1. Nanjing outbreak spreads to the capital
The Nanjing COVID-19 outbreak that began last Tuesday is getting worse –a lot worse.
On Wednesday, China reported (NHC):
- 24 new domestically transmitted symptomatic cases – down from 55 the day before.
- Two new domestically transmitted asymptomatic cases – up from one the day before.
How is that worse?
- The daily incremental cases may be smaller, but the infections have spread to 13 cities in seven provinces and more than 200 individuals.
Some context: Of the 26 total new infections reported on Wednesday, there were:
- 18 in Nanjing, Jiangsu
- Two in Yangzhou, Jiangsu
- Three in Chengdu, Sichuan
- One in Luzhou, Sichuan
- One in Changde, Hunan
- One in Beijing
How the infection was spread to Beijing is concerning:
- The infected individual in Beijing returned from Zhangjiajie, Hunan – a famous tourist spot – on Sunday.
- His wife was confirmed to be the second COVID-19 case in Beijing Thursday afternoon, just before we went to press.
They’re not alone:
- So far, 15 infected individuals across China had recently travelled to Zhangjiajie for tourism.
- Contact tracing has identified an indoor show held at Zhangjiajie last Thursday night to have been a high-risk event.
- The show’s attendees have mostly left the tourist spot and returned to their home cities.
Things are tense in Beijing:
- Nine residential compounds have already been put under lockdown, affecting more than 41,000 people.
Everybody is expecting more cases in Beijing. That’s because infected couple traveled on the Beijing subway on their way home on Sunday, making two transfer stops along the way.
Get smart: Things might be about to get bad.
2. Child support from big brother
On Wednesday, Panzhihua – a city in Sichuan province – became China’s first city to announce direct subsidies for families that have two or three children.
- Parents can claim RMB 500 per child per month for their second and third kids.
- Kids under three years old are eligible for the subsidies.
Some context: In 2019, average monthly income in urban Panzhihua was under RMB 3500 per person – and in rural areas, that figure was around RMB 1500.
- RMB 500 per child will go a long way.
Local officials hope the payments will rescue Panzhihua – an aging steel hub –from demographic collapse.
- The target is to expand the population to 1.5 million (from 1.21 million) by 2025.
More context: The 2020 census highlighted China’s rapidly aging population and precipitously low birthrate – and Panzhihua was no exception.
- Its population fell by 1,900 people over the past decade.
- The number of citizens under 14 years old shrank by 2.78%.
- And the share of people over 60 grew fast.
Get smart: Panzhihua may be the first city to announce such subsidies – but it won’t be the last.
Get smarter: We don’t expect this kind of subsidy to go national – they’ll be rolled out based on local demographic conditions and fiscal budgets.
3. Orderly expansion of capital
On Wednesday, Fang Xinghai, vicechairman of the China Securities and Regulatory Commission (CSRC), sat down for a virtual crisis management session with execs from a bunch of big foreign banks.
The reason: The CSRC is worried about foreign capital exiting China en masse in the wake of the crackdown on education technology listcos and big tech more broadly.
Some context: Beijing has been scrambling – through op-eds in state media and meetings like the one Fang held on Wednesday – to assure investors that regulators are only coming after a few sectors and that the opportunities in Chinese markets dwarf the risks (see next entry).
Details from the meeting are sparse, but attendees told Bloomberg that the gist of Fang’s message was:
- Recent policies are aimed only at the edtech sector and won’t spill over to the rest of the market.
The bigger gist: The government wants investors – domestic and foreign – to channel their investments into high-priority development sectors.
Get smart: Investors should steer way clear of sectors that might draw Beijing’s ire.
The rub: Knowing which sectors to avoid isn’t always clear.
Get smart: Asking foreign investors to channel their cash toward specific policy objectives isn’t a feasible long-term strategy.
- First, investors don’t like being told where (and where not) to put their money.
- Second, if foreign investors are seen as aiding China’s industrial policy goals, Western governments are likely to take action at some point.
4. MoE wants Michelle Pfeiffer, not Cameron Diaz
On Wednesday, the Ministry of Education (MoE) launched a nine-month crackdown on “bad” teachers at public schools.
