driving the day
1. That’s gonna be a no from me, dawg
Last week, TikTok struck a deal aimed at averting a ban by the Trump administration.
- The deal would give Oracle and Walmart a collective 20% equity stake as part of a partnership agreement that stopped short of a full sale.
- On Saturday, US President Donald Trump verbally approved the deal.
But ByteDance, TikTok’s parent company, still needs approval from Chinese regulators.
- On Wednesday, ByteDance applied to Beijing’s commerce bureau for an export license, effectively requesting permission for the deal to go forward.
So will Beijing okay the deal?
- Don’t count on it.
State media has denounced Washington’s attempts to force ByteDance’s hand (Xinhua):
- “The pirate logic of the US side is that the non-US enterprises that have gained the leading edge in the industry must be controlled by the US.”
- “The despicable behavior taken by the US side…is tantamount to extortion and plunder.”
People’s Daily also had some choice words:
- “Should the United States be allowed to get its way with its tricks and bullying, it would do the same over and over again.”
Get smart: The message is clear – Beijing would rather let TikTok die than allow Washington to strong-arm ByteDance into handing it over.
2. The State Council wants better listcos
On Wednesday, the State Council said it wants to improve the quality of listed companies.
A noble goal, indeed. But how do China’s authorities intend to do that?
We’re glad you asked. The State Council’s list of priorities include:
- Implementing statutory duties and responsibilities for controlling shareholders, directors, supervisors, and senior managers
- Improving information transparency and the quality of disclosures
- Allowing qualified foreigners to make strategic investments in listed companies
- Increasing penalties for market manipulation, insider trading, and other violations
Quick take: The State Council’s comments are a broad statement of intent. No doubt more specific implementation guidelines will follow.
Still, they leave plenty of questions unanswered.
One that jumps out at us:
- How will foreigners become “qualified” to make strategic investments?
Get smart: Beijing is serious about overhauling its exchanges so that they better serve the economy.
Get smarter: International analysts are too focused on moves that allow greater foreign involvement. Beijing has quietly unleashed a wave of micro-reforms that may ultimately have a transformative effect on the functioning of markets.
3. Do you even lift, bro?
The State Council talked about more than just listcos yesterday (see previous entry).
Also on the agenda: Improving gym quality.
We’re not kidding.
The meeting readout pointed out that:
- “Meeting the needs of the masses and strengthening the construction of national fitness venues can not only enhance the people’s physique, but also be conducive to the development of the health industry and the expansion of consumption.”
To get gyms and sports facilities fit for the masses, the State Council wants to:
- Ensure localities focus on building fitness facilities that are open and accessible to the public – including multi-functional sports fields, sports parks, fitness trails and courts
- Simplify review of fitness infrastructure projects
- Improve policy coordination and encourage private investor participation
The State Councilalso wants to promote working out at home and support the development of online sports platforms.
Get smart: Beijing is increasingly focused on quality of life issues. And it won’t hurt if a booming sports and fitness industry results as well.
Get smarter: This push isn’t happening in a vacuum – it’s right in line with the Healthy China Initiative (see July 26, 2019 Tip Sheet).
Our question: What’s next, a state-sponsored home workout video?
4. Big money for little villages
On Wednesday, the general offices of the Central Committee and the State Council jointly issued opinions with big implications for local government budgets in coming years.
- Provinces need to start using more of the money they earn from awarding land use rights to fund rural development.
- By 2025, local governments should earmark at least half of this revenue for rural and ag purposes (up from around 30% now).
That’s a lot of cash.
Today at a press conference, Han Jun, Vice Minister of Ag and Rural Affairs (MARA), noted that (CNStock):
- “These land revenues total RMB 6-7 trillion annually – this year may exceed 7 trillion.”
Wu Hongyu, also vice minister at MARA, reminded local governments that the money isn’t being taken from them:
- “The total amount of funds hasn’t decreased, the scope and structure of use has changed.”
- “You could say we’re taking it from the right pocket and putting it in the left pocket, but there is no new burden on the local government.”
Get smart: Funding is the missing piece in Xi Jinping’s rural revitalization agenda.
Get smarter: Local governments have relied on land income for decades. Complying will be painful for some, and outright impossible for others.
5. We know you miss waimai
Big shoutout to foreign Tip Sheet readers with Chinese residence permits.
On Wednesday, the Ministry of Foreign Affairs (MoFA) and the National Immigration Administration jointly announced that China will reopen borders to foreign nationals holding residence permits.
Some context: China effectively closed its border on March 28 to all foreign nationals even with valid visas as the COVID-19 pandemic was going out of control around the global (see March 27 Tip Sheet).
Three types of residence permit holders can now enter China:
- Foreign nationals with valid Chinese residence permits for work, personal matters, and family reunion will be allowed to enter China without applying for new visas after September 28.
- For those whose residence permits expired after the visa ban, they may re-apply for a relevant re-entry visa at their nearest Chinese consulate.
Get smart: China is confident it can stop the virus at the border with existing screening measures.
Get smarter: Now that China has ample experience containing the virus, it’s keen to normalize business activities as soon as possible.