1. Data dump – econ data
China’s stats bureau dropped the monthly econ data for the combined January-February period on Monday morning.
- Retail sales jumped 33.8% y/y in the first two months of the year, up from 4.6% y/y growth in December.
- Fixed asset investment increased by 35.0% y/y in the January-February period, up from 11.3% y/y growth in December.
- Value-added output at industrial firms rose 35.1% y/y in the first two months of the year, versus 7.3% y/y growth in December.
Watch-out for the base effect: This year’s econ data has been massively distorted by the collapse in economic activity at the start of last year.
A better indicator is how the first two months of this year fared relative to the same period in 2019:
- Retail sales were up 6.4% in the first two months of 2021 versus the same period in 2019.
- Fixed asset investment increased 3.5%.
- Value-added output at industrial firms rose 16.9%.
Get smart: New year, old problems – Chinese economic growth remains dangerously unbalanced between supply and demand.
Go deeper: For more in-depth analysis of the numbers, check out today’s (and everyday’s!) China Markets Dispatch.
2. PBoC announces FX trial for multinationals
On Friday, the People’s Bank of China announced the launch of a trial that will allow multinational corporations (MNCs) greater freedom to exchange currency.
The details: Select firms will be allowed to purchase foreign currency whenever they like – within limits – and deposit it in the domestic bank accounts that they use for cross-border transactions.
- The trial will take place in Beijing and Shenzhen.
- Local and foreign MNCs with “relatively high ratings” were invited to participate.
The goal: to help companies reduce the cost of hedging foreign exchange risk.
The Beijing part of the trial involves only one foreign firm – Royal Dutch Shell.
The other four participants are:
- Sinochem Group
- COFCO Group
- AVIC Corp
- China General Technology Group
The paper didn’t say who was involved in the Shenzhen leg of the program.
Get smart: Measures like this are designed to gradually open the capital account in ways that tangibly benefit the real economy.
Get smarter: Helping firms hedge currency risk is one thing, but the trial would truly benefit foreign companies if it allows for easier repatriation of profits.
3. NPC signals legislative priorities in 2021
Last Tuesday, we told you that the National People’s Congress (NPC) announced a distinctly aggressive legislative agenda for 2021 (see March 9 Tip Sheet).
- The agenda listed 45 legislative projects up for deliberation, with another 20 projects being held “in reserve.”
We’ve now got some more juicy details on what exactly is coming down the pike.
This year, the NPC plans to draft:
- The Law on Ensuring Food Security
- The Data Security Law
- The Hainan Free Trade Port Law
- The Futures Law
- The Stamp Tax Law
- The Rural Revitalization Promotion Law
- The Personal Information Protection Law
It will also amend:
- The Anti-Monopoly Law
- The Scientific and Technological Progress Law
- The Company Law
- The Enterprise Bankruptcy Law
- The Agricultural Product Quality Safety Law
- The Administration Reconsideration Law
The NPC will also look into pushing forward legislation to bolster technological development and counter the impact of foreign (read: American) sanctions.
Get smart: The NPC is often thought of as a mere rubber stamp, but China’s legislature plays a significant role in formulating policy – a role that is set to expand dramatically.
Get smarter: Foreign companies and commentators would do well to keep track of what’s on the NPC’s agenda since it becomes tomorrow’s law of the land.
4. Under a dark cloud
On Saturday night, the Tangshan municipal government called an emergency meeting to launch a crackdown on companies that have violated air pollution control measures.
ICYMI: On Thursday, a team from the Ministry of Ecology and Environment (MEE) made a surprise visit to steel producers in Tangshan.
- The team found companies churning out emissions despite rules limiting operation on highly polluted days.
Some context: This year’s Two Sessions in Beijing was plagued by heavy smog.
- It was a bad look, especially as China tries to build credibility as a climate leader.
- Tangshan, China’s largest steel producer, is just 200km from Beijing.
Tangshan regulators are moving fast.By Sunday, they had:
- Set up an inspection team to continue the crackdown
- Issued fines of RMB 1 million to four steel companies
- Downgraded violators’ corporate social credit rating to a D grade
- Put violators’ pollution discharge permits under review
- Detained responsible administrators
Tangshan also announced inspectors would:
- “Severely punish relevant companies…with a zero tolerance attitude, to ensure 100% implementation of emergency response measures for heavy pollution.”
Get smart: Between global climate commitments and rising expectations for blue skies at home, we’re calling it:
- China’s steel production peaked in 2020.
5. Defending retirement reform
On Saturday, Jin Weigang, head of the Social Security Research Institute at the Ministry of Human Resources and Social Security, did some damage control.
ICYMI: The 14th Five-Year Plan called for a gradual extension of the retirement age as part of the government’s plan to deal with China’s demographic crisis (see March 12 Tip Sheet).
- The plan has proved wildly unpopular – sparking severe public backlash on social media over the weekend.
In a media interview, Jin promised that no sudden shocks were in store (Xinhua):
- “China will raise the statutory age for retirement in a gradual, flexible, and differentiated manner.”
Jin told soon-to-retire workers not to worry:
- “[T]he country will raise the retirement age by a few months every year and finish the reform in several years. “
- “People nearing retirement age will only have to delay retirement for several months.”
However, younger folks should brace themselves:
- “[Young] people may have to work a few years longer but will have a long adaptation and transition period.”
Get smart: Chinese leaders know that retirement reform is politically unpopular.
Get smarter: The fallout from leaving things as is – resulting in a ballooning dependency ratio and a dried-up pension fund – would be many times worse.