driving the day
1. CEWC is coming to town
- We’re pretty sure the Central Economic Work Conference (CEWC) kicked off yesterday.
Some context: Each December, top leadership gathers at the CEWC to hash out economic policy priorities, targets, and plans for the coming year.
In other words: The CEWC is the most important economic meeting in the annual calendar.
The CEWC is never confirmed in advance. Xinhua just releases a readout after it concludes.
All signs suggest it’s on.
Clue #1: Xinhua published an editorial on Wednesday hailing what a great job Xi Jinping and other top leaders did in managing the economy in 2020.
- Xinhua often gives Xi a rave review on a topic that leaders are slated to discuss that day.
Clue #2: Party secretaries and governors from over a dozen provinces have taken meetings with ministers in Beijing since Monday.
- A year-end gathering of provincial leaders in Beijing is a strong sign that CEWC is underway.
What to watch: Xinhua may drop the meeting’s readout on Friday night.
2. Rickets of the brain
Yesterday, Xinhua ran an editorial criticizing the US.
- Nothing surprising about that.
What caught our eye: It didn’t target the US directly. Instead, it took aim at Chinese people who admire America, arguing that they’re sick in the head.
What are the symptoms?
- Admiring American-style democracy and freedom
- Touting the United States on human rights matters
- Exaggerating the ability of the US system to fix itself
- Praising the United States for its handling of COVID-19
Xinhua offered a grim prognosis for such US-boosters (Xinhua):
- “Some people are not standing on their own, mentally.”
- “[Those] who regard American values as their standard…suffer from rickets of the brain.”
The editorial concluded that fighting back is the only reasonable response:
- “Some people naively believe that trading interests for security and compromising to protect ourselves…will bring peace [with the US].”
Get smart: Xinhua can dispense with the medical metaphors – Chinese public opinion of the US is worsening all on its own.
- Even the “America huggers” in our own circles have become more critical this year.
Get smarter: An incoming Biden administration won’t undo the long-simmering mistrust between Beijing and Washington.
3. Australia warns China on coal import ban
On Tuesday, Australian Prime Minister Scott Morrison asked China to clarify the nature of its trade beef with Canberra.
Some context: In the past few weeks, Beijing has targeted a range of Australian goods with vague, politicized bans in response to rising geopolitical tensions between the two countries.
- Australian coal has been the biggest victim.
Surprise, surprise: Domestic coal prices are spiking in China.
- On Saturday, the state planner (NDRC) told state-owned coal power generators that limits on thermal coal imports were lifted – except those from Australia.
Oops: In a rush to rein in coal prices, the NDRC may have accidentally provided Australia with the proof it needs to turn up the heat on China’s coal ban in an international forum.
On Tuesday, Morrison said he had (FT):
- “Asked Beijing to clarify whether it had formally banned Australian coal.”
- “Warn[ed] that such a move would breach World Trade Organization rules and harm both countries.”
Get smart: Dropping the Aussie coal ban could fix the domestic coal price spike and quash any WTO pressure from Canberra at one stroke.
Get smarter: Such a move could be framed as an olive branch to the Biden administration, which is expected to take on China-Australia tensions as its first major foreign policy challenge.
4. Honey, I shrunk the list
On Wednesday, the macro planner (NDRC) and commerce ministry (MofCom) released the 2020 Negative List for Market Access.
Don’t get confused: This is NOT the negative list that tells foreign investors what areas are off limits.
- This one applies to both foreign and domestic investors.
How it works: Anything that isn’t on this negative list is wide open for investment without further administrative approvals.
Some context: This national list has been updated annually since 2018.
- It was previously piloted to good effect in 2016 in several localities, including Shanghai and Tianjin.
The list is getting shorter: It shrank from 151 restricted or prohibited areas in 2018, to 131 in 2019, to 123 in 2020.
Under the 2020 negative list, prior approvals are no longer required for:
- Appointing new executives in securities companies
- Providing inspection services for exported and imported goods
- Oil and gas exploration and production
- Services assessing forest and mineral resources as well as carbon emissions
Not all areas saw relaxation. Two notable items got added to the 2020 negative list:
- Setting up financial holding companies
- Transferring land management rights
Get smart: These new additions to the 2020 negative lists are evidence of Beijing’s commitment to financial derisking and keeping the real estate market in check.
5. The vaccine race is on
On Wednesday, Fosun Pharmaceutical announced that it plans to supply 100 million doses of the COVID-19 vaccine developed by Pfizer and BioNTech to China in 2021.
- Fosun is BioNTech’s Chinese partner.
Some context: The Pfizer-BioNTech vaccine has been approved by both US and UK drug regulators and has a 90% efficacy rate.
Not so fast: The vaccine still needs approval from China’s drug administrator (NMPA) first.
The vaccine also has some serious local competition:
- China currently has five domestically-produced COVID-19 vaccines in phase III clinical trials.
- Sinopharm’s vaccines have already been given to over a million Chinese citizens under emergency use protocols, and secured official registration in the UAE (see November 20 and December 10 Tip Sheet).
- On Wednesday, a State Council official said China is prepared to produce these vaccines on a massive scale.
And there’s another hurdle: The Pfizer-BioNTech vaccine requires special logistics – it must be kept at around -70C during shipping. China’s domestically-developed competitors can use normal cold chain infrastructure.
Get smart: The availability of Pfizer-BioNTech vaccines in China won’t make much of an impact – especially since Chinese regulators will likely approve massive commercial production of domestically produced alternatives in the coming days.