1. An offer you can’t refuse
On Monday, Xi continued his tour of Guangxi in southern China.
Xi visited local businesses in Liuzhou, a mid-size city in central Guangxi.
- Xi made a visit to state-owned machinery equipment manufacturer LiuGong Group.
- Xi then visited a food processing zone for Luosifen noodles.
Some context: Luosifen have blown up in recent years (SCMP):
- “There are now more than 8,000 restaurants in China specialising in the noodles across various chains.”
- “Taobao sold over 28 million luosifen packets [in 2019], making it the most popular food item on the platform, according to the 2019 Taobao Foodstuffs Big Data Report.”
Xi was impressed (Xinhua):
- “It is not an easy task to develop the small rice noodle business into such a large industry, said Xi.”
Xi had a message for the private sector:
- “We encourage the development of private businesses.”
- “When they encounter difficulties, the Party and the state give them support, and when confusion arises, guidance is offered, with the hope that they can develop boldly and with confidence.”
Get smart: Xi’s got a deal for private business – do what the Party says, and the Party will let you prosper.
Get smarter: It’s a deal they can’t refuse (just ask Jack Ma).
2. The campaign that keeps on giving
The anti-corruption campaign just don’t stop.
On Monday, the State Council held its annual work conference on clean governance.
At the conference, Premier Li Keqiang said that he wants to use the anti-corruption campaign to improve policy implementation.
Basically, Li thinks that corruption could perhaps maybe possibly get in the way of officials doing a good job (Xinhua 2):
- “[We must] give full play to the leading role of strict Party self-governance to ensure that the targets and tasks for economic and social development…will be accomplished.”
- “We should work in a strict, in-depth, and meticulous manner to ensure the implementation of various policies, such as tax and fee reductions.”
Li also said he wants to make sure that fiscal funds get where they are supposed to go. In particluar they should
- Help businesses
- Support employment, education, healthcare, and elderly care
Get smart: Li wants to make sure the government’s efforts are felt by the people.
Get smarter: The anti-corruption campaign isn’t just about rooting out and punishing bad officials.
- Improving the efficiency of the government’s work is of equal – or higher – importance to the top leadership.
3. Thar’s gold in them thar hills
“Clear waters and green mountains are as valuable as mountains of gold and silver.”
That’s classic Xi Jinping. He’s been using his “two mountains” slogan to push for better environmental protection since 2005.
Now it looks like Xi’s slogan may take on a more literal meaning:
- On Tuesday, the Party Central Committee and the State Council jointly issued a document that aims to create a framework for realizing the monetary value of nature, or what it calls “ecological products.”
The thinking is straightforward:
- Ecological products are public goods that have value.
- Users need to pay for them.
- Polluters should compensate the public for any damage they do to ecological products.
- Those that protect ecological products should be compensated.
There is one BIG problem: How do you put a price tag on nature?
- The document offers no answers, but does aim to create a framework for “quantifying, mortgaging, trading, and monetizing” ecological products by 2025.
Get smart: This is pretty radical stuff, and could fundamentally alter how China manages its economy.
Get smarter: It could lay the groundwork for the new Gross Ecosystem Product (GEP) – an alternative system being developed to measure economic development (see March 26 Tip Sheet).
4. Foreign espionage – just say no
On Monday, the Ministry of State Security (MSS) dropped new regulations on counter-espionage security for companies, social organizations, and individuals.
The aim: To make everyone a cog in the state’s anti-foreign infiltration machine.
Why that’s a big deal: This is the first time the MSS has called on the public to take on counter-espionage responsibilities.
Together with industry regulators, the MSS will make a list of critical organizations susceptible to foreign infiltration.
- Those on the list will be required to adopt specific counter-espionage measures.
These measures include:
- Holding counter-espionage training for members and staff
- Improving the management of classified personnel and materials
- Conducting pre-departure training and post-return interviews of personnel that have traveled abroad
- Implementing appropriate technical security measures
- Cooperating with MSS security checks and assigned counter-espionage tasks
Some context: Over the past two years, several state-owned enterprises (SOEs) – especially those involved with the military – have stepped up their internal counter-espionage security checks.
Get smart: The primary purpose of the new regs is to protect Chinese companies from… drumroll please… foreign espionage.
The big picture: National security concerns are increasingly permeating all aspects of policy.
Our question: How will this affect foreign companies (or their joint ventures) in China?
5. Antitrust probe expands to waimai
On Monday, China’s antitrust watchdog (SAMR) announced that food delivery giant Meituan is facing an antitrust probe.
- Specifically, Meituan will be investigated for engaging in forced exclusivity.
Some context: Forced exclusivity is an anti-competitive practice in which big tech platforms force merchants to choose between their own platforms or those of their competitors.
- A few weeks ago, Alibaba got fined for the exact same reason (see April 12 Tip Sheet).
This should not be a surprise: Earlier this month, SAMR warned Meituan and 33 other tech companies to correct anti-competitive practices (see April 14 Tip Sheet).
More context: Meituan has been in regulators’ sights for a while now:
- In the past two months, local authorities have penalized Meituan for three antitrust violations.
- The penalties led to a total fine of RMB 2.85 million.
Get smart: Ali was fined over RMB 18 billion, so it stands to reason that Meituan may be looking at a penalty of several billion yuan.
Get smarter: While painful, a massive fine would not cripple the food delivery giant. That’s by design.
- Regulators want to send a message to other tech companies to get their houses in order, but they don’t want to destroy pillars of the platform economy.
6. Vaccinations pick up speed
Good news everyone: Vaccination rates are beginning to pick up.
- As of Sunday, China had administered a total of 224.90 million vaccine doses – up from 192.13 million a week before.
- That brought the daily average of doses administered to 4.68 million for the week – up from 3.54 million per day the week before.
On Wednesday, the State Council COVID-19 Joint Prevention and Control Mechanism held a presser, where health officials said the vaccination plan has two priorities:
- Vaccinating high-risk populations such as health workers
- Prioritizing vaccination efforts in “key regions” – such as border cities and megacities where the risk of local outbreaks are higher
On both these counts, Chinese authorities look to be making good progress.
- More than 80% of medical staff have been vaccinated.
- Zhuhai, a major city in Guangdong, earned kudos for having vaccinated 80% of its population between the ages of 18 and 59.
Get smart: China is still well below the vaccination pace needed to achieve herd immunity in 2021.