1. A tale of two DCEP trials
As we’ve highlighted before, China’s central bank (PBoC) is going hard in the paint on rolling out its national digital currency (DCEP).
Monday saw another big step in the beta testing process when the Shenzhen government gave away 10 million digital yuan via a public lottery.
Here’s what happened next:
- 50,000 individuals were given 200 digital yuan each through the DCEP e-wallet app.
- They will have until Sunday to make purchases at 3,389 designated retailers in Shenzhen’s Luohu district.
The key takeaway: The user experience is reportedly as good as using Alipay or WeChat Pay (The Paper).
- That’s high praise indeed.
The Shenzhen giveaway generated a ton of buzz, so domestic media took a closer look at the state of the DCEP trials elsewhere in China.
The results from Xiong’an were disappointing (21st Century Biz):
- Xiong’an authorities published a list of 19 companies to test DCEP back in April, but many have not even installed the payment system.
- Some Xiong’an residents have even not heard of DCEP.
Get smart: As with most policies, the pace of the DCEP adoption will vary from locality to locality within China.
2. Reform and opening 2.0
Yesterday, we told you that Xi Jinping gave a landmark speech to mark the 40th anniversary of the Shenzhen Special Economic Zone (see yesterday’s Tip Sheet).
- We also told you that Xi’s speech was heavy on homily, but light on specifics.
But there was one important takeaway from Xi’s speech:
- Reform and opening is here to stay.
In his speech, Xi deployed a well-known maxim from Deng Xiaoping, the main architect of China’s original reform and opening, but put a twist on it (Caixin):
- “[W]e must…adhere to the combination of crossing the river by filling the stones and strengthening top-level design.”
Xi also hinted that China would not be dissuaded by the challenging external environment:
- “By no means should we be stopped by the reversing trends and tides.”
- “We…will further open up in a comprehensive manner.”
Xi also said that China will go all in on tech (Bloomberg):
- “We need to unswervingly implement an innovation-driven development strategy…so as to build a technological and industrial innovation high-ground with global influence.”
Get smart: Despite everything, China remains committed to reforms – on its own terms.
3. Getting tough on exports
On Tuesday, China’s national legislature convened to deliberate a slew of new legislation including the country’s first Export Control Law (see yesterday’s Tip sheet).
Some context: This is the legislature’s third and final round of deliberation on the law (see July 8 Tip Sheet). It will be finalized by October 17.
The draft law is undergoing some last-minute changes, most of which have a national security bent to them.
And foreign businesses aren’t gonna like most of the changes (Xinhua):
- The draft added back a previously removed article which allows China to take countermeasures against foreign countries that it believes have abused their export controls measures to harm China’s interests.
The new draft also mandates stricter punishment for rulebreakers (NPC 1):
- Violators could be subject to criminal, rather than administrative, penalties.
And some legislators have proposed expanding the coverage of the export control regime (NPC 2):
- The language of the legislation may also be revised to cover algorithms, source code, 5G technologies, and quantum information technologies.
Get smart: An intensifying tech war with the US and Washington’s strong-arming of Chinese tech companies like TikTok and WeChat have hardened Beijing’s stance on export control.
4. A sharp rebuke
We’ve been keeping an eye on Qingdao’s COVID-19 outbreak so you don’t have to.
Here’s the latest:
- Qingdao authorities have tested 7.6 million residents and have found no further cases (The Paper 1).
- One asymptomatic case detected on September 24 developed into a confirmed case on Wednesday (Gov.cn).
A refresher: Qingdao has reported 12 positive (six confirmed and six asymptomatic) cases since the outbreak’s initial detection in a local hospital on October 11 (see October 13 Tip Sheet).
Although the outbreak seems mostly under control, heads have rolled (The Paper 2):
- Sui Zhenhua, Director of the Qingdao Health Commission, was suspended from his position.
- Deng Kai, President of Qingdao Thoracic Hospital where the infections occurred, was fired.
Get smart: The government wants to make sure that its officials are not slacking in any way, shape, or form when it comes to COVID-19 control.
Our question: Is the bar of accountability too high for local officials to stay transparent?
5. Winter is coming
On Monday, the Ministry of Ecology and Environment (MEE) issued a draft air pollution control action plan for the Yangtze River Delta (YRD) region.
- The draft was directed to a shortlist of agencies, local authorities, and energy and transport SOEs for comment.
Some context: MEE issued a similar draft plan for the Beijing-Tianjin-Hebei region in September.
More context: Authorities have issued strict winter smog control plans since 2017. This is because air pollution peaks in winter:
- In the YRD region, 95% of days rated “highly polluted” take place in the winter.
In past years, pollution curbs have been painful, since factory shutdowns on highly polluted days hurt companies and workers.
But shutdown orders are again part of the plan this winter:
- Facilities deemed “backward” will see strict shutdowns
- Leading companies meeting high pollution control standards may qualify to continue operating
Policymakers have also warned localities to:
- Avoid preemptive, long-term, and one-size-fits-all shutdowns
- Expect central government inspections
Get smart: As the post-COVID recovery continues, industrial pollution may also rebound, putting pressure on localities trying to hit air quality targets.
The bottom line: Maintaining employment is the top priority for policymakers. If shutdowns hit jobs, they will be scaled back.