finance economics
1. Guo Shuqing talks financial sector risk
Since the Party approved recommendations for the 14th Five-Year Plan (FYP) at October’s Fifth Plenum (see October 30 Tip Sheet), top officials have published essays elaborating on what the plan means for their respective areas of responsibility.
On Monday, Caixin summarized the important points from China Banking and Insurance Regulatory Commission (CBIRC) Chairman Guo Shuqing’s essay.
In the piece, Guo observed that the pandemic had led to an accumulation of financial sector risks, highlighting:
- A rebound in nonperforming loans
- A capital shortfall among some small and medium-sized banks
- Rising debt levels among firms, households, and local governments
- The potential for a resurgence in high-risk shadow banking
He reserved a special mention for the real estate sector (Caixin):
- “At present, real estate-related loans account for 39% of bank loans.”
- “Real estate is financial risk’s biggest ‘grey rhino’.”
Guo also outlined a number of lessons he had learned from reviewing the history of financial supervision both at home and abroad.
Quick take: Guo’s listed lessons aligns closely with the current challenges facing the regulator, namely:
- Dealing with bond defaults by state firms
- Reining in fintech
- Boosting the capital of financial institutions
- Protecting retail investors from the unscrupulous marketing of investment products
Get smart: After a four-year financial derisking campaign, the CBIRC remains as committed as ever to ensuring financial stability.
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Caixin: 郭树清：房地产是现阶段金融风险最大的“灰犀牛”
politics policy
2. Xi looks to strengthen hold over military
On Monday, the Politburo sat down for its monthly meeting.
Top of the agenda: Reviewing revisions to the rules regarding “political work” in the armed forces.
Some context: “Political work” focuses on making sure that soldiers are au fait with the Party’s ideology.
For Xi, political work is fundamental to a strong military (CPC People):
- “Political work is the lifeblood of the people’s army. It must be strengthened, never weakened.”
Xi has one overarching goal in revising the rules – to ensure that the armed forces remain loyal to the Party.
These days, being loyal to the Party means being loyal to Xi:
- “[We must] comprehensively and deeply implement the system of responsibility to the chairman of the Military Commission [i.e. Xi Jinping].”
- “[We must] persist in using Xi Jinping Thought on a Strong Military to cultivate and educate, and ensure absolute loyalty, absolute purity, and absolute dependability.”
Get smart: The Party has always understood that the control of force is fundamental to political power. It was Mao Zedong who said “political power grows out of the barrel of a gun.”
Get smarter: Xi’s predecessor Hu Jintao did not have full control over the military. Xi has made every effort to make sure that the same thing cannot be said about him.
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CPC People: 中共中央政治局召开会议 审议《军队政治工作条例》《中国共产党统一战线工作条例》和《中国共产党党员权利保障条例》 中共中央总书记习近平主持会议
3. Xi encourages more efforts on United Front
At Monday’s Politburo meeting (see previous entry), the top leadership also discussed work rules for the United Front.
Some context: The Party’s United Front Work Department liaises with non-Party groups to make sure they are down with the Party’s agenda. Non-Party groups include businesses, religious organizations, ethnic minorities, and overseas Chinese.
More context: The Politburo approved trial work rules for the United Front in April 2015.
Even more context: Xi Jinping has placed particular emphasis on United Front work. He established a United Front Leading Small Group – which he chairs – in 2015.
The reason for the United Front work rules: Xi wants Party members throughout the system to focus more on United Front work.
Get smart: Many of the Party’s thorniest issues are closely related to United Front work, including Taiwan, Tibet, and Xinjiang. Given that, it’s no surprise that Xi has put such an emphasis on United Front work.
Our question: Right now, the head of the United Front Work Department is not a Politburo member. Will that change after the next Party Congress in 2022?
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CPC People: 中共中央政治局召开会议 审议《军队政治工作条例》《中国共产党统一战线工作条例》和《中国共产党党员权利保障条例》 中共中央总书记习近平主持会议
4. Li addresses the SCO
On Monday, Premier Li Keqiang delivered an address via videolink to the Council of Heads of Government of Member States of the Shanghai Cooperation Organization (SCO).
Some context: The SCO’s membership consists of China, Russia, India, Pakistan, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan.
More context: Xi Jinping promoted international cooperation at a different SCO summit earlier this month (see November 11 Tip Sheet).
Li’s comments to the body were basically more of the same (Gov.cn 2):
- “Efforts should be made to continue joint anti-terrorism exercises and de-radicalization cooperation, effectively cope with new challenges such as cyber-terrorism, and maintain data security.”
- “All parties should stick to openness and cooperation, to enhance free trade and investment in the region.”
Li also called for:
- “[E]fforts to foster growth points in cooperation in digital economy…integrate development of [the] digital and real economy, cultivate new industries and new forms of business, and jointly promote high-quality economic development.”
Get smart: Notice how Li’s suggestions for the SCO sound like China’s domestic priorities writ large? That’s not by accident.
Get smarter: Beijing is looking for geopolitical allies at a time when China’s international image has taken a major hit.
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Gov.cn: 李克强在上海合作组织成员国政府首脑（总理）理事会第十九次会议上的讲话
Gov.cn: Premier Li attends 19th meeting of SCO member states’ council of heads of government
5. Good news on another virus
Today is World AIDS Day.
The occasion was marked by the top leadership with instructions from Premier Li Keqiang.
Li hailed China’s achievements in preventing and controlling AIDS, while also calling for perseverance in:
- “Improving systems and mechanisms for disease prevention and treatment, and strengthening responsibility among four parties – government, key departments, society, and individuals.”
Some context: Earlier in his career, Li faced criticism after mishandling an HIV/AIDS outbreak in Henan during his time as governor.
- Since then, he has taken time out of his schedule to remark on World AIDS Day every year.
On Monday, officials in Yunnan – an HIV/AIDS hotspot –announced a major milestone in the province’s fight against the disease (Xinhua):
- Yunnan hit the UN’s 90-90-90 target on HIV/AIDS.
What’s that? Achieving this goal requires that:
- 90% of people living with HIV know their status
- 90% of people diagnosed with HIV receive antiretroviral treatment
- 90% of all treated people show suppressed viral loads – meaning they are unlikely to infect others
Get smarter: Controlling the spread of AIDS is a part of a broader campaign to improve public health – which is rising in priority as a result of the COVID-19 pandemic (see yesterday’s Tip Sheet).
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Gov.cn: 李克强对艾滋病防治工作作出重要批示
Xinhua: China achieves UN targets in key anti-AIDS battleground