1. Data dump – Q4 GDP
China’s stats bureau dropped the Q4 GDP results this morning.
It makes for an impressive read:
- China’s economy expanded 2.3% y/y in real terms in 2020.
- No other major economy is expected to record positive economic growth this year.
The year ended on a high note:
- China’s GDP increased 6.5% y/y in real terms in Q4.
- That’s up from 4.9% y/y growth in Q3 and is also higher than the 6.0% y/y expansion recorded in the final quarter of 2019.
But despite the good news, there is one big caveat to China’s impressive recovery: It was heavily reliant on capital expenditure and industrial output.
- Fixed asset investment rose 2.9% y/y in 2020.
- Value-added output at industrial firms increased 2.8% y/y last year.
- But retail sales fell 3.9% y/y.
Get smart: In 2021,Chinese officials face the difficult task of rebalancing growth away from production towards consumption.
Go deeper: For more in-depth analysis of the numbers, check out today’s (and everyday’s!) China Markets Dispatch.
2. Li Keqiang: food delivery guy extraordinaire
On Friday, Premier Li Keqiang did his thing, chairing the State Council weekly executive meeting.
Top of the agenda: Ensuring basic living necessities of those impacted by epidemic containment measures.
ICYMI: China is in the midst of its largest COVID-19 outbreak in months.
Between January 15 and 17, China added:
- 216 confirmed cases and 38 asymptomatic cases in Hebei
- 42 confirmed cases and 130 asymptomatic cases in Heilongjiang
- 40 confirmed cases and 93 asymptomatic cases in Jilin
- Six confirmed cases in Beijing
While local governments are working hard to contain the outbreaks, Li reminded them not to forget another important matter (Gov.cn):
- “We must ensure the market supply of daily necessities such as rice, noodles, oil, vegetables, meat, eggs, and milk, so that people can rest assured for the New Year.”
To help those in need, Li urged local governments to guarantee:
- Adequate supplies and stable prices of groceries
- Timely delivery of social aid packages
- Adequate care for migrant workers and students unable to return home as well as for children and elderly people in rural areas
Li also warned officials not to appropriate social aid money from the government for other purposes.
Get smart: Hardline epidemic control measures take a toll on people’s wellbeing. While containing the virus remains the first priority, the government wants to make sure the process is no more painful than necessary.
3. State Council to expand the scope of bulk drug buying
Friday’s State Council meeting wasn’t just about making sure people had their basic needs met during Chinese New year (see previous entry).
The meeting also promised to reduce medical costs for ordinary folks (Gov.cn 2):
- “China will take a step forward in its centralized drug bulk-buying program, and make it a regular and institutionalized practice to lower medical costs for the general public.”
Some context: Since December 2018, China has conducted three rounds of bulk purchases of drugs, which helped reduce the average price of drugs by 54%.
The scope of bulk purchasing will be expanded:
- “[H]igh-demand, high-cost drugs in the catalog of basic medical insurance will be prioritized in procurement.”
- “The program will extend, over time, to other clinically needed and quality drugs and consumables available on the domestic market.”
Get smart: Foreign drug makers need to go through government procurement programs if they want to sell into public hospitals in China, which is the majority of the drug market.
- They usually find themselves at a price disadvantage against cheaper domestic alternatives.
The big picture: Getting millions of people better access to affordable drugs is a major quality-of-life issue in a rapidly aging China.
4. Rare earths get regulated
On Friday, the Ministry of Industry and Information Technology (MIIT) called for comments on a set of draft Regulations on Rare Earth Management.
Some context: China is the leading global producer of rare earths – a group of metallic elements with properties that make them valuable for use in electronics and other high tech applications.
More context: At the height of the US-China trade war in 2019, Xi Jinping said he wants to leverage China’s control of this strategic resource (see May 21, 2019 Tip Sheet).
The draft regulations:
- Describe rare earths as a strategic resource with relevance to national security
- Reiterate that MIIT and other agencies will set rare earths production quotas
- State that rare earths are subject to export control laws
- Mandate that state reserves of rare earths be adequately maintained
- Add a new requirement to maintain reserves of land with rare earth deposits
Get smart: Not much in the above is new – the draft mostly consolidates existing rules for rare earths into a single policy document.
- Still, the changes create a one-stop shop for regulating the entire rare earths supply chain.
Get smarter: This is one of those *ahem* rare places where China holds sway over the global tech sector. Beijing intends to milk that for all it’s worth.
5. Wang Yi warns against false multilateralism
For the past six days, Foreign Minister Wang Yi has been on tour in Southeast Asia.
Some context: On Friday, we told you about his visit to Indonesia (see January 15 Tip Sheet).
- He also stopped off in Myanmar, Brunei, and the Philippines.
On Sunday, Wang gave a wide-ranging interview where touched on key themes of the trip including trade, investment, and vaccine diplomacy.
Two subtler themes also caught our eye.
Wang commented on China’s disputes with its Southeast Asian neighbors over the South China Sea (The Paper):
- “China…made it clear that we will manage maritime differences through friendly consultations…and be vigilant to prevent external forces from instigating interference.”
Wang also warned against the “wrong type” of multilateralism:
- “We must be vigilant against all kinds of ‘false multilateralism.’”
- “We want to work with ASEAN to oppose interest group politics under the guise of multilateralism, imposing rules on the international community under the pretext of multilateralism, and the deployment of multilateralism targeting specific countries.”
Get smart: Beijing’s expansive claims to the South China Sea have strained its relations with several members of the Association of Southeast Asian Nations (ASEAN).
Get smarter: Wang wants to head off a concerted ASEAN response in favor of dealing with rival claimants on an easier-to-manage bilateral basis.