1. Data dump – credit
China’s central bank released credit data for December late yesterday.
- Net new total social financing (TSF) hit RMB 1.72 trillion last month, lower than the forecasted RMB 2.20 trillion.
- Net new bank loans was RMB 1.26 trillion in December, slightly exceeding the average forecast of RMB 1.22 trillion.
Credit growth last month was the weakest since July:
- Growth in the outstanding value of TSF slowed to 13.3% y/y from 13.6% in November.
Get used to hearing this: Monetary policy is normalizing.
- Policymakers are now gently reversing the sharp expansion in credit introduced in the wake of the COVID-19 outbreak.
Get smart: This is not the start of a rapid declaration in credit expansion.
- Policymakers have made clear that they will gradually normalize monetary policy.
Go deeper: For more in-depth analysis of the numbers, check out today’s (and everyday’s!) China Markets Dispatch.
2. Han Zheng speak at the One Planet Summit
On Monday, Executive Vice Premier Han Zheng attended the One Planet Summit.
Some context: The virtual summit brought together international leaders from the public and private sectors to discuss climate change and biodiversity.
Han called on all parties to work closely together and formulate rational and enforceable post-2020 targets for biodiversity and climate change.
More context: China will be hosting the upcoming 15th meeting of the Conference of the Parties to the Convention on Biological Diversity (COP-15) in Kunming, Yunnan this year, where a Post-2020 Global Biodiversity Framework will be formulated.
Han described China’s ongoing efforts (Xinhua 2):
- “He said that China has made remarkable achievements in environmental protection, drawing a red line for ecological protection, setting up a national park system, and implementing major projects for biodiversity protection.”
- “[The government] will continue to improve environmental quality and build a beautiful China in accordance with the requirements of high-quality development.”
Get smart: If China can position itself as a global leader on climate and biodiversity issues, it would go a long way in establishing it as a responsible global power.
3. Mark your calendars
The next National People’s Congress Standing Committee (NPCSC) meeting will be January 20-22.
- NPCSC Chairman Li Zhanshu announced the dates on Tuesday, along with a chunky list of legislation that will be up for consideration or review.
The date breaks with precedent (NPC Observer):
- “The NPCSC used to hold regular bimonthly sessions in even-numbered months.”
- “It seems to have abandoned that routine, after the Communist Party’s recent Five-Year Plan … directed the standing committees of people’s congresses to meet more frequently.”
Some context: TheParty wants China’s legislature to play a bigger role (seeMonday’s Tip Sheet).
The NPCSC will consider drafts of or amendments to:
- The Legal Aid Law
- The Licensed Physicians Law
- The Wetlands Protection Law
- The Family Education Law
- The Workplace Safety Law
- The Education Law
- The Animal Epidemic Prevention Law
- The Coast Guard Law
- The Administrative Penalties Law
- The decision to establish a Beijing Financial Court
Get smart: The NPCSC passed a record number of laws in 2020. It looks likely to challenge that record in 2021.
4. Local governments get serious about forests
Yesterday, the general offices of the Party and the State Council jointly released a guideline to install “forest chiefs” nationwide.
The deets (Gov.cn):
- In every province, either the provincial Party secretary or governor will take on the new role of forest chief.
- The setup will be duplicated in lower-level governments by June 2022.
The job description:
- Forest chiefs are responsible for the preservation of forests and grasslands in their jurisdictions.
- They will have KPIs such as forest coverage and desertification control.
Some context: The forest chief program is similar to the “river chief” scheme that started in 2016. The country now has over 300,000 rivers chiefs, made up of leading cadres, who are responsible for river protection.
More context: The river chief scheme was first invented and trialed by local governments in Jiangsu and Zhejiang provinces to tackle the severe pollution of Lake Tai in 2007.
Get smart: Xi Jinping is serious about conservation. Now provincial bigwigs will have to get serious about conservation too.
5. Monitoring bull
We’ve kept a close eye on crop and livestock genetic research since they were named top 2021 priorities at the Central Economic Work Conference (see January 5 Tip Sheet).
On Tuesday, Vice Premier Hu Chunhua put the spotlight on the sector during a visit to a livestock research institute affiliated with the Chinese Academy of Agricultural Sciences, where he (Gov.cn):
- Attended an expert forum
- Visited the National Beef Cattle Genetic Improvement Center and the National Bull Online Real-time Monitoring Center
That’s right: China monitors its best breeding bulls in real time.
Some context: China estimates beef and dairy imports will grow rapidly until 2030. Improving domestic cattle breeding could reduce dependence on imports.
Hu outlined measures to improve the ag genetics space, including:
- Promoting innovation at major enterprises
- Improving integration between industry and universities
- Improving systems for commercializing new developments
Get smart: We’re not sure breeding alone can milk much more efficiency out of domestic herds.
Get smarter: Much of the edge countries like the US, Australia and Brazil have in livestock comes from cheaper feed and more plentiful farmland.
6. COVID-19 spreads from Hebei and Heilongjiang
On Tuesday, China reported:
- 90 confirmed cases and 15 asymptomatic cases in Shijiazhuang and Xingtai in Hebei province
- 16 confirmed cases and 12 asymptomatic cases in Suihua, Yichun, Harbin, and Qiqihar in Heilongjiang province
- Seven asymptomatic cases in Changchun and Tonghua in Jilin province
- One asymptomatic case in Weihai in Shandong province
- One asymptomatic case in Haining in Zhejiang province
Cases cropping up in previously unaffected Shandong, Jilin, and Zhejiang have been linked to the outbreaks in Hebei and Heilongjiang:
- The case discovered in Weihai, Shandong returned from Suihua, Heilongjiang.
- Four of the asymptomatic cases reported in Jilin were linked to Heilongjiang.
- The case in Haining, Zhejiang was linked to the Hebei outbreak.
Don’t forget: Shanxi and Xinjiang also recently reported cases linked to the Hebei outbreak (see January 12 China Market Dispatch).
Some local governments are taking precautionary measures:
- Guizhou and Guangxi provinces are tracking close contacts of confirmed cases from Hebei.
- Qingxu county in Taiyuan, Shanxi province, has temporarily suspended public transit and taxis in the county.
Get smart: In the previous few months, local outbreaks were sporadic and isolated. This latest outbreak is something more serious.
The big question: Can central and local governments contain the spread without derailing the country’s economic recovery.
7. Government tries to limit travel
Even under optimal conditions, the resurgence of COVID-19 would be concerning (see entry above).
With Chinese New Year (CNY) – aka the world’s largest annual human migration – just weeks away, conditions are distinctly suboptimal.
- According to China’s railway authority, an estimated 407 million train journeys are expected to be taken between January 28 and March 8.
To combat the danger, the central government has done what it does best – it convened a committee:
- The State Council has assembled a 15-member task force led by Minister of Transportation Li Xiaopeng to manage the risk.
- The group will oversee emergency planning and efforts to discourage large crowds from traveling during the holiday.
Li’s thinking (SCMP):
- “Li said it was necessary to stagger journeys and monitor passenger flow during the festivities.”
- “The working group should strictly regulate imports of cold chain logistics and tighten up pandemic controls covering people returning from overseas, he said.”
While sensible from a public health perspective, a muted CNY holiday is kind of a bummer economically speaking.
- CNY is a boom time for China’s economy each year, akin to the shopping season before Christmas.
Get smart: China’s economy has been on the mend, but a significant drop in travel during the holiday could hamper growth in Q1.
What we’re watching: Will authorities have the outbreak under control by CNY, or will more stringent restrictions be put in place?