driving the day
1. Xi assembles tech brain trust for 14th Five-Year Plan
It’s that time of the decade.
Last Friday, Xi Jinping held a symposium with top scientists, industry leaders, and politicians to collect expert input on the upcoming 14th Five-Year Plan (FYP).
The A-list crowd included:
- Xu Kuangdi, former president of the Chinese Academy of Engineering
- Yao Qizhi, dean of the Institute for Interdisciplinary Information Sciences (IIIS) at at Tsinghua University
- Shi Yigong, president of the Westlake Institute for Advanced Study
- Chen Zuoning, Vice President of the Chinese Academy of Engineering
- Wang Jian, chairman of the Alibaba Group Technical Committee
China’s political A-team was in attendance as well, including:
- First Secretary of the CCP Central Secretariat Wang Huning
- Executive Vice Premier Han Zheng
- Vice Premier Liu He
- Vice Premier Sun Chunlan
- Director of the General Office of the CCP Ding Xuexiang
- Minister of the National Development and Reform Commission He Lifeng
No prizes for guessing what the assembled eggheads talked about:
- Achieving technological self-reliance
- Achieving scientific breakthroughs in core areas
Get smart: China’s leaders have been utterly obsessed with technological self-reliance ever since the US started putting the screws to Chinese tech companies over the past two years.
Get smarter: Expect Beijing to roll out a beefy new technology game plan within the 14th FYP.
2. Hurry up and innovate
At Friday’s scientific symposium (see previous entry), Xi had a clear message for China’s top scientists (Xinhua):
- “[Scientists] should […] focus on the frontiers of global science and technology, the primary economic battlefields, the needs of the country, and the health of the people.”
- “In particular, we must prioritize unique, original innovation, and strive to achieve more ‘0 to 1’ breakthroughs.”
Translation: Dear scientists, hurry up and make big, groundbreaking discoveries.
As external pressure on China’s tech supply chains increases, Xi wants to usher in a renaissance of indigenous innovation.
Specifically, Xi not so subtly implied his preference for reducing reliance on foreign:
- Crop seeds
- Core technologies and technical components
- Oil imports
To get there, Xi is doubling-down on support not only for research, but also to the broader innovation ecosystem, including:
- Creating national laboratories
- Optimizing research resource allocation
- Prioritizing STEM education
- Enhancing “scientific spirit” and integrity
Get smart: China has moved beyond simply throwing money at scientists to spur innovation, but turbocharging the broader research and development environment will take time.
3. Regulators tighten rules on financial conglomerates
On Sunday, the central bank (PBoC) released a newset of detailed rules to bring financial holding companies under closer regulatory oversight.
Some context: Two weeks ago, we flagged that the State Council passed rules on financial holding companies (see September 3 Tip Sheet).
The PBoC is worried about risk contagion (PBoC):
- “Some companies have blindly expanded into the financial sector and accumulated risk, but lack isolation mechanisms [for preventing systemic risks].”
Financial holding companies will need special regulatory approval to continue operation (Bloomberg):
- “Companies with a banking operation and financial assets of more than 500 billion yuan ($73.1 billion), or those with financial assets exceeding 100 billion yuan must seek a license.”
- “Those that are denied a license must sell their stakes in the financial companies or give up control, according to the rules.”
These companies will have until November 1, 2021 to obtain such a license.
Get smart: The complex structure of financial holding companies is making regulators nervous about systemic risks in the financial sector.
Go deeper: For more details, sign up for China Markets Dispatch, our daily research and analysis for investors, where we explain the key listed targets of the new policy.
4. Premier calls out local protectionism
On Friday, Premier Li Keqiang chaired the National Meeting to Deepen Administrative Reforms and Improve the Business Environment.
Some context: Li has held this meeting every year since 2015.
Li sounded a familiar refrain (Gov.cn 2):
- “Talking about various restrictions, market access barriers and overlapping approvals in innovation and entrepreneurship, [the] Premier urged governments at all levels to list out the approval items and reform the approval system.”
- “He stressed simplifying repetitive approvals, clarifying the governments’ responsibilities, and canceling unnecessary ones.”
An interesting theme emerged this year: better coordinating local governments.
- “The Premier called for more integration and ‘inter-provincial coordination’ […] 280 million people have been separated from their households, living and working in other places.”
- “More and more enterprises operate across different regions. Thus running back and forth to deal with issues has caused a lot of trouble.”
- “It is necessary to speed up data sharing, promote the construction of standardization and recognition of electronic certification across provinces in fields such as education, social security, health care, pension, and enterprise registration.”
Get smart: Inefficiency, bureaucracy, and high transaction costs for businesses that operate across provincial lines are a real drag on the economy.
- Fixing these issues would be a big boon for medium-term growth.
5. Vice Premier visits Heilongjiang amid food security jitters
Over the weekend, Vice Premier Hu Chunhua visited some of China’s largest farms on a tour of Heilongjiang province.
- He also visited Sino-Russian development projects in the Jiamusi border region.
This is the latest in a series of efforts to reassure the public that food security is well in hand.
Some context: Food security was listed as one of the “six guarantees” promised to the public in the wake of COVID-19. But trade frictions, natural disasters, African swine fever, rising grain prices, and Xi’s recent campaign against food waste (see the August 12 Tip Sheet) have left some households understandably jittery.
Hu’s Jiamusi visit was a nod to the ag trade relationship with Russia.
More context: Since 2017, bilateral projects have expanded farming in Russia’s Far East and facilitated a green channel for imports.
- Chinese companies are operating over 600,000 hectares of farmland in the region– an area roughly the size of Delaware.
Get smart: Heilongjiang is renowned as China’s breadbasket. Hu’s visit is meant to send a clear signal that despite a challenging year,Chinese citizens will not need to worry about where their next meal is coming from.