1. Politburo calls for expanding domestic demand (again)
The Politburo held its monthly meeting on Friday.
Top of the agenda: Reviewing the 14th Five-Year Plan (FYP) and this year’s government work report (GWR).
Some context: Both the FYP and the GWR are set to be released during the Two Sessions, which kicks off on Thursday and will run for around 10 days (check out Friday’s Tip Sheet for our Two Sessions preview).
The readout from Friday’s Politburo meeting was terse, as per usual.
Overall, there were no indications of any big shifts in policy.
However, a few things did stand out to us.
First, when discussing the 14th FYP, the read out said:
- “[We must] plan development and security as a whole.”
Why that’s important: Increasingly, Xi Jinping is asking officials to view everything through a national security lens – including economic policy.
With regards to this year’s GWR, we were struck by this:
- “[We must] persist in our strategy to expand domestic demand.”
Our question: What is that strategy, exactly?
- There has been a lot of talk about expanding domestic demand over the past year, but it’s still not clear exactly what policy tools the government will use to do so.
2. Making net gains
On Friday, the Politburo held a study session following the body’s monthly meeting (see previous entry).
The topic: Building a better social security system.
- Hu Xiaoyi, chairman of the China Social Insurance Association (CSIA) and former vice minister of human resources and social security, gave a presentation on the topic.
After Hu’s presentation, Xi Jinping gave a speech.
He commended the country’s progress in expanding the social safety net (Xinhua):
- 1.36 billion people out of over 1.4 billion are now covered by basic medical insurance
- China’s basic pension scheme now covers close to one billion people
But Xi said social protections could be further strengthened by:
- Implementing a multilayered pension scheme on top of the government’s basic pension system
- Improving social services in rural areas
- Extending social security coverage to migrant workers and freelancers
- Continuing to promote government bulk drug buying programs and improving the efficiency of medical insurance spending
Get smart: Building a better social security system is key to Xi’s common prosperity goal.
Get smarter: The question of how to sustain an expansive social safety net to adequately cover China’s huge (and rapidly aging) population is one of the thorniest problems keeping policymakers up at night.
3. Xi calls Macron
On Thursday, Xi Jinping rang up French President Emmanuel Macron.
This may shock you, but Xi extolled the virtues of win-win cooperation between China and France (MoFA):
- “China and France should continue to champion multilateralism, and inspire global efforts to uphold equity and justice, coordination and cooperation, as well as openness and inclusiveness.”
- “China…stands ready to work with France to support…international cooperation against the pandemic.”
Xi also expressed his support for:
- Building Paris into Europe’s pre-eminent post-Brexit financial center
- Implementing the recently concluded China-EU Comprehensive Agreement on Investment
- Working with France to “open up new space for China-EU cooperation” in Central and Eastern Europe
But Xi’s primary message was thatEurope should stand on its own two feet.
- “China believes a stronger Europe is conducive to the peace, stability…and to boosting cooperation between…China and the EU to jointly tackle various global challenges.”
Get smart: The volatile “America First” foreign policy of the Trump-era rattled European leaders and prompted some to seek greater strategic autonomy from Washington.
- That suits Xi just fine.
Get smarter: Growing European mistrust of China may serve to push the EU right back into the US strategic orbit. Beijing needs to tread carefully.
4. A climate of change
The rubber is hitting the road on climate policy.
On Thursday, we got confirmation of a new Special Office for Climate Change Affairs (China Environment):
- Environment ministry (MEE) spokesperson Liu Youbin said MEE set up the office in cooperation with the Ministry of Foreign Affairs (MoFA) and the National Development and Reform Commission.
- The office is led by Xie Zhenhua, recently reappointed as special climate envoy (see February 5 Tip Sheet).
And get this: On Friday, MoFA spokesperson Wang Wenbin let slip that Xie has already reached out US climate czar John Kerry to kick off cooperation (Caixin).
We also got a timeline for the launch of the new national carbon market this weekend.
MEE Minister Huang Runqiu told officials at local emissions trading centers in Shanghai and Hubei province that (MEE):
- “Systems must be in operation as soon as possible to ensure the [national] launch of online trading before the end of June.”
Some context: Rules for the national carbon emissions trading market were finalized in January (see January 14 Tip Sheet), but this is the first official confirmation of a timeline for launch of the new market.
Get smart: Expect lots of climate policy developments to emerge as regulators lay the groundwork for achieving Xi Jinping’s pledge to peak carbon emissions by 2030.
5. The future of innovation
On Friday, the State Council held a press conference on boosting technological innovation.
The presser was attended by top officials from the Ministry of Science and Technology (MoST) and provided a preview of innovation policy in the 14th Five Year Plan.
ICYMI: Technological innovation has skyrocketed its way up the list of China’s national priorities in recent months.
In particular, two points from the presser stood out to us in terms of how the government plans to retool its innovation policies over the next five years:
- Policymakers will look to implement a “list and commandeer” system, whereby the government publishes a list of core scientific projects and solicits help from researchers on a voluntary basis.
- They will also look to develop policy instruments to more efficiently select and allocate funding to potentially groundbreaking research projects.
What it means: The government is formulating a two-pronged approach to supercharging the country’s RD system.
- Namely, enlisting the help of the private sector and better allocating resources to emerging new technologies.
Get smart: Policymakers have identified the problems correctly. We’ll be watching to see if they can implement an effective solution.