1. Flooding across Henan causes heavy losses
Since the weekend, “once-in-a-thousand-years” extreme rainfall led to substantial flooding across Henan Province, causing heavy losses.
In Zhengzhou, the provincial capital and a major iPhone production center, 617 millimeters of rain fell from late Saturday to late Tuesday.
- That almost equals the city’s average annual rainfall of 641 millimeters in just three days.
- Authorities said that the extreme weather event broke records across the board.
Infrastructure was inundated. Several of the 12 confirmed flood fatalities in Zhengzhou were drowned in the subway.
In response, Xi Jinping sent instructions to mobilize all levels of government:
- The military and police will perform rescue and relief work.
- Soldiers have already blasted one dam to release floodwater.
- Various ministries were tasked with implementing flood relief and disaster management measures.
Get smart: Disruptions to transportation may further constrain commodities production.
- Zhengzhou’s railway hub is one of China’s largest transportation centers.
- Henan province is also the country’s 8th largest producer of coal and steel.
Get smarter: Natural disasters regularly test the Chinese government’s mettle.
- They’re also opportunities to showcase the efficiency of the Chinese model of governance.
2. Waxed, vaxxed, and not over-taxed
On Tuesday, the State Council issued “The National Plan for Delegating Administration, Innovating Supervision, and Streamlining Services to Stimulate the Vitality of Market Players.”
- If that title alone hasn’t stimulated your vitality, we don’t know what’s wrong with you.
Some context: “Delegating administration, innovating supervision, and streamlining services” refers to a policy framework aimed at simplifying administrative procedures and devolving authority, while still maintaining a high standard of regulatory supervision.
- Trust us, it sounds better in Chinese.
More context: Tuesday’s work plan emerged from an early-June State Council meeting at which Premier Li Keqiang demanded greater efforts to advance the policy.
The plan calls for:
- Using big data to identify taxpayers eligible for tax breaks
- Improving the system for companies to raise problems and complaints with local governments
- Allowing certain localities to carry out market access relaxation pilot programs
- Strengthening fair competition review mechanisms, to prevent localities unfairly restricting competition
- Improving anti-monopoly enforcement in key areas like medicine, public utilities, building materials, and education
Get smart: Reducing tax burdens and streamlining administrative procedures is one of Li Keqiang’s most cherished pet projects.
Irony alert: It remains to be seen if China’s highly centralized bureaucracy can be effectively decentralized by order of the center.
On Tuesday, the Party Central Committee and State Council released a policy document chock full of details on how they plan to boost the birthrate.
Some context: China’s 2020 census showed a fertility rate of 1.3 births per woman – well below the replacement rate of 2.1.
- Just weeks after results were released, Beijing relaxed restrictions on having a third child.
The document keeps things pretty G-rated, with plans to:
- Roll back remaining penalties and fees for having a third child
- Improve basic maternal and child care
- Increase government support for childcare services, and push some companies to provide childcare for employees
- Better protect women against pregnancy-related employment discrimination
Plans for a big tax write-off put us in the mood (for policy analysis of course):
- Regulators will make expenses on children under three years old tax-deductible during an upcoming revision of the Personal Income Tax Law.
But this is what really caught our eye: The document promised to ensure “educational equity” and “balanced development of compulsory education” while “strictly regulating off-campus training.”
ICYMI: There’s been a major policy push this year to reduce the costs and stress associated with getting kids educated.
It has included:
- Restrictions on private tutoring companies
- A push to reduce enrollment in private elementary and middle schools
- A crackdown on property market speculation in elite school districts
Get smart: In the short term, income tax breaks might get prospective parents feeling frisky.
Get smarter: Addressing costs and equitable access to education will be extremely difficult – but it increasingly looks like Beijing means business.
4. LKQ, the math guy
Back to basics, folks.
On Monday, Premier Li Keqiang met with experts from the National Natural Science Foundation of China (NSFC).
Some context: Directly affiliated under the State Council, the NSFC is the main channel for funding the country’s basic research.
Li’s message: Double down on basic research to boost innovation (Gov.cn):
- “We have reached a critical point to scream for more basic research.”
- “In fact, many ‘bottleneck’ issues in tech are ultimately stuck in basic research.”
What to do? Li told everyone to take math more seriously.
Don’t forget: “Mathematics is the foundation of science.”
So… “We need to increase the quality of education on basic science.”
Li also promised to:
- Use tax incentives to encourage companies to do more basic research
- Subsidize researchers in cutting-edge work
- Streamline the process of making and reviewing budgets for scientific projects
Get smart: Nurturing better basic research (and world-beating science) is a long-term endeavor.
Get smarter: There’s only so much Beijing can do to widen this bottleneck.
5. Tech bounty
On Tuesday, Yicai pulled together a list of 26 R&D projects that the Ministry of Science and Technology has added to its new innovation program in recent months.
Some context: The new program – dubbed the “accepting the bounty and taking charge” reform – was touted by policymakers in the 14th Five year Plan as THE big thing to realize the country’s ambition for tech self-sufficiency.
- As its name suggests, the program is designed to incentivize the most capable researchers, in public institutions or private companies, to work on “core technologies.”
Subsidies worth RMB 2.67 billion will be allocated to these 26 R&D projects, which include:
- High-end scientific equipment and materials – mostly related to semiconductor technologies
- Medical devices
- mRNA vaccines
- New energy vehicles
- Rare earth elements
Get smart: The list basically lays out which technologies China needs the most.
Get smarter: Pay attention at the back! The core idea of this program is to build a results-driven R&D system.