driving the day
1. Li Keqiang continues crusade against red tape
On Wednesday, the State Council did it’s thang – holding its weekly executive meeting.
Premier Li Keqiang once again delivered his anti-bureaucratic economic message to the state bureaucracy.
Li highlighted recent business environment improvements (Gov.cn):
- “Last year’s tax and fee reductions and temporary social security payment exemptions have been key to maintaining the stability of the markets and the broader economy.”
But he stressed that the work was far from finished:
- “Given the current complex situation related to the pandemic and the economy, market entities continue to face difficulties.”
- “We must…reduce the burden on businesses and strengthen the foundation for a stable economic recovery.”
Li had some thoughts on how to keep the momentum going, including:
- “Nationwide inspections on arbitrarily levied fees on businesses.”
- “Standardization of regulations [related to] transportation, taxation, and emergency services, including reducing the use of fines in traffic violations.”
- “Tightening oversight on arbitrary and excessive fees at ports.”
- “Local governments should not increase the financial burden of businesses, particularly SMEs.”
Get smart: This is latest effort by Li to support struggling businesses and the economic recovery more broadly.
Get smarter: Though ostensibly a response to the post-pandemic recovery, these measures are long-term items on Li’s ease-of-doing-business wish list.
2. Liu He wants more support for SMEs
On Thursday, Vice Premier Liu He presided over a meeting of the State Council Leading Small Group for Promoting the Development of Small and Medium-sized Enterprises (SMEs).
Hot tip: Those in the know call the body the SCLSGfPtDoSaMsE for short.
The meeting emphasized the importance of SMEs to China’s economy (Gov.cn):
- “SMEs and the private economy are deeply intertwined.”
- “They play a key role in protecting the [health of the] market and employment.”
- “They are a key link in enhancing the stability and competitiveness of the industrial supply chain [and] are an important force in resolving choke points in key technology areas.”
The assembled also acknowledged that small businesses still face a grim outlook:
- “[SMEs] are still facing many difficulties, such as insufficient market demand and rising raw material and labor costs.”
The meeting resolved to help SMEs by:
- Ensuring the continuity of existing support policies
- Directing financial institutions to provide more financing to SMEs
- Pushing local governments to optimize the business environment
Get smart: SMEs have been one of the last areas of China’s economy to rebound from COVID-19. That’s largely down to lackluster demand.
What to watch: We expect central and local governments to roll out more concrete support measures to assist SMEs in the near future.
3. Living off the land
On Thursday, Executive Vice Premier Han Zheng led a special meeting on rectifying illegal occupation of farmland for the construction of residential buildings.
Han’s message was simple (Gov.cn):
- “We must adhere to ‘zero tolerance’…for illegal occupation of farmland.”
Some context: China feeds some 20% of the global population with just 7% of the world’s arable land. Protecting farmland has long been a priority, but the issue was flagged for extra effort at the Central Economic Work Conference in December (see January 4 Tip Sheet).
Han elaborated on how regulators will address illegal housing on land zoned for farming:
- Investigations will start in high-priority areas
- Regulators will focus on “malicious” activities including intentional development and sale of illegal structures
- Farmers’ reasonable needs for housing and other structures will be considered
- Regulators will avoid a one-size-fits-all approach
Get this: Yang Xiaodu, deputy secretary of the Central Commission for Discipline Inspection – the anti-corruption watchdog – was in attendance.
- That means heads are gonna roll.
Get smart: If you’re an official or developer who ignored rules and built a bunch of stuff on top of farmland, you’re about to be in a world of pain.
4. National legislature looks to correct the records
On Wednesday, China’s top legislative body, the National People’s Congress Standing Committee (NPCSC), listened to a report reviewing the body’s work in 2020.
The report evaluated the legality of normative documents – including regulations and judicial interpretations.
- This is the fourth year the NPCSC has conducted such a review.
Why it matters: Should the legislators find a regulation to be unconstitutional, unlawful, or in conflict with any of the Party center’s major policies, they can change it.
Two aspects of the 2020 report caught our eye.
First, the public put forward a record number of review requests.
- Requests totaled 5,146 in 2020 – up from a mere 138 in 2019.
- Of those requests, the NPCSC reviewed 3,378 requests.
Get smart: The big uptick in requests is mostly due to the new online channel for public input, opened in 2020.
Second, the NPCSC has come down hard on local governments to make sure they follow directions from Beijing:
- For instance, the legislature changed local rules prohibiting non-local residents from working as taxi drivers, as the central government tries to free up labor flows.
Get smarter: The national legislature will be critical in ensuring legal and regulatory consistency across the country.
5. Political advisors advocate for less regulation
On Thursday, the Chinese People’s Political Consultative Conference (CPPCC) held its biweekly policy symposium.
Some context: The CPPCC is the country’s top political advisory body. It has no policymaking authority, but its suggestions are an important input into the policymaking process.
This week’s topic: Improving the business environment.
There was a consistent theme to participants’ suggestions: The government needs to leave businesses alone.
Participants advocated for:
- Less red tape
- A more hands-off approach to regulation
- A reduction in fees imposed on companies
And this suggestion caught our eye (CPC People):
- “It is necessary to introduce business environment assessment indicators into the local government assessment system, and make good use of third-party assessments.”
Get smart: This bears watching. If promotions start depending on whether or not local officials improve the business environment, then… local officials will start improving the business environment.