1. Light bondage
The great belt-tightening is upon us.
On Tuesday, Caixin reported that local government bond issuance is way down so far in 2021:
- “[Localities] have sold or plan to sell 222.7 billion yuan ($34.3 billion) of so-called special bonds in January to April.”
- “That’s a sharp decline from 729.6 billion yuan of debt sold in the same period in 2019 and 1.15 trillion yuan in 2020.”
Some context: Special purpose bonds (SPBs) are primarily used to fund infrastructure projects.
- SPB issuance reached record highs in 2020 as the central government leaned on provincial governments to stimulate the economy in the wake of COVID-19.
But Beijing’s calculus may now be changing:
- “[T]he drop in bond sales suggest a quiet scaling back of fiscal support.”
Earlier this week, we learned that the State Council told local governments not to waste money on expensive new high-speed rail lines and to focus on more practical transportation projects (see April 26 Tip Sheet).
- We suspect that broader concerns over overleveraged local governments and inefficient infrastructure spending is at the heart of the drawdown in SPB issuance.
Get smart: Top leaders are shifting their attention from stimulating the economy to reining in risk.
2. Low hanging fruit
Premier Li Keqiang did his thing on Tuesday – presiding over the weekly State Council executive meeting.
At the top of the agenda: Boosting rural consumption.
Li said more effort is needed to improve the rural business environment, in order to (CPC People):
- “Boost rural consumption, stimulate domestic demand, and deliver on rural revitalization goals.”
Then Li shared a few ideas on how to get it done, including:
- Improving rural commercial facilities, including shops that serve locals and city visitors
- Encouraging companies to make stuff that rural people can use – and afford
- Supporting farmers to sell their products online and to large commercial buyers
- Making land and finance available for commercial development in rural areas
- Extending quality and safety supervision to rural markets
In the hot seat: The meeting’s readout said county-level governments are on the hook to deliver on this agenda.
Get smart: Some 500 million people live in rural China.
- Getting this population to buy and sell more stuff would be a big boon to the economy.
Get smarter: Direct stimulus to rural consumers is still not on the agenda.
3. State Council talks IPR governance
Tuesday’s State Council meeting didn’t just address rural consumption (see previous entry).
Officials also discussed how to improve intellectual property rights (IPR) governance.
Premier Li Keqiang said IPR protection is important (Gov.cn):
- “Protecting intellectual property is protecting innovation.”
- “This is a key part of our effort in fostering a world-class, market-oriented business climate governed by a sound legal framework.”
Li wants to make IPR governance better, by:
- Cutting down the time needed for patent approval and trademark registration
- Focusing on the quality of IP registrations instead of quantity
- Allowing public access to basic data of IP
- Strengthening IPR protection
That’s not all:
- Before the end of June, all subsidies and incentives for trademark and patent applications will be abolished nationwide.
Some context: That deadline is not new. It was first put forth notice by the National Intellectual Property Administration in early February (Yicai).
Get smart: Rewarding trademarks and patents has led to a lot of worthless trademarks and patents.
The bigger picture: Better IPR protections underpin a bunch of Beijing’s major policy objectives – from improving the business environment and attracting foreign investment, to boosting domestic innovation.
4. Results are (almost) in
China’s 2020 census is complete, and results are in.
But they’re still not OUT.
On Tuesday, the Financial Times scooped that census results were delayed so officials can prepare responses to a decline in China’s population – the first in over 50 years.
It’s a big deal, says Huang Wenzheng, a fellow at the Center for China and Globalization:
- “The census results will have a huge impact on how the Chinese people see their country and how various government departments work.”
Officials have spent the last few weeks bracing for impact.
National Bureau of Statistics spokesperson Liu Aihua told reporters the delay was:
- “Partly due to the need for ‘more preparation work’ ahead of the official announcement.”
Some context: Policymakers have seen this coming for a while – that’s why the 14th Five-Year Plan included an extensive section on demographic reform (see March 12 Tip Sheet).
Get smart: It’s best to reserve final judgment until the official census results are public.
- Regardless, we don’t expect the picture to be pretty.
The big picture: Falling birth rates and the rapidly aging population will present major headwinds to growth over the next few decades.
5. No more foxes in charge of the user data henhouse
On Monday, the Standing Committee of the National People’s Congress reviewed the second draft of China’s Personal Information Protection Law (PIPL).
Some context: Inspired by the EU’s GDPR, the PIPL is China’s landmark user privacy legislation. Once finalized, it will form the foundation of China’s personal information protection regime.
Under the new draft, major platforms will be required to establish independent oversight institutions to review the company’s processing of user data.
- Institutions must be primarily composed of members external to the company.
- If the proposal is finalized, legislators will release follow-up regulations governing who exactly is qualified to sit on such bodies.
The rationale for the proposal is based on the idea that China’s big tech platforms are now as critical to the economy and society as public utilities (21st Century Biz):
- “Foundational platform services [are similar in nature to] public [services].”
- “[T]hus more external and independent supervision is needed to protect [the rights and interests of users].”
Our question: Is this another channel through which officials can keep an eye on big tech?
Get smart: Chinese legislators don’t trust the foxes to manage the user data henhouse.
- Considering the widespread abuse of user data, there’s no reason they should.