1. Vaccination campaign picks up speed again
Over the past week, China’s vaccination drive has shown signs of picking up speed again, after losing momentum at the beginning of July.
- As of Monday, China had administered a total of 1.56 billion vaccine doses – up from 1.47 billion doses a week ago.
Let’s do the math: That means last week’s daily administered doses averaged 14.08 million.
Some context: Although that performance still lags behind the record-breaking 20 million doses administered daily at the end of June, it is significantly higher than the 10 million-ish daily doses seen in the past two weeks.
Get smart: Getting jabs into people’s arms is an achievement – but vaccination isn’t 100% effective as an epidemic prevention tool.
- The outbreak that started in Nanjing last Tuesday has as of writing infected 98 individuals in five provinces.
- Last Thursday, a medical expert fighting the epidemic in Nanjing told reporters that all but one infected individuals were vaccinated.
Get smarter: China currently employs a “zero tolerance” policy toward COVID-19 cases, initiating overwhelming local containment measures in the event of even one positive test result.
- At some point, if China were to fully reopen its borders, leaders in Beijing will need to shift their position and tolerate a handful of positive cases in the country at any given time.
- That’s due to the imperfect nature of the vaccines, and the various mutations of the COVID-19 virus.
Go deeper: Check out our thinking in our macro-policy note to paid clients: China Vaccination Campaign Update: Now the Long Grind.
2. Little guys vs big guys
On Tuesday, China’s economic tsar, Vice Premier Liu He, gave a speech via video at a summit of innovative small and medium-sized enterprises (SMEs).
Some context: “Innovative SMEs,” in this case, refers to firms that are specialized in niche areas and considered indispensable in industrial chains.
More context: Policymakers are trying to help these SMEs to flourish in order to secure China’s supply chains and limit disruption from overseas.
Liu conveyed these messages (MIIT):
- SMEs are critical to China’s innovation drive.
- The government should foster an environment in which SMEs can grow.
But what really stood out to us was his implicit reference to the tech crackdown:
- “The new stage of development requires us to balance the relationship between (economic) development and security.”
- “[That balance serves] to protect fair competition, promote the healthy and orderly development of capital, [and] protect the interests of consumers.”
- “This creates a good environment for SMEs as well.”
Get smart: Liu is the most senior official to date who has publicly talked about the crackdown (okay, kind of talked about it).
Get smarter: Policymakers are not on a mission to crush China’s tech sector. Rather, officials want to rein in big tech’s monopolistic behavior, poor treatment of employees, and data misuse.
3. Hainan gets negative list for service sector
At your service! (Just not in this, this, and this.)
On Monday, the State Council released China’s first negative list for market access in the service sector – covering the Hainan Free Trade Port.
- The list stipulates which service sector business activities remain no-go, or have additional requirements, for foreign businesses.
It limits foreign service companies in 70 areas across 11 industries, including stuff like:
- Operating financial institutions, brokerages, and securities consulting businesses without domestic licenses
- Providing notary services, unless the company meets all required domestic qualifications
As for concrete benefits to the international service sector, the list (Global Times):
- “Eases restrictions in areas…such as legal services and market research…[and] also lifts limits on more than 10 vocational exams for overseas citizens.”
Vice Minister of Commerce Wang Shouwen insists it’s a big deal:
- “This goes beyond China’s commitments for WTO accession and its main free trade agreements.”
Get smart: In the short term, the new list doesn’t appear to do a whole lot for foreign businesses.
Get smarter: By making clear exactly what is off-limits, negative lists make it easier to chip away at market access barriers over time.
What to watch: Expect similar lists to be rolled out in other free trade zones.
4. Assessing the damage
On Monday, Premier Li Keqiang chaired a video conference at the State Flood Control and Drought Relief Headquarters in Beijing.
In attendance were key figures from flood and typhoon-stricken provinces, including:
Some context: Devastating levels of rainfall have killed scores and displaced millions – particularly around Zhengzhou, Henan’s provincial capital.
More context: It looks like there’s more nasty weather headed for China’s eastern seaboard in the coming days.
