1. One big happy family
On Tuesday, Xi Jinping continued his visit in Qinghai (see yesterday’s Tip Sheet).
On the itinerary: Visits to a Tibetan village and to Qinghai lake.
Some context: Qinghai lake is China’s largest. It’s well known for abundant bird life due to its location at the crossroads of several major avian migration routes across Asia.
At the lake, Xi – unsurprisingly – touted environmental protection (Gov.cn 1):
- “We should build Qinghai’s ecological civilization, protect its ecological resources, implement the national ecological strategy and build a national park.”
- “Ecology is resources and wealth, and it is our treasure.”
Then, during a visit to Gangcha – a small Tibetan village – Xi struck a decidedly paternalistic tone (Gov.cn 2):
- “We are a family, we are all brothers and sisters.”
- ”Not one single ethnic group will be left behind in the country’s efforts to fully build a modern socialist China.”
According to Xi, that love goes both ways (Xinhua):
- “The Party has won the people’s wholehearted support because it has always served the people…and strived for the wellbeing of all ethnic groups.”
Our thought: It can be a little tricky getting other people to say they love and respect you.
- But just saying so yourself is easy peasy.
2. CEEC-ing a friend for the end of the world
Hold on to your pierogi, everyone!
On Tuesday, the 2nd China-Central and Eastern European Countries (CEEC) Expo kicked off in Ningbo.
Some context: The CEEC formulation, informally known as “16+1”, was cooked up by China’s foreign ministry in 2012 to deepen ties between China and a group of 16 Central and Eastern European economies.
- It used to be “17+1” – but Lithuania dropped out of the grouping last month.
Xi Jinping sent a congratulatory letter to the attendees (CGTN):
- “Xi said the China-CEEC cooperation mechanism is an important platform…to enhance friendship, expand cooperation and seek common development.”
- “Xi stressed the importance of aiming for concrete results and increasing cooperation outcomes that benefit both sides.”
To wit, the big man pledged to:
- “Import goods worth $170 billion from [CEEC] and double CEEC agricultural exports to China in the next five years.”
Get smart: Xi’s emphasis on “concrete results” is interesting.
- Some CEEC members have complained that, so far, members have seen no real benefits.
- That’s one of the reasons Lithuania peaced out.
Get smarter: We’ve seen this problem before.
- Beijing loves setting up international cooperation frameworks, but has repeatedly struggled to make them feel worthwhile for member countries.
3. Can’t give it away
On Tuesday, domestic media reported that the State Administration of Market Regulation (SAMR) is moving to end “one-cent flash sales” on group buying platforms.
A quick definition: One-cent flash sales are what they sound like – a sale where platforms offer a product with wide appeal – fresh fruit, for example – priced at just 1/100th of a RMB. Stock goes quickly.
This raises a couple issues for regulators:
- These flash sales allow platforms with deep pockets to attract huge numbers of customers – threatening small- and medium-sized players who lack the budget to compete.
- The technique seems a lot like “low-price dumping” and “cash burning,” which regulators have already warned against.
SAMR reportedly instructed a number of companies to cease the practice in late May (Late Post).
- Meituan and Pinduoduo – already on SAMRs radar for other anti-competitive practices – were among those told to stop flash sales.
Get smart: The anti-monopoly crackdown on tech platforms is far from over.
Get smarter: We’ve said this before, but China’s platform companies are heavily reliant on expensive consumer subsidies to create and maintain a user base.
The big question: Will cracking down on consumer subsidies actually create more competition? Or just harm consumers?
4. Blockchain hope
On Monday, the Ministry of Industry and Information Technology (MIIT) and Cyberspace Administration of China announced plans to make China a world leader in blockchain technology.
Some context: Top leaders – including Xi Jinping himself – have been interested in blockchain for a while as part of a wider push for homegrown technical breakthroughs (see October 28, 2019 Tip Sheet).
The rub: There haven’t been any big breakthroughs yet.
MIIT’s solution: Push blockchain applications harder.
Specifically, the plan wants to use blockchain to:
- Reduce operational costs in supply chain management, product traceability, and data sharing
- Increase the transparency of public services
But the plan highlights one one big problem (MIIT):
- “Blockchain technology is not yet mature, and is still rapidly developing and evolving.”
Get smart: The regulators themselves are unsure about what the future holds for blockchain.
Get smarter: Beijing is investing in emerging technologies much like a venture capital firm. It investing in a wide range of nascent technologies in the hope that some will produce outsized returns.
5. Coal walks a tightrope
On Wednesday, the China Coal Industry Association (CCIA) published its plan for developing the coal industry over the next five years.
CCIA says coal consumption is still set to grow…
- They target a modest annual coal consumption growth rate of just 1% per year through 2025.
- They also set regional coal production guarantees, in the name of energy security.
…but the industry’s ecological footprint will shrink.
- CCIA aims to further consolidate the coal industry – with large operations slated to account for 97% of coal produced domestically.
- CCIA is also pushing for a range of technical upgrades to reduce environmental impacts from the mining and processing of coal.
Get smart: Industry leaders are walking a tightrope. They need to support policymakers’ insistence on a swift transition to high-quality, ecologically friendly development – without jeopardizing an equally important push for energy security.
Get smarter: All told, this plan signals a “steady as she goes” approach.
- It pays lip service to national emissions goals, but remains largely focused on delivering stable supply and prices amid supply side structural reforms.
agriculture and rural affairs
6. Some reservations
On Tuesday, Executive Vice Premier Han Zheng chaired a meeting at the National Food and Strategic Reserves Administration (NFSRA).
Unsurprisingly, Han kicked things off by talking about the importance of food security (Economic Daily):
- “Food security is an important foundation of national security.”
- “[We must ensure] the Chinese people firmly hold their rice bowl in their own hands.”
Then, he outlined his wishlist for the national reserve system, calling to:
- Improve infrastructure and upgrade reserve storage facilities
- Strengthen R&D in food storage technologies
- Make better use of both markets and government interventions
- Spare no effort to increase reserve capacity
Get this: Han kept his remarks broad – but just a few hours later, the National Reform and Development Commission and State Council jointly issued a contingency plan for pork reserve management.
Get smart: Han’s visit to NFSRA was to get them onboard with the pork reserve reform agenda.
Get smarter: For years, state reserves have focused on stocking staple grains.
- These days, the price of pigs and pork have a much bigger impact on both consumers and China’s largest agribusinesses.
The bottom line: The reserve system needs to catch up with modern needs.