finance economics
1. Shenzhen pilots new growth metrics
On Tuesday, the Shenzhen municipal government announced that had developed a new Gross Ecosystem Product (GEP) system to measure economic development.
Why it’s a big deal: In Shenzhen, GEP will now be used alongside GDP as a core measure of government performance.
Some context: This is a long-awaited development. It was already on the city’s task list when the central government designated Shenzhen a “pilot demonstration area of socialism with Chinese characteristics” back in 2019 (see August 19, 2019 Tip Sheet).
So what is GEP?
- It attempts to value the contributions of nature – like forests, wetlands, fresh water, farmland, and urban green land – to economic activity.
Get smarter: This is not straightforward. Most ecosystem goods don’t have a functional market. That means it could be easy for the government to manipulate prices to achieve GEP targets.
Get smarter: GEP is not the only new metric on the market. A few other cities are trialing different green development KPI systems.
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Shenzhen Gov.cn: 深圳市政府新闻办新闻发布会（深圳市GEP核算“1+3”制度体系）
politics policy
2. Xi offers pragmatic comment on Taiwan
On Thursday, Xi wrapped up his four day trip to Fujian (see also March 23, March 24, and March 25 Tip Sheets).
Xi met up with the local leadership to listen to reports and dole out some words of wisdom.
Xi reiterated some of his macro policy priorities, calling for:
- Promoting high quality development
- Implementing the new development concept
- Increasing support for innovation
- Advancing the Belt and Road Initiative
But this is what caught our eye: Xi’s comments on Taiwan.
He actually sounded pretty pragmatic (Xinhua):
- “We should focus on promoting integration by means of communication, benefit, and emotions, and have the courage to explore new ways of cross-strait integration and development.”
Get smart: Xi’s rhetoric is a step change from what we’ve heard from him over the past year, during which cross-strait relations have deteriorated markedly.
Our question: Does this mean Xi has not given up on peaceful reunification?
The bottom line: With Beijing’s handling of Hong Kong fresh in mind, it will be extremely hard – if not impossible – to sell any kind of peaceful reunion plan to Taiwan.
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Xinhua: 习近平在福建考察时强调 在服务和融入新发展格局上展现更大作为 奋力谱写全面建设社会主义现代化国家福建篇章
3. Premier Li promises money for RD
On Thursday, Premier Li Keqiang popped over to Jiangsu to inspect a few of the province’s enterprises.
Li’s mission: Making sure companies are aware of new tax deductions for research and development (RD).
Some context: Li announced the tax deductions at a meeting of the State Council earlier this week (see March 25 Tip Sheet).
Lucky for Li, some of the executives he met with had taken his message to heart.
- One company leader said that his enterprise has decided to increase RD investment by between three and five times its former amount.
Li was chuffed (Gov.cn):
- “The more you invest, the more tax credits you get, the happier we will be.”
- “This [policy] will effectively stimulate enterprise innovation and promote industrial upgrading.”
- “We want to leverage enterprises and society as a whole to increase investment in RD through tax incentives and market-based approaches that are fair and inclusive.”
Get smart: Li really really wants companies to know that they will be rewarded for increased RD spending.
Get smarter: This is far from the only way that the government is looking to boost innovation. The government is funding more basic research, while also requiring state-owned enterprises to spend more on RD.
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Gov.cn: 什么政策？李克强昨天开国常会部署，今天就来江苏企业“站谈”
4. State Council puts the government to work
On Thursday, the State Council assigned government agencies their to-do lists for the coming year.
- The government specified responsibility for completing 44 tasks from the 2021 Government Work Rerport.
Some context: The State Council assigns the tasks outlined in the Government Work Report every year. This year’s task list is shorter than usual – 2019’s listed 98 tasks.
But get this: Most of the numbered tasks have multiple sub-tasks.
- And this year, the State Council set specific deadlines for 53 of them.
One exciting tidbit: The National Development and Reform Commission and the Ministry of Commerce have until October to cross a few more items off the negative list for foreign investment.
And this caught our eye: Nine ministries and agencies – from the science ministry to the central bank – have until September to work together and make policy that better regulates “platform enterprises.”
The doc was clear on what the ministries need to achieve, requiring the new rules for tech platforms to strike a balance between (Gov.cn 1):
- Supporting innovation and international competitiveness
- Ensuring a fair market environment
Get smart: A shorter task list with clearer deadlines puts a lot more pressure on agencies to get the work done.
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Gov.cn: 关于落实《政府工作报告》重点工作分工的意见
Gov.cn: 国务院印发《关于落实〈政府工作报告〉重点工作分工的意见》
5. Regulators crack down on platforms, again
The regulatory crackdown on big tech just took on a new dimension.
On Thursday, the National Reform and Development Commission, along with 27 other government departments, released a plan to clean up abusive labor practices and exorbitant fees in the platform economy.
The primary target: China’s food delivery platforms.
Important context: In September, domestic media released a series of exposés on widespread exploitative working conditions for Chinese delivery drivers. The exposés went viral, forcing platforms to promise swift changes.
Now policymakers are stepping in to make sure those changes happen.
The plan called for better protections for gig workers in the platform economy, including:
- Paid annual leave
- Reasonable wages and working hours
- Occupational injury protection
- Proper access to social insurance
The plan will also target excessive fees and commissions charged to on-platform sellers:
- Those fees can currently gouge businesses for up to 20% of revenue.
Get smart: It’s not just Alibaba that’s under the gun. Chinese regulators are taking a top-down look at the entire platform economy.
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21st Century Biz: 发改委等28部门发文：要求降低平台交易成本、整治平台垄断
Gov.cn: 国家发展改革委等二十八部门联合印发《加快培育新型消费实施方案》