driving the day
1. Operators standing by
On Monday, Premier Li Keqiang chaired the weekly State Council executive meeting.
Top of the agenda: Optimizing government service hotlines.
Here’s the problem: A bunch of different local government hotlines are proving confusing for businesses who need help accessing services.
Luckily, the meeting provided a solution (Gov.cn):
- “Service hotlines set up by governments at subnational levels and those [established by ministries but] operated at local levels should be merged, wherever possible, into one unified number.”
Policymakers also want better monitoring and accountability mechanisms, so that:
- “Problems and reasonable demands raised by businesses and people are properly handled in a timely manner, and…concerns are more accurately referred to relevant departments.”
Premier Li also reminded attendees that all eyes are on local governments’ efforts to improve the business environment, adding:
- “We have been working hard to transform government functions and make it easier for businesses and people to get things done.”
Get smart: One of the cheapest ways for the government to support small and medium-sized enterprises is simply to reduce the hassle of doing business.
- It’s also wildly popular.
Get smarter: Ensuring anyone can efficiently access information and services can help boost trust in government.
2. Ant’s mea culpa
In a speech at an internet forum on Tuesday, Ant Group Chairman Eric Jing took a step toward mending fences with China’s authorities.
Jing touted the importance of regulating fintech (Caixin):
- “Compliance with regulation is the cornerstone for stable and long-term development of financial technology.”
- “Regulation ensures development that is healthier and more sustainable.”
That’s quite the 180 from Ant’s leadership.
ICYMI: In October, Ant Group co-founder Jack Ma accused regulators of stifling innovation by regulating fintech the same way as traditional banking.
- That ended badly for Ant, with Xi Jinping himself pulling the plug on the company’s IPO (see November 13 Tip Sheet).
But Jing’s meek words didn’t stop the hits from coming.
On Tuesday, Sun Tianqi, director of the PBoC’s financial stability bureau, called for greater oversight of tech companies providing a platform for banks to raise deposits (21st Century Biz).
- Sun said that the insertion of tech firms as intermediaries between banks and savers created unregulated risks.
Get smart: It’s important for Ant’s leadership to make peace with Beijing, but that’s not going to halt the wave of regulatory scrutiny coming Ant’s way.
Get smarter: The regulators have fintech in their sights, and the list of issues they’re looking to address will only get longer.
3. Excavating a source of finance
Monday’s State Council executive meeting didn’t just focus on government service improvements (see first entry).
Also on the agenda: Setting up a national registration system for movable property and rights pledges.
Some context: Movable property includes stuff that many businesses own, including equipment, raw materials, and finished products.
- These items are valuable, but riskier for banks to lend against than fixed assets.
The registration system will be managed by the central bank.
Policymakers hope the system will boost credit to small businesses (Gov.cn 1):
- “[During local pilots,] privately owned firms and micro, small, and medium-sized enterprises accounted for more than 95 percent of new pledge registrations.”
- “The unified registration system will enable financial institutions to get a full picture of movable property and rights information and enhance their readiness to provide pledge financing to enterprises.”
Get smart: When creditors default, financial institutions know how to recoup losses by selling mortgaged real estate. We’re not sure they’ll be as adept at navigating the second-hand market for excavators.
Get smarter: This is unlikely to do much for the most vulnerable small and micro-businesses, which don’t even have an excavator to offer.
4. Han Zheng stresses environmental protection
On Tuesday, Executive Vice Premier Han Zheng chaired a meeting of the Central Leading Small Group on Ecological and Environmental Protection Supervision Work.
Pro tip: Real insiders refer to the group as the CLSGoEaEPSW.
Some context: The CLSGoEaEPSW was established in June 2019, when the purview of overseeing the leading small group on environmental work was transferred from the State Council to the Party Central Committee (see June 18, 2019 Tip Sheet).
- The group’s main job is to inspect environmental protection work carried out by central government agencies and state-owned enterprises.
At the Tuesday meeting, Han said environmental protection inspections should be done with “unremitting efforts” (Xinhua):
- “[China] has ‘zero tolerance’ for acts that damage the environment.”
The group does not see environmental protection as necessarily in conflict with economic development:
- “Efforts should be made to coordinate high-quality economic growth and environmental protection.”
Get smart: Timing is everything. Han convened this meeting just ahead of the annual Central Economic Work Conference (CEWC), signaling that protecting the environment is as important as growing the economy.
Get smarter: The CLSGoEaEPSW has teeth. Both the Party’s disciplinary body (CCDI) and HR department (OD) are part of it. This means that officials’ career prospects are being impacted by their environmental protection performance.
5. Express delivery packaging going green
The packaging used for your latest Taobao delivery is going green.
On Monday, the State Council publicized measures to make express deliveries greener.
Some context: Increasing domestic consumption is a major tack of the government’s new economic framework, the dual circulation strategy.
- Much of that increase will be done on ecommerce platforms.
- This means more deliveries and more resources spent on packaging.
The industry is in for some big changes:
- By 2022, less than 15% of express deliveries will have a second packaging layer – and over 7 million reusable boxes will be in circulation.
- By 2025, no express deliveries will have a second packaging layer – and over 10 million reusable boxes will be in circulation.
ICYDK: It’s common for express deliveries to come with two packaging layers.
- After getting the parcel from the vendor, express delivery companies often wrap it in a second layer with their own logo that displays the delivery information in a standardized layout.
Get smart: Beijing is keen to assure everyone that environmental protection and economic development can go hand-in-hand (see previous entry).
- Considering the volume of ecommerce purchases, targeting the excessive packaging behavior of express delivery companies should pack a substantial punch.
6. PBoC to include “alternative data” in lending risk assessments
On Tuesday, the People’s Bank of China (PBoC) called for broader use of “alternative credit data” in the assessment of lending risk.
What this means: The PBoC wants to use more of the data collected under the social credit system (SCS) to supplement traditional financial credit data.
Quick reminder: Two types of data are collected under the SCS:
- Public Credit Information (PCI) – government records generated by state agencies
- Market Credit Information (MCI) – other information generated through a company’s interaction with customers, industry associations, and other market actors
The crux of the issue:
- PCI is fairly standardized and easy to get. In fact, the PBoC is already using it.
- MCI is not standardized and hard to access reliably – but the PBoC wants to define and use it.
Why MCI matters: Many small and medium-sized enterprises don’t have the collateral to back big debts.
- Without accurate data to underpin lending risk assessments for small businesses, China will struggle to fund its innovative entrepreneurs.
Get smart: The hunt for alternative credit data isn’t just a China issue. US credit rating bureaus Experian, Equifax, and TransUnion are also seeking alternative data sources to extend loans to those who are locked out of traditional credit models.
Want to go deeper on the Corporate Social Credit System?Check out our definitive report here.