finance & economics
1. Dragon Boat Festival consumption disappoints
We are pretty obsessed with the Chinese consumer.
The reason: Household consumption is key to China’s economic recovery.
Some context: China has seen a two-track recovery from the pandemic.
- Investment and exports have boomed.
- But consumption has lagged.
If China wants to sustain its economic recovery, consumption is going to need to pick up.
That’s why data from the Dragon Boat Festival holiday are so disappointing.
According to the Ministry of Culture and Tourism:
- Total tourism revenue over the three-day holiday was RMB 29.43 billion.
- That’s a mere 74.8% of pre-pandemic levels.
It gets worse: Those numbers are particularly bad when you remember that international travel is basically verboten.
- With everybody stuck in the country, you would expect domestic tourism numbers to be higher than normal.
Get smart: The Chinese consumer is not back.
Get smarter: That bodes ill for growth in H2.
2. Xi and Li are on the case
On Sunday, President Xi Jinping and Premier Li Keqiang gave instructions to firm up nationwide safety checks following a deadly incident in Hubei.
The instructions followed a pipe explosion in Shiyan, Hubei on Sunday morning.
- At least 25 people were killed and over 100 were injured.
Beijing is taking control. The central government has taken over the investigation of the explosion from provincial authorities.
Xi wants accountability. He called on officials to (Xinhua):
- “Discover the cause as soon as possible and solemnly determine accountability.”
Xi doesn’t want anything going wrong in the run up to the Party’s birthday:
- “[We must] maintain social stability and create a good atmosphere for the 100-year anniversary of the founding of the Communist Party.”
Li called for everyone to do more:
- “The State Council Work Safety Committee and the Ministry of Emergency Management should urge all localities to strengthen safety supervision, further investigate hidden dangers, and resolutely limit major accidents.”
This is hardly an isolated incident: Over the weekend, a chemical leak in Guizhou and a workplace incident in Sichuan killed a total of 14 people.
Get smart: Workplace deaths have fallen by two-thirds over the past decade (Sohu).
Get smarter: China is still a very dangerous place to work. Workplace deaths per capita are still three times as high as in the EU, and around 20% higher than in the US.
3. Fist bump
On Friday, Xi Jinping sent a congratulatory note to Mongolian President-elect Ukhnaa Khurelsukh.
Some context: Khurelsukh, a former Prime Minister, is the chairman of the Mongolian People’s Party – a group that now effectively controls the Presidency and the Parliament.
Fun fact: Khurelsukh earned his nickname – “Fist” – after punching a member of Parliament in 2012.
Another fun fact: Thanks to its location between Russia and China, Mongolia is one of the only developing countries to have more available vaccine doses than people.
Xi was all good vibes, saying (Xinhua):
- “Since the Covid-19 outbreak, the Chinese and Mongolian governments and people have pulled together and helped each other combat the virus.”
- “I….look forward to working hard together to lead progress on the China-Mongolia comprehensive strategic partnership.”
Get smart: As of 2019, Mongolia sends over 80% of its exports to China.
Get smarter: With China-Australia tensions showing no signs of abating, and global supply chain uncertainties rising, Mongolia will remain a critical source of resources for China.
4. Send pics!
On Friday, China released the first images taken by the Zhurong Mars rover, part of the Tianwen-1 mission that successfully landed on the Red Planet last month (see the May 17 Tip Sheet).
Vice Premier Liu He offered some well-deserved congrats to the team at the image unveiling ceremony.
- “The [Tianwen-1 mission program] courageously accepted the challenge… and has achieved a major success that will be recorded in the annals of history.”
- Tianwen-1 is historic in that it achieved Mars orbit, soft landing and deployment of a rover all on the first attempt.
Tianwen-1 is but one front in China’s campaign to become a science and technology superpower. Liu encouraged the nation to press on by:
- Removing the roadblocks to aerospace development
- Accelerating the industrialization of scientific research
- Making breakthroughs in key core technologies
- And striving to achieve scientific and technological self-reliance
Get smart: Improving domestic technology is China’s No.1 economic – and strategic – priority.
