1. Li solicits CPPCC support
On Monday, Premier Li Keqiang joined a session of the Standing Committee of the Chinese People’s Political Consultative Conference (CPPCC).
Some context: The CPPCC is China’s top political advisory body. It brings together senior leaders with non-Party groups and individuals, to solicit policy ideas and suggestions from a wider range of experts.
The body gathered to review outcomes of the fifth plenum.
- This included the Party’s recommendations for the 14th Five-Year Plan (FYP) (see November 4 Tip Sheet).
Li was there to ask for advice on the 14th FYP:
- “Li expressed his hope that political advisors [would] contribute their wisdom to the formulation of the nation’s development plan.”
He urged them to have confidence in China’s development:
- “Li stressed that China is still in a period of important strategic opportunity for development, urging strong confidence in the development and full preparation for various difficulties and challenges ahead.”
He also asked for some help with implementation:
- “Li called for efforts to implement the proposals by the CPC Central Committee for formulating the 14th Five-Year Plan.”
Get smart: Li knows the support of business elites and academic experts, along with the Party faithful, will be critical to facing the myriad of challenges ahead.
2. State Council looks to boost trade
On Monday, the State Council issued guidelines for promoting innovative foreign trade.
- The circular is all about fleshing out the dual circulation strategy (DCS).
Some context: DCS is a policy prescription aimed at reducing the Chinese economy’s vulnerability to external shocks by making domestic demand the main engine of economic growth.
The circular promises to “optimize layouts for international and domestic markets, business entities, commodity structure and modes of trade” by (Gov.cn 1):
- Upholding the multilateral trade system, participating in formulating international trade rules, and working to conclude the Regional Comprehensive Economic Partnership
- Establishing legal aid platforms for cross-border trade and investment
- Boosting the development of trade in eastern China while supporting China’s middle and western regions to construct a low-cost international trade channel
- Encouraging enterprises to carry out production and inspection procedures in accordance with international standards
- Developing digital trade and build national export bases for digital services
- Encourage the import of high-quality consumer goods, agricultural products, and technology intensive services
And much, much more!
- Seriously, there were a ton of proposed measures on the list. Check it out.
Get smart: The guidelines show that DCS does not spell the end of China’s opening.
Get smarter: These measures are also about making Chinese companies globally competitive.
3. State Council streamlines administrative approvals
On Monday, the General Office of the State Council released a notice to expand a “notification-commitment system” nationwide, after piloting it in Shanghai and other cities since 2015.
Some context: The system is aimed at streamlining administrative approvals and minimizing bureaucratic hassle – a top priority this year (see January 15, September 11, September 18, and October 22 Tip Sheet).
So what’s the plan?
Under the notification-commitment system, businesses (Gov.cn):
- Will be notified of their legal obligations when seeking certain administrative or regulatory approvals
- Can be granted administrative approvals without providing supporting documents and materials if they commit to these obligations
- Will be subject to regulatory punishment if they are found to have violated their obligations
For the next step:
- Local governments will work with central ministries to nail down the range of administrative licenses that qualify under the expanded system.
- Administrative approvals concerning national security, state secrets, public safety, financial risks, environmental protection, and people’s health will not be part of the system.
Get smart: Policymakers want businesses to hit the ground running, without getting stuck on notoriously bureaucratic administrative procedures and excessive paperwork.
Get smarter: The effort is well-intended, but setting businesses free while keeping regulatory risks in check is no small task. We’re keen to see the results of this one.
4. China wants to be more like the US
On Saturday, economic policy wizard Han Wenxiu met with senior officials and SOE executives in Beijing to brief them on the recently concluded Fifth Plenum (see October 30 Tip Sheet).
- Han is Vice Premier Liu He’s right-hand man on econ policy and one of the top drafters of the Party’s 14th Five-Year Plan (FYP) recommendations.
Some context: Whenever a new important document is out, the Party will task its drafters to explain to officials at all levels what it entails.
Han took the opportunity to expand a bit further on the dual circulation strategy (DCS).
Han said DCS is a way for China to become more like the US (Sina):
- “A common feature of the big economies is that they are dominated by domestic demand and domestic [economic] circulation.”
- “[The US] has a dependence on foreign trade of 26.4%, which is 9 percentage points lower than that of our country. But this does not prevent the US from being a major global trading country, and a major power utilizing foreign investment and conducting outbound investment.”
Get smart: Han and other policymakers are attempting to harness the DCS to push through longstanding policy priorities such as rebalancing the economy.
5. Old policies, new packaging
At Saturday’s meeting (see previous entry), Han Wenxiu highlighted a few things the government will do to make the domestic part of the dual circulation strategy run more smoothly.
He broke it down into four buckets (Sina):
- China must control critical technologies and ensure the security of supply chains.
- China must improve efficiency of logistics and lower costs.
- Han said that the Party will “resolutely prevent income polarization” by optimizing the structure of income distribution.
- China must protect consumers’ rights and build an environment conducive to consumption.
Han went on to chastise those local officials who see DCS as an opportunity to unfairly further their own regional economies:
- “[DCS] is not about building intra-province or intra-city circulation.”
- “[We must not] conduct local protection in the name of domestic circulation.”
Get smart: All the measures Han mentioned were in train before the Fifth Plenum, though implementation has been slow.
Get smarter: Top leaders want to use DCS to create a sense of urgency amongst officials to revive long idled reforms.
6. Filling the chips void
Thought we were finished gushing about Saturday’s Fifth Plenum debrief?
At the meeting, Han Wenxiu also weighed in on China’s top priority for the next five years – innovation.
He argued that innovation and control of key technologies is a must for China to minimize vulnerability to foreign countries (Sina):
- “Reality has shown us that key core technologies cannot be bought [from foreign countries].”
- “Even if they sell it to you they may ask for a high price, or once they are in a bad mood they will cut off the supply and put you in shock.”
Hmm, whatever could he be talking about?
Here’s a clue: It’s chips.
- “In 2019, China imported USD 305.5 billion worth of chips. It can be said that many multinational companies, such as Qualcomm, Intel, etc., could not have grown to their present size without cultivating the demand of the Chinese market.”
- “Now the US cut off supply, but our market demand still exists. This provides a rare opportunity for our domestic chip companies.”
Get smart: In key sectors, China is determined to replace foreign suppliers with domestic alternatives.
What to watch: Officials are still arguing about what, exactly, those key sectors are. Stay tuned.