driving the day
1. Reforms comprehensively deepened, again
On Monday, Xi Jinping led the most recent meeting of the Central Committee for Comprehensively Deepening Reform (CCCDR).
Some context: The CCCDR was set up during the massive government and Party restructuring in March 2018. It’s the Party’s most important policymaking body.
No fireworks here – it was a procedural meeting.
The CCCDR reviewed and approved policy documents relating to:
- New efforts on SOE and market reform
- Another push to improve supervision of state-owned assets
- Plans to improve the process for allowing publicly listed companies to de-list
- A call to crack down on illegal activities in the securities sector
- Support for the elderly care service sector
- A document nudging the cultural sector toward a more “correct” orientation
The group also heard reports on education reform.
The meeting’s readout instructed top leaders to stop planning and get to work (Xinhua):
- “From the perspective of top-level design, we’ve already got a full plate.”
- “In the next period, we should focus our energy on promoting, and overseeing implementation.”
Our question: At these CCCDR meetings, Xi Jinping often focuses on the need for better implementation of reforms, underscoring his frustration that things aren’t moving faster. Does that mean the Big Man is feeling the limits of his power?
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Xinhua: 习近平主持召开中央全面深化改革委员会第十六次会议强调 全面贯彻党的十九届五中全会精神 推动改革和发展深度融合高效联动 李克强王沪宁韩正出席
finance economics
2. Ant Group execs “invited for tea”
On Monday, a group of top financial regulators, including the central bank, invited executives from Ant Group, the Alibaba-affiliated fintech giant, for a little chat.
- Jack Ma, Ant’s co-founder and controlling shareholder, was among the “guests.”
Some context: In case – much like an actual ant – you’ve been living under a rock, Ant Group has been preparing for a massive IPO.
More context: In just the past few minutes we’ve learned that both the Hong Kong and Shanghai legs of Ant’s IPO have been suspended.
So what did the regulators say to the execs?
- It’s hard to say for sure – officials described the meeting as a “regulatory interview” without providing additional details (CSRC).
But a statement issued by Ant Group had more clues (SCMP):
- “Views regarding the health and stability of the financial sector were exchanged.”
- “Ant Group is committed to implementing the meeting opinions in depth and continuing our course based on the principles of: stable innovation; embrace of regulation; service to the real economy; and win-win cooperation.”
More context: JackMa caused a stir last month, openly criticizing Chinese regulators’ approach to financial markets as too risk-averse, at a high-profile industry forum.
Get smart: These meetings are usually held quietly, behind closed doors. Publicizing it sends a clear message that regulators won’t back down from scrutinizing even the biggest of the big boys.
The latest: Given the IPO suspension, we’re guessing the meeting didn’t go so well.
- More on this in the coming days, as we get more info.
Go deeper: For much more on the regulatory context and implications of yesterday’s meeting, check out today’s China Markets Daily.
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CSRC: 四部门联合约谈蚂蚁集团有关人员
Caixin: Financial Regulators Summon Jack Ma Ahead of Mega Listing
politics policy
3. In and out, SOE edition
We already mentioned the pile of policy documents approved by the Central Committee for Comprehensively Deepening Reform (CCCDR) on Monday (see entry #1).
One caught our eye: A call for more reforms at State-owned enterprises (SOEs).
Per the meeting’s readout, the CCCDR wants to reshuffle the way SOEs spend their money (Xinhua):
- “[SOEs should] persist in doing some business but stop doing other business.”
- “[They should] concentrate resources on functions that support strategic security, industry leadership, the national economy, people’s livelihoods, and public services, by adjusting existing holdings and optimizing the structure of new investments.”
Too abstract? Du Guogong, a senior official at the research center affiliated to SASAC – the SOE regulator – broke it down for us in an op-ed published last month.
Du says SOEs need to move up the value chain (SASAC):
- “On one hand, [SOEs should] take the initiative and withdraw from industries that are low-end, backward, and inconsistent with new development concepts.”
- “On the other hand, [they should] move to high-end, cutting-edge [sectors] in line with new development concepts.”
Get smart: Improving the way state capital is invested is one of the eight SOE reform priorities for the next three years.
Get smarter: Policymakers are still counting on SOEs to play a major role in shoring up China’s economic future.
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Xinhua: 习近平主持召开中央全面深化改革委员会第十六次会议强调 全面贯彻党的十九届五中全会精神 推动改革和发展深度融合高效联动 李克强王沪宁韩正出席
SASAC: 高质量推进国有经济布局优化和结构调整
4. A less ambitious NEV plan
On Monday, the State Council released its final version of the New Energy Vehicle (NEV) Industry Development Plan (2021-2035).
Some context: The last NEV plan, covering the years 2012 to 2020, turbo-charged the industry’s growth.
- It resulted in a big, but weak, NEV sector.
December’s draft plan had already showed less ambition (see the December 3 Tip Sheet).
- But since then, key targets have been reduced even further.
The final plan shoots to have NEVs accounting for (Gov.cn):
- 20% of new auto sales by 2025 (down from 25% in the draft)
- 80% of new auto purchases by the public sector, including buses and taxis, starting in 2021 (down from 100% in the draft)
Policymakers also managed expectations on intelligent connected vehicles (ICV):
- The final version of the plan removed the draft goal that ICVs would make up 30% of new car sales by 2025.
Get smart: Policy documents that set market share targets are not terribly market-oriented.
Get smarter: The prior plan delivered quantity, not quality. This time, policymakers want to take a more realistic approach.
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Gov.cn: 国务院办公厅关于印发新能源汽车产业发展规划（2021—2035年）的通知
5. Counting the cost of decoupling
Breakups are hard…and expensive.
- This was the message that Huang Qifan, the outspoken former mayor of Chongqing, delivered on Saturday in an address to business leaders in Shanghai.
In his speech, Huang highlighted the dangers of decoupling – in dollars and cents (Caijing):
- “More than ten thousand US-funded enterprises have invested more than 500 billion US dollars in China.”
- “Last year, these companies achieved sales of USD 700 billion and a profit of USD 50 billion.”
- “If [full economic] decoupling occurs, USD 700 billion (RMB 5 trillion) of value will be lost to China.”
- “The RMB 3 trillion output value of the lost RMB 5 trillion would also be gone.”
- [So in total] China may lose RMB 8 trillion of sales value, which will impact 4 million people’s employment.”
Huang also speculated about the impact of full decoupling on American firms:
- “[Decoupling] will have little impact on the overall national economy of the United States, but for 10,000 American enterprises in China, it is fatal to lose the USD 700 billion China market.
Then he summed it up:
- “As you can see, decoupling doesn’t work.”
Get smart: While Huang’s back-of-the-envelope math is far from authoritative, he’s right that the cost of full-on decoupling would be prohibitively high for both countries.
Get smarter: While calculations like these may not seem super scientific, they often inform official scenario planning exercises around US-China relations.
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Caijing: 黄奇帆：双循环战略体现中国反制能力