driving the day
1. Growing the talent pool
On Tuesday, Premier Li Keqiang gathered some of the country’s top talents for some chit chat.
Some context: The assembled were all recipients of government special allowances – a rewards system for highly-skilled personnel begun in 1990.
Li said that China faces a big challenge (Xinhua):
- “It is unprecedented in the history of humankind for a big country like China, with a population of 1.4 billion, to realize modernization.”
For Li, human capital is the secret sauce:
- “[If] we give full play to our rich human resources, we will be able to gather into a powerful force of modernization.”
The assembled discussed a plethora of possible ways to harness China’s top talent, including:
- Improving the allowances system
- Enhancing basic research
- Increasing support for skilled and young talents
- Promoting international exchanges
Smart people indeed.
Get smart: Improving human capital is a complex, multi-decade endeavor. It won’t be easy, but top leadership seems committed to getting it done.
politics & policy
2. Hopped off a plane at Ashgabat
It’s been a red-letter week for China-Turkmenistan relations.
On Thursday, Xi Jinping called Turkmen President Gurbanguly Berdymukhamedov, offering a remarkably specific vision on how to improve ties (MoFA 1):
- “Xi…stressed that bilateral cooperation on natural gas is a clear manifestation of the mutually beneficial and win-win relations between China and Turkmenistan.”
Some context: Turkmenistan is a major natural gas producer and one of China’s largest suppliers.
On Sunday, Chinese Vice Foreign Minister Le Yucheng paid a visit to Ashgabat and met with Turkmen Foreign Minister Rashid Meredov (MoFA 2):
- In addition to calling for broad consensus and cooperation, Le’s visit coincided with the arrival of 500,000 doses of Sinovac’s COVID-19 vaccine.
The very next day, Meredov schlepped over to Xi’an for two days of meetings with Chinese Foreign Minister Wang Yi and Executive Vice Premier Han Zheng.
Wang wasn’t coy about expressing China’s interests in Turkmenistan’s natural resources (MoFA 3):
- “[T]he bilateral cooperation in natural gas [is] the ‘bedrock’ of the ties between the two countries.”
Get smart: An increased focus on energy security is leading China to try to find more reliable sources of energy.
- In the case of natural gas, that means reducing imports from Australia and solidifying ties with Turkmenistan.
3. More census results
Yesterday, we told you the census results are (finally) out.
- The low birth rate and ageing population will present a major headwind to growth (see May 11 China Markets Dispatch)
Today, we wanted to dive a little deeper into the demographic trends that will shape the macroeconomy for years to come.
This is important: People are moving out of China’s agricultural heartland and rust belt, and into coastal cities.
The populations of central and northeastern regions fell since 2010:
- Central provinces account for 25.8% of the population, down .79 percentage points.
- Northeastern provinces are home to 6.9% of the population, down 1.2 percentage points.
Why this is happening: Lower demand for labor in farming and heavy industry is driving workers to pursue employment in new industries.
Unsurprisingly, more people showed up in the eastern coastal region:
- The east now accounts for 39.9% of the population, up 2.15 percentage points since 2010.
The population is also getting better educated. According to Ning Jizhe, director of the National Bureau of Statistics (Caixin):
- 218.36 million Chinese now have a university education.
- The percentage of people with a university degree rose from 8.9% to over 15%.
- The illiteracy rate fell from 4% to 2.6%.
Get smart: Migration, urbanization, and education will help to improve labor productivity, which will serve to blunt the negative impact on growth of China’s ageing, shrinking population.
4. Property tax rollout inches forward
On Tuesday, the Ministry of Finance (MoF) posted a one-sentence statement about property taxes on its website.
- Here’s 13 sentences to tell you how important it is.
The statement: MoF held a symposium to hear from officials and experts on property tax reform pilots.
- The meeting was co-chaired by the legislature’s Budgetary Work Committee (NPC BWC), the Ministry of Housing and Urban‑Rural Development, and the State Taxation Administration.
Some context: Over the past six months or so, the slow drumbeat of progress toward a property tax law has picked up pace among top fiscal policymakers (see May 7 Market Dispatch).
More context: Shanghai and Chongqing piloted property tax schemes in 2011, but little came of them.
Pay attention: MoF’s statement is a big deal for two reasons.
first, the right people were in the room:
- The four central agencies that led the meeting are directly involved in the design and rollout of a property tax.
- The NPC BWC and MoF are assigned to lead drafting of the Property Tax Law.
Second, they appear to be doing something:
- Policymakers have repeatedly mentioned a national property tax in top-level Party and government policy documents since 2013.
- But talk is cheap – this is the first time any action has been (publicly) taken.
What to watch: More property tax pilots would be a concrete sign that things are actually moving forward.
5. Positive injections
On Tuesday, Fu Ying, chairperson of Tsinghua University’s Center for International Security and Strategy, delivered a keynote address on the state of US-China relations at the AmCham China Annual Government Affairs Conference.
She’s kind of a big deal: Fu joined the foreign ministry in 1978, working her way through the ranks to become ambassador to the UK and vice foreign minister.
- She is also a foreign policy moderate, who has spoken out against bellicose “wolf warrior” diplomacy (see April 2, 2020 Tip Sheet).
Fu complained that US politicians too often use China as a punching bag (Tsinghua CISS WeChat):
- “[T]he information presented by Congress [on China] is quite negative, and public opinion [toward China] is full of resentment.”
She said a change is needed:
- “[M]ore people need to be brave enough to inject positive factors into Sino-US relations.”
Fu said the business community could play a pivotal role:
- “The…commercial circles of the two countries have the responsibility to…play a role in promoting Sino-US communication.”
- “We should…let the two societies see the efforts of the industrial and commercial circles to…maintain healthy competition…and to see mutually beneficial and win-win results.”
Get smart: Fu is right to focus on the business community. US politicians may have soured on China, but American companies sure haven’t.
6. Who you callin’ cheap?
On Tuesday, the Communist Youth League (CYL) took to Weibo to criticize Taiwanese computer hardware manufacturer Gigabyte Technologies over some offensive promotional copy.
Some context: It was also the CYL that kicked off the backlash against Swedish fashion retailer H&M in March over a statement it issued on Xinjiang’s cotton industry (see March 25 Tip Sheet).
So what is it this time? The description of the Aero e-sports laptop series on the firm’s website boasted that it manufactures it products to the highest standards…
- “Unlike other brands, which choose cheap, low-quality Chinese OEMs.”
The fallout so far:
- The CYL’s censure brought the matter to the attention of quick-to-enrage Mainland internet users.
- Then e-commerce platforms JD.com and Sunning blocked the brand from their sites.
Gigabyte’s damage control efforts have garnered mixed results:
- The company’s hasty apology included affirmation of the “One China” principle.
That drew criticism in Taiwan.
Get smart: Companies serving Chinese consumers are increasingly going to face Catch-22 situations like these.
Hot tip for foreign brands in China: Make good use of your PR colleagues and service providers.