driving the day
1. Thank you, SAMR, may I have another?
On Saturday, China’s antitrust watchdog (SAMR) slapped Alibaba with a record-setting fine for antitrust violations.
The damage: A cool RMB 18.2 billion
- After a four-month investigation, SAMR found that Alibaba had abused its dominant market position to force merchants to choose between Ali’s online platforms and those of its competitors.
But there’s less than meets the eye to this eye-watering figure:
- According to China’s Anti-Monopoly Law, SAMR could have fined Alibaba up to 10% of its previous year’s revenue.
- Instead, the amount came out to just 4% of Alibaba’s 2019 domestic revenue.
- SAMR also could’ve confiscated Alibaba’s illegal gains from its monopolistic practice, but it didn’t.
State media said the fine represented tough love (People’s Daily):
- “This penalty…does not mean that China is changing its supportive attitude towards the development of the platform economy.”
Get smart: Chinese authorities want to make an example of Alibaba to send a message to other big tech firms.
- Still, that doesn’t mean regulators want to see Ali crushed.
Get smarter: The message is clear – Beijing will allow big tech companies to prosper as long as they toe the Party line.
2. LKQ highlights new economic uncertainties
On Friday, Premier Li Keqiang invited economists and business leaders to Zhongnanhai to discuss the economy.
The lucky invitees included (Gov.cn):
- Zhang Xiaojing, director of the Institute of Finance and Banking of Chinese Academy of Social Sciences
- Peng Wensheng, chief economist of China International Capital Co. Ltd.
- Ma Bin, vice chairman of the China Association of Small and Medium Enterprises
Also in attendance were top executives from:
- Baiyun Power Group
- Zhejiang China Commodities City Group Co. Ltd. the operator of Yiwu Market, the world’s largest market for daily goods
- Online travel agency Trip.com.
The timing of this year’s sit-down is interesting:
- Li usually hosts these meetings twice a year, once before the Politburo’s mid-year meeting on economy, and again just before the Central Economic Work Conference at the end of the year.
We’re not sure why Li is getting the posse together in early April, but recent inflationary pressure might have something to do with it:
- The invitees noted that rising commodity prices were increasing operating costs for companies.
- During the meeting, Li instructed officials to make adjustments to the raw materials market and ease rising commodity costs.
Get smart: These comments signal that upstream inflation is a burgeoning concern for policymakers.
- In fact, the Financial Stability and Development Committee discussed the same issue last Thursday (see April 9 Markets Dispatch).
Get smarter: Try as they might, policymakers can’t bring down commodity prices by fiat.
3. Xi and Li send instructions on telecom scams
On Thursday, Xi Jinping and Premier Li Keqiang sent instructions to a national conference on combating telecom and online fraud.
Some context: Telecom and online fraud typically include scams where criminals set up call centers or web links to swindle victims out of money.
Some context: Telecom and online fraud is a major issue in China (Xinhua 2):
- In 2020 alone, over 360,000 scammers were apprehended, and the authorities recovered some RMB 187 billion in fraudulently obtained money.
- The amount that authorities were unable to recover is even higher.
Now Xi and Li want the government to do more to combat scammers (Xinhua):
- “Xi urged the regulators of sectors including finance, telecom, and the internet to shoulder primary responsibilities.”
- “Li urged continuous efforts to consolidate and push forward the achievements in combating telecom and online fraud in accordance with law.”
Get smart: Fighting petty scammers may seem like an odd use of top leaders’ time, but online and telecom fraud affects millions of people each year.
Get smarter: Many of the fraudsters are operating from outside of China itself, which makes enforcement difficult and international cooperation necessary.
4. Bottom-up brainstorming
On Friday, the National Development and Reform Commission (NDRC) and the Ministry of Science and Technology (MoST) jointly announced plans to put some pep in the step of China’s research and development (RD) ecosystem.
Some context: Policymakers have wanted to turbocharge China’s innovation capabilities for some time, but top-down policy initiatives haven’t delivered the desired results.
Under the new plan:
- Local governments will solicit fresh ideas on RD system reform from local innovation hubs, enterprises, universities, and research institutes.
- The NDRC and MoST will create and refine a national list of the best suggestions.
- Each year, local governments will be required to select and implement at least three measures from the list.
Officials that follow through win fun prizes:
- Local governments that successfully implement reform pilots will be given prioritized access to funding and support.
Get smart: Measures like these are yet another indication that China is pulling out all the stops to achieve breakthroughs in “choke point” technologies like high-end chips.
Irony alert: The fact that policymakers are trying to bolster bottom-up innovation via top-down directives illustrates one of the primary problems with China’s RD landscape.
5. Ain’t no party like a Party party, cuz a Party party don’t stop
Break out the confetti!
The Communist Party of China is gearing up to celebrate the 100th anniversary of its founding, on July 1, 1921.
- On Sunday, Xinhua published a bunch of new details about the arrangements.
The thrilling theme:
- “Follow the Party forever.”
Subsidiary themes include:
- “The Communist Party is good.”
- “Socialism is good.”
- “Reform and opening up is good.”
- “The great motherland is good.”
- “All ethnic groups are good.”
The main event: Xi Jinping will give a speech on July 1, where he is expected to officially announce that China has built a “moderately well-off society in all respects” – a goal first set by Deng Xiaoping back in 1979.
That’s not all: Between now and May, leaders at all levels will study and promote key Party priorities, including:
- The outcomes of the Fifth Plenum
- The recently concluded poverty alleviation campaign
- The prospects for the 14th Five-Year Plan period
And after the party there’s an afterparty: A series of events focused on the successes of the Party and its bright future will continue throughout 2021.
Get smart: Anniversaries are important opportunities for China’s leaders to crow about their achievements.
- There’s basically no anniversary bigger than the CCP’s 100th birthday.