1. Li Keqiang wants to build back better
On Wednesday, Premier Li Keqiang did his thing, presiding over the State Council’s weekly executive meeting.
The meeting’s theme: Getting cracking on implementing the 14th Five-Year Plan’s (FYP) major projects.
Li told officials to hop to it (Gov.cn):
- “The major programs identified in the [14th FYP] are of strategic, fundamental and pace-setting importance.”
He also wants private industry to play a major role:
- “The government needs to make inputs, and the role of [the] private sector also needs to be better leveraged in the course of implementation.”
- “Market entities and private players will be fully mobilized to play their part in the implementation of the major programs.”
Li also highlighted an important change of approach in how the government plans to support the economy:
- “Last year, economic growth was mainly driven by tax and fee cuts, and support for market entities.”
- “This year, while effectively tapping the fundamental role of consumption, the key role of effective investment will be better brought out.”
Translation: This is actually a pretty boilerplate statement. It’s a further indication that officials want to reduce pandemic-era support measures and have the economy function more normally via:
- Stronger consumption
- More efficient investment
2. That wasn’t very win-win cooperation of you
On Wednesday, the Foreign Affairs Committee of the National People’s Congress Standing Committee (NPCSC) put Washington on blast.
The gripe du jour: The US Senate’s passage of the US Innovation and Competition Act of 2021 (USICA).
Some context: The USICA allots USD 200 billion to equip the US to counter Chinese influence across a broad range of areas.
- It passed the Senate on Tuesday with strong bipartisan support.
Needless to say, the NPCSC isn’t a fan (Xinhua):
- “[T]he act is full of Cold War thinking and ideological bias, slanders and discredits China’s…domestic and foreign policies, interferes in China’s internal affairs…and tries to contain China’s development.”
- “[T]he bill attempts to exaggerate the so-called ‘China threat’ to maintain the global hegemony of the United States.”
The statement urged the US to change its evil ways:
- “We strongly urge the US Congress to take an objective and rational view of China’s development and…not to undermine the overall situation of US-China relations.”
Get smart: The NPCSC’s admonitions will fall on deaf ears.
- Pro tip: Calling these moves “Cold War thinking” isn’t an insult in DC.
- To US policymakers, the Cold War is a massive success story.
Get smarter: Despite the rhetoric, Chinese leaders are hunkering down for a protracted confrontation with Washington.
- Case in point, the NPCSC’s expedited efforts to build out a “legal toolkit” to fight sanctions and long-arm jurisdiction (see June 8 Tip Sheet).
3. Candid, constructive, confusing
Aiyo, here we go again.
On Thursday, Minister of Commerce Wang Wentao spoke with US Commerce Secretary Gina Raimondo.
Here’s how it went, according to the Ministry of Commerce (SCMP):
- “[The two sides] had a candid and pragmatic exchange of views on relevant issues and mutual concerns in the China-US business field.”
- “The two sides stated that dialogue and exchanges in the field of business between China and the US are very important, and they agreed to promote the healthy development of pragmatic trade and investment cooperation and properly handle differences.”
- “Both parties agreed to continue to maintain communication.”
Hmmm…sounds very rah rah, but it’s not a lot to go off.
Some context: This is the third high-profile meeting between Chinese and American economic officials in the past two weeks.
- Since the end of May, Vice Premier Liu He has spoken with US Trade Representative Katherine Tai and US Treasury Secretary Janet Yellen (see May 27 and June 2 Tip Sheets).
- Those meetings produced similarly vague statements on the importance of cooperation.
Get smart: The Chinese side is pushing hard for increased dialogue, and potentially even cooperation, on economic issues.
- Ironically, despite a still ongoing trade war, they now see economic issues as the area with the most potential for finding some common ground.
- That’s one reason they are spinning these calls with such optimism.
Get smarter: The feeling in DC is not mutual.
- Don’t expect any breakthroughs any time soon.