Li called to improve:
- Rain and flood forecasting
- Early warning and response mechanisms
- Public awareness
Li also promised to open up government coffers (Gov.cn):
- “We will promote the recovery of production as well as post-disaster reconstruction, immediately utilize central reserve funds, allocate billons of RMB to severely affected areas, and increase support according to local context.”
- “Local governments should also make use of special funds.”
Get smart: The government is going to spare no expense on the post-flood recovery.
Get smarter: That spending will pale in comparison to the wide-ranging disaster prevention and preparedness programs that are a sure bet once the water subsides.
5. Here’s an itemized list of several years of disagreements
On Monday, US Deputy Secretary of State Wendy Sherman held talks in Tianjin with her Chinese counterpart Xie Feng.
It didn’t go great:
- The summit reminded us of March’s rancorous meeting between top US and Chinese officials in Alaska.
Xie set the tone for the meeting by handing Sherman two lists.
The first list demanded that the US:
- Lift visa restrictions on Party members and Chinese students
- Stop suppressing Chinese companies
- Stop registering Chinese media organizations as foreign missions
- Drop the extradition case against Meng Wanzhou
The second list expressed Beijing’s specific concerns overissues including:
- Unfair treatment of Chinese nationals and diplomats in the US
- Growing anti-Chinese sentiment in the US
Xie also told Sherman that mutual respect was a prerequisite for cooperation on specific topics like North Korea, and climate change.
- “The US…cannot expect cooperation on one hand and to hurt China’s interests on the other. This won’t work.” (SCMP)
- “It seems that a whole-of-government and whole-of-society campaign is being waged to bring China down.” (Straits Times)
Get smart: The pageantry of giving the other guy what-for is now a central feature of US-China summits.
- As with the Alaska meeting, though, we expect more substantive discussions happened behind the scenes.
6. And another thing!
US Deputy Secretary of State Wendy Sherman also met with Xie Feng’s boss, Chinese Foreign Minister Wang Yi, on Monday in Tianjin (see entry #5).
Wang wasted no time broaching thorny topics, listing China’s red lines, and telling Sherman that the US must not:
- Challenge or subvert China’s model of governance
- Interfere in China’s development
- Violate China’s sovereignty or territorial integrity
Wang also had words for US President Joe Biden (Xinhua):
- “The new U.S. administration has…continued its predecessor’s extreme and erroneous China policy, constantly challenged China’s bottom line, and stepped up containment and suppression on China.”
- “The great rejuvenation of Chinese nation…cannot be held back by any force or country.”
To improve strained ties, Wang said the ball remained in the US’s court:
- “The U.S. side [must] make correct choices as to whether the bilateral ties will head to confrontation or improvement.”
Finally, Wang said China wanted coexistence over conflict, saying the two countries should:
- “Find a way for two major countries with different systems, cultures and stages of development to coexist peacefully on this planet through dialogue.”
Get smart: China has repeatedly called for better ties, but refused to take any responsibility for deteriorating ties.
Get smarter: The chance of compromise on any major bilateral issue is still slim to none.
7. China challenges the EU’s great green wall
China is not happy about the EU’s Carbon Border Adjustment Mechanism (CBAM) plans. And said so again on Monday.
Important context: The CBAM, now under deliberation, would charge an “adjustment” on emissions-intensive imports from countries with lower emission standards than the EU.
- It’s a way to prevent “carbon leakage,” making sure EU producers can’t simply offshore to skirt regulations at home.
On Monday, China’s environmental regulator denounced the CBAM, calling it unilateral and a violation of WTO rules, and adding:
- “It is an unprincipled extension of the climate issue to the domain of trade.”
Why it hurts: China is the world’s top manufacturer of emissions-heavy, industrial raw materials such as cement and steel.
Get smart: Concern over unfair trade barriers is widespread.
- The UN and WTO, along with the US, Russia, and most other EU trading partners, have all voiced similar concerns.
Get smarter: But trade is unquestionably key to the climate challenge.
- Emissions embodied in trade pose a serious threat to emission reduction efforts – one that China will also have to tackle if it wants to be a climate leader.