driving the day
1. Xi wants private companies to know who’s boss
On Monday, Xi Jinping met with representatives from the eight democratic parties, experts with no party affiliations, and representatives from the All-China Federation of Industry and Commerce (ACFIC).
Xi’s message: Happy Spring Festival!
Some context: Xi does this every year (see January 15, 2020 Tip Sheet).
Xi had some instructions for his friends from the ACFIC (Gov.cn):
- “The AFCIC must focus on promoting the healthy development of the non-public economy…and strengthen its political leadership and ideological guidance.”
Allow us to translate: The AFCIC needs to make sure that private companies are serving the national interest.
Get smart: Xi wants private companies to know that they thrive at the pleasure of the Party. Just ask Jack Ma.
The big picture: In Xi’s China, the line between private business and the Party is increasingly blurred.
2. Weak PMIs heading into CNY
Over the past two days, the National Bureau of Statistics (NBS) and Caixin released their January manufacturing purchasing manager indexes (PMI).
The verdict: Both PMIs showed a slowdown in manufacturing in January.
- The Caixin January PMI fell to 51.3, down from 53.0 in December and the lowest level in seven months.
- The official NBS PMI fell to 51.3 from 51.9 in December.
A reminder: A PMI over 50 represents expansion in the sector, while anything under 50 represents contraction.
This isn’t good (Caixin Global):
- “The [Caixin] survey…showed that firms signaled notably weaker growth in output and total new work, with the subindex for output hitting the lowest since April, and the one for new orders the lowest since June.”
According to the Caixin survey:
- Part of the slowdown was from a renewed drop in new export orders, down for the first time in six months.
- Manufacturing employment fell slightly.
- Manufacturers maintained a positive outlook for the next 12 months, but there are concerns over the sustainability of the recovery.
Get smart: The economy is facing multiple headwinds in 2021. These PMIs indicate that manufacturers are increasingly aware of the challenges facing the economy.
3. MEE smacks down NEA
On Friday, the Ministry of Ecology and Environment (MEE) called out the energy regulator (NEA) for failing to do enough to protect the environment.
Some context: The Party has been sending MEE inspectors to check on local enforcement of environmental policies since 2015. The latest round of such inspections took place in August.
A key complaint: The NEA has let the coal industry run wild.
The NEA also got smacked down for:
- Not taking environmental protection seriously
- Revising language in laws and regulations to give coal producers more leeway
- Not doing enough to coordinate the absorption of renewable-sourced energy
How bad did NEA mess up? According to the inspectors:
- Between 2017-2020, some eastern provinces expanded coal-fired electricity production capacity well beyond their local plans.
- Two of 14 inspected power transmission lines are devoting less than 1% transmission capacity to renewable energy.
- The NEA has 30 days to come up with a rectification plan.
Get smart: The MEE has gained more power as part of Xi Jinping’s push to better protect the environment.
Get smarter: As NEA address these issues, some already-approved but not yet-constructed coal power projects look set to be scrapped. Meanwhile, power grids will be forced to accept more renewable energy.
4. You can go your own way
On Tuesday, Politburo member and top diplomat Yang Jiechi gave an address via videolink to the National Committee on US-China Relations.
Yang’s message: It’s time for the US to change course re: China.
Yang criticized the Trump administration’s handling of US-China relations (SCMP):
- “For the past few years, the Trump administration adopted misguided policies against China, plunging the relationship into its most difficult period since the establishment of diplomatic ties.”
Yang hoped that the Biden administration would change tack to restore relations:
- “I hope the new administration will remove the stumbling blocks to people-to-people exchanges, like harassing Chinese students, restricting Chinese media outlets…and suppressing Chinese companies.”
- “These policy measures are not only wrong but also unpopular.”
Reality check: Forceful anti-China measures have strong bipartisan backing in Washington.
Yang also had a warning. He told the US not to cross China’s red lines in Taiwan, Hong Kong, Tibet, and Xinjiang:
- “Any trespassing would end up undermining China-US relations and the United States’ own interests.”
Get smart: The downturn in Sino-US relations is structural. It was not caused by the Trump administration, and it will not be reversed now that there is a new administration in DC.
5. Localities told to be targeted in controlling COVID
China’s COVID-19 outbreak appears under control.
On Monday, China added:
- 12 confirmed cases and seven asymptomatic cases – down from 33 confirmed cases and 10 asymptomatic cases on Sunday.
There was also good news from some recent hot spots:
- Hebei reported no new cases for the first time since early January.
- Shanghai and Beijing have reported no new cases for three consecutive days.
Still, local authorities have been told not to let their guard down.
On Monday, the Ministry of Civil Affairs and the National Health Commission jointly issued a notice guiding local communities to take “precise” COVID-19 control measures, including:
- Establishing community-level COVID-19 response systems
- Focusing efforts on vulnerable groups and high-risk areas
- Reducing group gatherings
- Strengthening epidemic control measures during village election periods
- Improving community services
Some context: The central government has urged local officials not to take an overbearing one-size-fits-all approach to COVID-19 containment (see yesterday’s Tip Sheet).
Get smart: It won’t be clear if authorities have avoided a second wave until the Chinese New Year travel rush is over and done with.