driving the day
1. Don’t read too much into August’s credit growth jump
The monthly credit data for August has landed.
At first glance, it looks like policymakers are putting their footon the credit pedal.
- Overall credit growth grew by 13.3% y/y in August, up from 12.9% in July.
- The 40bp m/m acceleration in the pace of growth wasthe most since May.
Hold up:Things are notas bullish as they seem.
The increase in overall credit growth in August was almost entirely down to a massive month for government bond issuance.
- Net new local government and treasury bonds hit RMB 1.38 trillion last month, the most on record.
That pace of growth is not going to last.
- Local governments have nearly exhausted their bond issuance quota for this year.
Get smart:August was the high-water mark for credit growth this year. It’s all downhill from here.
Want to know more? We break these numbers down further in our premium China Markets Dispatch newsletter. Click here to find out more.
2. Xi phones Uruguay, Saudi Arabia
After a hiatus of several weeks, Xi Jinping got back to his old shenanigans on Wednesday, calling world leaders with messages of goodwill and cooperation.
The lucky recipients of Xi’s warm wishes were:
- President Luis Lacalle Pou of Uruguay
- Saudi King Salman bin Abdulaziz Al Saud
Xi tried out some new material.
In his call with Lacalle Pou, Xi mentioned economic opening and the dual circulation strategy (DCS) in the same sentence (MoFA):
- “China will improve the level of opening-up…and foster a new dual-cycle development architecture, with the domestic cycle as the mainstay and with domestic and international development reinforcing each other.”
- “This will provide countries around the world including Uruguay with a wider market and more development opportunities.”
In his call with King Salman, Xi said (Xinhua):
- “China will continue to work with Saudi Arabia on the research and development of COVID-19 vaccines.”
- “The two sides should…promote cooperation within the G20 and help make COVID-19 vaccines a global public good.”
Get smart: Mask diplomacy is dead. Long live vaccine diplomacy.
Get smarter: Xi has officially joined the chorus of officials insisting that dual circulation does not mean the end of opening.
3. State Council issues new measures to improve business environment
On Thursday, the general office of the State Council released a notice with 12 measures to further improve the business environment.
The notice aims to dothat by streamlining business registrationand regulatory supervision.
More specifically, the notice pledges to:
- Make online services for corporate registration available nationwide by the end of this year
- Shorten the time needed to start a new company to four working days or less
- Promote the use of electronic business licenses, invoices, and stamps
- Allow businesses to register one official business address but have multiple operation sites
- Use big data and artificial intelligence to expedite the approval of business names
- Streamline the procedures for businesses to obtain production and operation licenses
- Enable one-stop certification and testing services for compulsory products
- Emphasize interim and ex-post oversight over pre-registration approvals
- Improve the disclosure of business information and a unified punishment mechanism based on social credit records
Get smart: These boring, nuts and bolts changes don’t get a lot of attention. But they really do make it easier to do business.
4. Know your commander
The Party’s Central Committee and the Central Military Commission (CMC) recently issued new regulations on Party-building in the military.
- Readers know we love us someParty-building.
Bummer town: The full text of the regs has not yet been released.
Luckily, the political work department of the CMC revealed some of their key themes in a written QA.
The top priority is to enforce Xi’s absolute leadership over the military (People.cn 2):
- “The CMC chairman is responsible for all the work of the CMC, commanding the nation’s armed forces, and making decisions on all major issues of national defense and military building.”
Another focus: Getting the armed forces battle ready.
To this end, the regs note that:
- Preparing for war is the People Liberation Army’s (PLA) main responsibility.
- The military is required to keep building the awareness of “real war” and cultivate its fighting spirit.
Get smart: The PLAhasn’t seen active combat in over 40 years. That makes Xi and other leaders nervous– especially with geopolitical tensions rising.
5. Liu He talks China-EU digital cooperation
Yesterday, Vice Premier Liu He co-chaired the first High-level Digital Dialogue with European Commission executive vice-president Margrethe Vestager.
They touched on several subjects, including:
- ICT standard setting
- Artificial intelligence
- Product safety for products sold online
- Digital taxation
- Research and innovation
Talks turned out pretty chummy (EU Commission):
- “This first high-level digital dialogue was held today in a constructive atmosphere.”
Decoupling was not on the table, but Vestager said that hurdles to cooperation remain:
- “The EU and China will both play a role in defining how global technological developments will go forward.”
- “The dialogue is therefore necessary to foster cooperation, but also to address divergences we have, like on reciprocity, data protection and fundamental rights.”
China’s new Initiative on Global Data Securitydidn’t really end up making the agenda (see yesterday’s Tip Sheet) (SCMP):
- ”While there was “no direct mention” of the Chinese initiative, Liu made reference to the ’spirit’ of it during his talks with Vestager, according to an EU official with knowledge of the meeting.”
Get smart: Yesterday’s talk focused on areas where the two sides might actually make progress. A smart move to keep the momentum going ahead of the EU-China summit on Monday, considering the many remaining sticking points in therelationship.
6. The vaccine race is on
Yesterday, state-owned pharmaceutical giant Sinopharm released a QA on its upcoming vaccines for COVID-19.
Some context: Sinopharm is currently conducting phase III clinical trials on two inactivated vaccines for COVID-19 as well as running a strategy to scale up production.
The company is leading the vaccine race in China (Sinopharm):
- “China has approved three vaccines [for emergency use], two of which are developed by Sinopharm.”
- “There have been zero infections among the tens of thousands of people who were vaccinated [by Sinopharm] and went to high-risk areas in other countries.”
The good news: Vaccines may be ready in just a few months.
- “The inactivated vaccines will hit the market in December  at the earliest.”
- “The [phase I] manufacturing facility can produce up to 300 million shots per year. [We] will be able to supply 100 million shots by year end.”
- “The phase II manufacturing facility will be able to produce up to 1 billion shots per year.”
- “It will be ready for production in 3 to 6 months.”
Get smart: The global vaccine race is not only about developing an effective product, but also about having the capabilities to scale up production.
7. China and India agree to chill out
ICYMI: China’s long-simmering border dispute with India has been heating up in recent days.
- Earlier in the week, both sides accused the other of firing shots near contested territory in the Himalayas.
- Both sides have been increasing their military presence in the area (SCMP).
Don’t forget: Clashes between Chinese and Indian soldiers in June left at least 20 Indian soldiers dead; there were likely casualties on the Chinese side as well, though China has not disclosed them.
On Thursday, the two sides agreed to de-escalate.
- Foreign Minister Wang Yi met with his Indian counterpart, Subrahmanyam Jaishankar, on the sidelines of the Shanghai Cooperation Organization foreign ministersmeeting in Moscow.
According to the official readouts (MoFA and India MEA):
- “Both ministers had a frank and honest discussion.”
- “The two Foreign Ministers agreed that the current situation in the border areas is not in the interest of either side.”
- “They agreed therefore that the border troops of both sides should continue their dialogue, quickly disengage, maintain proper distance and ease tensions.”
Get smart: It’s not clear how long the truce will last. The two sides agreed to de-escalate in June, only to see tensions flare back up a couple months later.