – after Standard Chartered – to be allowed to hold securities on behalf of mutual and private funds domiciled in China.
Some context: Having spent years lobbying for greater access to China’s securities markets, foreign financial institutions’ wishes are finally coming true:
- In yesterday’s China Markets Dispatch, we noted that eight foreign financial institutions have now been OK’d to assume majority ownership of their local securities brokerages (see subscription options for CMD and our premium investor service here).
- Last week, JPMorgan confirmed it was buying out its Chinese partner in their fund management joint venture.
- Over the weekend, Blackrock said it had been approved to set up its own mutual fund business in China.
Get smart: Beijing has big plans for its capital markets. Foreign firms are no longer a threat to be kept at arm’s length. They are meant to be part of the solution.
Get smarter: It remains to be seen if foreign financial firms have already missed the party, given how big and established domestic firms have now become.
- Giving foreign finance companies more clout will make the sector more competitive, but just how lucrative this will be for the firms themselves is still in question.
5. Europe trippin
As regular Tip Sheet readers know, foreign minister Wang Yi has been gallivanting around Europe for the past week.
Some context: On hisfirst trip abroad since the COVID-19 outbreak in February, Wang visited Italy, the Netherlands, Norway, France, and Germany.
On Tuesday, Wang said thatChina and Europe were pretty much on the same page, agreeing to adhere to multilateralism and to oppose “decoupling” (see also yesterday’s Tip Sheet).
To build the relationship further, Wang put forth six major short- and long-term economic goals (MoFA 2):
- Preparefor the next stage of high-level EU-China exchanges
- Complete the negotiations for the EU-China Comprehensive Agreement on Investment (CAI) within the year
- Sign the EU-China 2025 Strategic Agenda for Cooperation asap
- Build a “green partnership” between China and the EU
- Strengthen digital economic cooperation
- Strengthen support for multilateral institutions
But the Europeans wanted to talk about more than economics. During the trip, several of his hosts commented on some… er… sensitive topics.
But no biggie. Wang is all for an open, respectful, discussion (Xinhua):
- “Wang said that…some of his local colleagues inquired about Hong Kong and Xinjiang affairs, but they all first stressed their respect for China’s sovereignty and that they had no intention to interfere in China’s internal affairs.”
Get smart: Givenquickly deteriorating relations with the US, China is keen to stabilize it’s tense relationship with Europe.