driving the day
1. Xi endorses local experimentation
On Tuesday, Xi continued his trip in Fujian (see yesterday’s Tip Sheet).
Visiting western Fujian’s city of Sanming, Xi popped popped over to (Xinhua 1):
- A hospital, where he stressed the need for medical and healthcare reform
- A village, where he promoted rural revitalization
He also stopped by a rural property rights transaction center.
- There he learned about the local efforts to advance collective forest tenure reform by giving householdsa share in timber revenue.
The local reform efforts got Xi really excited (Xinhua 4):
- “Xi underlined the combination of top-level design with grassroots exploration in pushing forward reforms.”
- “For major reforms, trials should be conducted first to gain experience before such reforms are promoted, he said.”
And he underlined his belief in one tried-and-true method (Xinhua 3):
- “The reform approach of ‘crossing the river by feeling the stones’ is not outdated, nor will it ever be.”
Why that matters: It seems to directly contradict what Xi was saying just a few years ago. When he came to power, Xi stated that reform had entered a “deep water area,” i.e. an area where you can no longer feel the stones.
Get smart: Xi’s reversal signals that local officials will get more leash.
2. MoF wants to help with your taxes
Monetary policy is normalizing.
Stimulus is over.
But companies can still expect a helping hand.
- On Tuesday, the Ministry of Finance (MoF) and State Taxation Administration announced they will extend some of the tax breaks rolled out last year to help companies get through the pandemic.
Tax breaks will be extended until end 2021, for:
- The film industry
- Firms involved in pandemic relief
- Charitable donations to pandemic relief efforts
Some companies in Hubei will get additional support:
- Small firms based in the province at the epicenter of the pandemic will continue benefiting from a lower value-added-tax rate until the end of 2021.
Some context: Government officials have repeatedly reassured firms that, despite efforts to return the economy to a more normal footing, there will be no “policy cliff” – meaning support policies won’t come to an abrupt halt.
More context: MoF isn’t the only agency to postpone the end date for corporate relief.
- In January, the People’s Bank of China told banks to extend loan forbearance for small firms beyond a March 31 deadline.
- In the Government Work Report, Premier Li Keqiang said quotas for re-lending and re-discounting – already upped in 2020 – will be expanded even further.
Get smart: Beijing is taking an ambidextrous approach to post-pandemic economic policy – withdrawing stimulatory support with one hand, but offering targeted aid to those who need it with the other.
Get smarter: Small, targeted support programs won’t detract from the overall push toward normalization.
3. Party party planning
At a press conference on Tuesday, the Central Committee shared its plans for the Party’s upcoming 100-year birthday celebration this summer.
There’s lots to look forward to.
There will be exciting new learning opportunities:
- There will be a Party-wide campaign to study CCP history and education (this is secretly our favorite).
There will be a Party party (Xinhua 2):
- “A grand gathering will be held, during which President Xi Jinping…will deliver an important speech.”
But that’s not all.
- “Major theme exhibitions will be held to showcase the CPC’s journey in the past century, as well as its achievements and experience.”
- “A major theatrical performance will be hosted.”
- “Seminars and symposiums on theoretical study will also be organized.”
Feeling the FOMO?
No worries, non-Party members also gets to join in the festivities:
- “Documentaries, special programs, TV dramas, music, dances and films will be created and promoted.”
- “Major publications, including a book on the CPC’s 100-year history, will be compiled and released.”
- “Party-themed publicity and education activities will be carried out for the public nationwide.“
One thing there won’t be: A military parade.
What to watch: We are curious to see how Xi will leverage the centenary to boost his own standing.
4. Approvals streamlined for foreign investment in encouraged sectors
The government wants foreign companies to contribute to national development goals.
That’s why on Monday, the macro planner (NDRC) released a notice to streamline the approval process for investments in encouraged industries.
- Foreign investments into encouraged sectors already enjoy a discounted corporate income tax rate, prioritized land use, and other tax exemptions.
- But investments have been minimal due to complicated approval processes.
Now, approval procedures will be simplified for foreign investments in:
- Certain equipment encouraged for use
- Encouraged strategic sectors such as industries that are listed in the 2020 edition of the Encouraged Industries for Foreign Investment Catalogue (see January 5 Tip Sheet).
And here’s the real kicker:
- NDRC approvals will be scrapped altogether for foreign investments in encouraged sectors under USD 30 million.
For foreign investment in encouraged sectors between USD 30-300 million:
- The approval process will be delegated to provincial NDRC offices, which will be required to confirm the validity of such investments within seven business days.
Get smart: Facilitating foreign investment – especially into high-end manufacturing, production-oriented service industries – is a key component in shoring up China’s supply chains.
5. Nobody lays a finger on my personal information
On Monday, the Cyberspace Administration of China (CAC) – China’s internet watchdog – and three other agencies finalized new rules governing the collection of personal information by app developers.
Some context: The CAC has been in a pitched battle against rampant over-collection of user data on domestic apps since 2019.
The measures insist that apps collect only the information necessary for core functions. And they don’t leave “necessary” open to interpretation:
- 39 common types of app are named — including navigation, ride-hailing, food delivery, and instant messaging — along with what constitutes necessary data for each.
The goal: Cracking down on apps that use bundled consent to force users into handing over tons of data:
- “Apps shall not refuse to allow users to access basic functions and services because users refuse to provide non-essential personal information.”
It’s not just downloaded apps, either:
- The measures clearly include mini-programs in the scope of supervision for the first time.
Get smart: This will serve as a stopgap until the forthcoming Personal Information Protection Law is finalized.
Get smarter: Big tech makes big bucks reselling (anonymized) user information to data brokers. This could put a crimp in more than one side hustle.
6. Xie and Kerry’s climate heat cute
On Tuesday, China’s top climate envoy, Xie Zhenhua attended the “Ministerial on Climate Action.”
Some context: The Ministerial on Climate Action is an annual talk attended by high-level officials from around the world to discuss their countries’ progress on implementing the Paris Climate Agreement.
- China is chairing this year’s meeting.
Know who else was there?
- US Special Presidential Envoy for Climate John Kerry.
Why that matters:
- Chinese leaders have held up climate change as an issue that Washington and Beijing could cooperate on.
- The Biden administration has expressed cautious interest in such an arrangement.
According to the US State Department, Kerry will not meet directly with Xie at the summit, but will keep lines of communication open (SCMP):
- “Envoy…Kerry has been in touch with his counterpart, Minister Xie Zhenhua, since they were both appointed, and we expect conversations between the two will continue.”
- “We know the climate challenge does not get successfully addressed without significant additional action by China.”
Get smart: This space bears watching. If China and the US can’t cooperate on climate, then it’s doubtful that they can cooperate on anything.
- On the other hand, if they can build momentum on climate, it could help to stabilize other parts of the relationship.