driving the day
1. Xi makes waves at APEC
On Friday, Xi Jinping addressed the 32nd Asia-Pacific Economic Cooperation (APEC) summit hosted virtually from Kuala Lumpur.
Most of Xi’s speech was pretty standard fare (Xinhua 2):
- “Xi highlighted promoting openness and inclusiveness, accelerating innovation-driven growth, enhancing regional connectivity, and pushing for mutually beneficial cooperation.”
- “The approach of pursuing cooperation as equals and resolving differences with mutual respect is what essentially makes economic development and prosperity in the Asia-Pacific possible.”
But then Xi dropped a bombshell.
- He said China would consider joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
Some context: The CPTPP is the successor to the original Trans-Pacific Partnership (TPP) trade pact championed by the US before US President Donald Trump withdrew from negotiations in 2017.
This is awkward: The TPP was originally envisioned at least partially a means of countering Chinese economic influence in the Asia-Pacific region.
Get smart: Along with the signing of RCEP (see November 16 Tip Sheet), China looks to be building a powerful economic agenda-setting role for itself in Asia-Pacific.
- Washington’s retreat from the region has given Beijing room to maneuver.
Our question: Joining the CPTPP will require China to make some big concessions in areas like SOEs and labor rights. Does the political will for joining the trade pact really exist?
2. Xi touts sustainable development at G20
On Sunday, Xi Jinping virtually sat down with other heads of state for the G20 Riyadh Summit.
The summit’s topic – Realizing Opportunities of the 21st Century for All – was like catnip to Xi.
He opened with some general comments (Xinhua 2):
- “He stressed efforts to alleviate developing countries’ debt burden, continue to provide them with necessary financing support, as well as boost infrastructure construction and connectivity.”
- “Xi called for…advancing poverty reduction and economic growth through trade, and help[ing] developing countries better integrate into the global market.”
Xi then took the opportunity to humblebrag about China’s own developmental achievements:
- “He stressed that China is about to achieve the goal of eliminating absolute poverty, 10 years ahead of the schedule set by the United Nations 2030 Agenda for Sustainable Development.”
- “Over the past 40-plus years…more than 700 million people in China have been lifted out of poverty, contributing more than 70 percent of the global poverty reduction, Xi added.”
Get smart: Chinese leaders are proud of their country’s remarkable economic transformation. Beijing is increasingly holding up its own experience as a model for other countries.
Go deeper: China is deeply invested in the idea of economic development as a human right. It’s a concept that Beijing hopes to popularize.
3. Li signals policy continuity
On Saturday, Li Keqiang convened a meeting with five provincial governors to get their suggestions on economic policy.
Some context: This is all in preparation for the Central Economic Work Conference (CEWC), which will be held in December. The CEWC will set economic targets and policy priorities for 2021.
Li had three questions for participants:
- How is your region’s economy?
- What are your economic priorities going forward?
- What concrete suggestions do you have for macroeconomic policy?
Participants’ responses were not reported, but Li shared his thinking (Gov.cn):
- “[We] must…preserve policy continuity.”
- “This year, in response to the unprecedented impact of the epidemic, we introduced a coordinated set of timely policies.”
- “We did not engage in ‘flood-style stimulus.’”
- “The effects have been better than expected.”
Get smart: This is (yet another) clear indication that the government is looking to take its foot off the stimulus pedal.
Our take: The economy faces multiple headwinds in 2021, from growing stress in the banking system to upstream deflation.
- Combine those with less government support, and we think that growth is likely to disappoint to the downside next year.
4. Liu He talks bonds
On Saturday, Vice Premier Liu He chaired a meeting of the Financial Stability and Development Committee (FSDC) – the coordinating body for financial regulators.
The meeting focused on the recent spate of bond defaults, like that of Yongcheng Coal (see Friday’s Tip Sheet).
The FSDC said it’s cool with defaults – as long as there’s no dodgy dealings involved.
Liu demanded that regulators uphold a “zero tolerance” attitude in maintaining market order.
Regulators were instructed to:
- “Severely punish fraudulent bond issuance, the disclosure of false information, the transfer of assets in bad faith, and the misappropriation of funds.”
- “Punish any attempts by debtors to evade paying debts, and protect investors’ interests.”
The meeting also warned that the various parties involved in the bond issuance process must：
- “Adhere to regulations, behave ethically, and be honest in their dealings.
Get smart: These aren’t idle musings.
- Banks and securities companies have previously come under regulatory scrutiny for their role in facilitating bonds that later defaulted.
- In recent days, at least one company seemingly tried to shield assets from creditors by transferring them away prior to default.
Get smarter: The FSDC knows defaults are essential to a healthy capital market. As it encourages more defaults, it wants to make sure there is no funny business around them.
5. Old habits die hard
On Friday, People’s Daily published an editorial by Ding Xuexiang explaining the Party’s recommendations for the 14th Five-Year Plan.
Some context: Ding Xuexiang is the director of the general office of the Party’s Central Committee and Xi Jinping’s chief of staff.
- How to improve the Party’s leadership over the economy.
Ding reminded officialsthat they’re meant to be implementing six big economic programs over the next 15 years.
- Fostering domestic demand
- Speeding up technological self-reliance
- Upgrading industrial and supply chains
- Modernizing agriculture
- Improving the people’s livelihood
- Ensuring the security of economic development
Ding also put officials on notice:
- “[We will] prevent and correct problems where some [officials] profess [their support for the Party center’s decisions] quickly and in a high-profile way, but hesitate to implement or even circumvent the center’s decisions when their own interests conflict with…center’s requirements.”
Ding said the Party would keep officials honest by givingthem revamped performance assessments.
Some context: An overhaul of officials’ performance assessment system is already underway (see November 9 Tip Sheet).
Our thinking: Getting local cadres to listen to the Party center is all well and good, but it’s also important that the Beijing bigwigs solicit and incorporate bottom-up feedback based on local conditions as well.