Get smarter: For policymakers, Tianwen-1 validates the focus on pursuing “leapfrog development,” i.e. focusing on next-generation technologies where no country has a clear advantage.
5. Yang v. Blinken 2: Bilateral Boogaloo
On Friday, China’s top diplomat Yang Jiechi held a phone call with US Secretary of State Antony Blinken.
Some context: The pair got off to a bad start during their first face-to-face meeting in Alaska back in March (see March 19 Tip Sheet).
- Friday’s call was the first time they’d touched base since then.
As predicted, Blinken brought up some unappetizing issues, including (Reuters):
- Human rights in Xinjiang and Hong Kong
- The need for an investigation into the origins of COVID-19
- Beijing’s pressure campaign against Taiwan
In turn, Yang blasted Washington for (Xinhua):
- Interfering in China’s internal affairs re: Xinjiang, Hong Kong, and Taiwan
- Slandering China over COVID-19
- Pushing “pseudo-multilateralism” by forming anti-China cliques
Then things got productive.
Blinken put forward an expanded list of areas for US-China cooperation, which included (US State Department):
- The North Korea nuclear issue
- “Shared global challenges” such as Iran and Myanmar
- Climate change
Get smart: There is currently no steady state in Sino-US relations. But both sides are keen to better delineate where they can cooperate – and where they can’t.
6. State Council’s 2021 legislative agenda
On Friday, the State Council dropped its 2021 legislative to-do list.
It’s going to be a busy year: In total there are 46 pieces of legislation that the body wants to write or revise this year.
- 18 draft laws will be sent over to the National People’s Congress for deliberation.
- 28 administrative measures will be formulated or revised.
- An undefined number of “legislative projects” related to national defence, military reform, government functions, and other issues are also on the agenda.
- An additional 21 legislative items were designated as coming – but not necessarily this year.
Businesses take notice. These will affect the broader business environment:
- Draft amendment to the Anti-monopoly Law
- Implementing rules for the Law on Protection of Consumer Rights and Interests
- Regulations on Data Security Management
- Interim Regulation on Enterprise Information Disclosure (Revision)
Get smart: Creating a law-based, predictable business environment is all the rage in Beijing these days.
Get smarter: Companies that will be affected by these laws and regulations should be figuring out how to influence them – or, at a minimum, track their progress.
7. Government is done supporting renewables
Last Friday, the macro policy planner (NDRC) made a big announcement right before the Dragon Boat Festival holiday.
The big news: Central government subsidies for renewable energy are over. Done. Kaput.
Specifically, beginning this year, there will no longer be any central government subsidies for newly-approved:
- Centralized solar power stations
- Distributed solar power projects for commercial or industrial purposes
- On-shore wind power projects
The end of renewables subsidies hardly comes as a surprise.
- The decision was made back in 2018.
- The subsidy cut-off date was also repeatedly hinted at in recent policy documents (see May 24 Tip Sheet).
Some context: The central government’s renewables subsidy programs began in 2006. It’s been a total mess.
- By the end of 2019, the central government had a backlog of over RMB 300 billion in subsidies that it needed to pay.
Get smart: Even without subsidies, China’s renewable energy capacity will expand rapidly in the coming years.
- That’s because wind and solar are already competitive with other sources of power.
8. Vaccination drive hits speed bumps
China’s COVID-19 vaccination campaign has slowed down.
As of Monday, China had administered a total of 904.13 vaccine doses – up from 794.13 million doses a week ago.
- That brought the daily average of administered vaccine doses to 15.7 million for the past week.
- That daily average is several million short of the 18.95 million (see June 8 Tip Sheet) and 19.17 million (see June 1 Tip Sheet) seen in the two weeks before.
The good news is that domestically transmitted COVID-19 cases are on the decline as well.
- Over the past week, China reported a total of 43 domestically transmitted confirmed cases and three asymptomatic cases – mostly in three Guangdong cities.
- That’s down from 76 confirmed cases and 21 asymptomatic cases in the previous week.
Get smart: China still has two more weeks to make good on its goal to fully inoculate 40% of the entire population by the end of June.
Get smarter: The vaccination slowdown is probably due to the central government pausing administration of first doses while it prioritizes second doses as it chases its inoculation goal.