4. Treating what ails public hospitals
Cracking the whip on investment spending (seen entry #1) wasn’t the only thing Premier Li Keqiang got up to at Wednesday’s weekly State Council executive meeting.
Also on the agenda: Ensuring fair wages for hospital workers.
Li reminded everybody why doctors are important (Gov.cn):
- “The vast number of medical personnel are guarding people’s lives and health and have made outstanding contributions to the fight against the epidemic.”
To improve their work environment, Li wants to:
- Deepen reform of the salary system in public hospitals
- Ensure reasonable salaries for medical staff
- Up the enthusiasm of medical staff to serve the masses
The meeting proposed that salaries be determined and adjusted “dynamically” to ensure a fair wage for public healthcare workers.
- Raising the salaries of junior doctors got a dedicated shout-out.
There’s just one caveat. Any adjustments must be made on the basis of:
- “[E]nsuring that the overall [cost] of people’s medical treatments does not increase.”
Get smart: Public healthcare workers are the backbone of the public health system and Li and co. want to ensure they are taken care of properly.
- But raising salaries without raising medical costs will be a tricky needle to thread for many public hospitals.
The bigger picture: The COVID-19 pandemic not only revealed the shortcomings of China’s healthcare system – it also heightened people’s awareness of medical issues.
5. (Fiscal) Disciplinarian Xi
On Wednesday, Xi Jinping wrapped up his three day visit to Qinghai with a sit-down with the provincial government.
The meeting agenda read like a Xi policy initiative best-of list, featuring:
- Innovation and development
- Environmental protection
- Ethnic unity
- The Party being great
- Rural revitalization
But this caught our eye: During the meeting, Xi pushed for the “strict enforcement of fiscal discipline.”
There’s a good reason for Xi to bring it up: Provincial debt is sky high.
- Beijing tends to keep part of the numbers under wraps, so the exact scale of the problem is unknown.
- But in 2019, nine of China’s provinces, including Qinghai, had a debt ratio of over 100% – with Guizhou topping the list at 145% (21st Century Biz).
Other top officials are worried too: In a December speech, former Minister of Finance Lou Jiwei warned (Sina):
- “During the 14th five-year plan period…roughly, more than 50% of the provincial fiscal revenue will be used for debt services.”
Get smart: Xi and co. are extremely concerned about local government debt burdens after borrowing increased significantly in 2020 to help counter the economic effects of the pandemic.
6. The NDRC is back
Xi Jinping has pledged that China will reach peak carbon emissions by 2030 and carbon neutrality by 2060.
The environment ministry (MEE) was supposed to be in charge of figuring out how to achieve those goals (see October 14 Tip Sheet).
But the National Development and Reform Commission (NDRC) has muscled in on the MEE’s turf.
- The NDRC is now leading the drafting of the peak emissions plan, to be finished later this year.
- It is also running the day-to-day operations of the newly established leading small group on peak emissions and carbon neutrality (see May 28 Tip Sheet).
The NDRC and the MEE have had a beef for years.
- In 2008, the NDRC was given control of the climate change portfolio – much to the chagrin of the MEE (then the Ministry of Environmental Protection).
- The MEE got its revenge in 2018, when it took over on climate as part of the MASSIVE government restructuring (see March 14, 2018 Tip Sheet).
Now back in the driver’s seat, the NDRC is watering down climate policy (WSJ):
- “Behind the scenes, [the NDRC] weakened provisions of the [national carbon emissions trading] scheme, fearing the potential impact on growth, according to people familiar with the matter.”
- “Officials at the [NDRC] want to seize the momentum of the global post-pandemic recovery, even if it means elevated emissions in the short term.”
Get smart: While this is certainly a loss for the MEE, it might not be so bad for China’s climate ambitions.
- The NDRC is arguably better placed to drive through the necessary changes to meet Xi’s climate goals.
This also bodes well: The NDRC is headed by He Lifeng – one of Xi’s nearest and dearest associates.