Some context: This campaign follows a Party policy document over the weekend on reducing educational burdens. The document delivered a death blow to many private tutoring companies and will reorder the whole industry.
More context: The measures cracking down on private tutors have dominated the headlines. But most of the policy document focuses on expanding and improving public schools.
The MoE wasted no time acting on it – by punishing bad actors.
Bad actors include teachers: (MoE)
- “Teach[ing] only after classes [for extra fees] but not during classes”
- Taking a part-time job at private tutoring companies
Get this: These problems have existed for years, despite multiple government efforts to root them out.
Get smart: Their persistence points to a fundamental issue – public education resources are in short supply and underpriced.
Get smarter: Eliminating private education will not necessarily make public education better.
5. Our (new) man in Washington
On Wednesday, former Vice Foreign Minister Qin Gang landed in Washington to take up the post of China’s ambassador to the United States.
A little about Qin:
- A fluent English speaker, he has little professional experience dealing with the US, having spent most of his career focused on UK and Western European affairs.
- Head of protocol in recent years, he’s seen as a Xi Jinping confidant after accompanying the big man on several trips abroad.
- Previously a foreign ministry spokesperson, Qin is credited with pioneering a more assertive tone for China’s diplomats as they counter Western criticism.
Despite Qin’s record as an implacable defender of China’s interests, his comments to the press upon landing were downright conciliatory (Chinese Embassy in the US):
- “The China-U.S. relationship…[faces] not only many difficulties and challenges but also great opportunities and potentials.”
- “I look forward to working [with US partners] to…uphold the shared interests of the two peoples, and endeavor to bring China-U.S. relations back on track.”
Get smart: At a time of increasing American pressure, Beijing wants somebody trusted, tough and smart on the ground in Washington.
Get smarter: We expect Qin, 55, to be significantly more strident than his predecessor, Cui Tiankai, 68.
6. LKQ backs off to back up scientists
On Wednesday, Premier Li Keqiang chaired the weekly State Council executive meeting. As he does.
Top of the agenda: Excitement! Specifically, the meetind discussed how to make scientists feel excited about doing science.
The problem: The government has been too hands-on regarding use of the R&D funds.
One issue that has really upset the scientific community is the jailing of scientists for “misappropriating” funds. Many researchers claim that they had to break the rules, which were overly restrictive, just to get their work done.
Li wants to give scientists more money and power. As follows:
- Give top scientists more autonomy to determine research scope and budgets
- Give researchers more flexibility to adjust budget allocation
- Increase performance-based compensation for researchers
- Speed up the disbursement of R&D funds
Get smart: Beijing knows better R&D lies at the heart of boosting China’s technological capabilities. The government is committed to clearing the roadblocks.
7. When it comes to your face, the Supreme Court’s got your back
On Wednesday, China’s Supreme People’s Court (SPC) issued judicial regulations on civil cases involving facial recognition.
Some context: Judicial regulations are legally binding instructions on how courts should hear and try cases relevant to specific laws.
More context: China’s use of facial recognition technology has proliferated in recent years, from vending machines to apartment complex security gates. And, no, masks can’t hide you.
This speedy adoption has resulted in a pandemic of personal information abuse. The more egregious issues include:
- Online platforms forcing users to consent to face scans
- Buying and selling of facial and biometric data online
- Property managers requiring residents to submit to facial recognition to enter buildings
- Stores using facial recognition to profile and market to customers without consent
Back off! China’s increasingly privacy-savvy citizens are starting to take complaints to court:
- The first facial recognition case concluded in April – and the plaintiff won!
The SPC’s new regs clarify that courts should find in favor of:
- Residents suing property managers who won’t provide alternative building access methods
- Users suing platforms that force them to submit facial data
- Individuals who sue platforms to delete their facial data
Get smart: Beijing is getting serious about data privacy, but regulators don’t have the manpower to address every case.
- The SPC regs encourage individuals to defend themselves.
agriculture and rural affairs
8. How the sausage is made
R&D wasn’t the only thing on the agenda at the weekly State Council executive meeting (see entry #6).
A pig…uh…big part of the agenda: PremierLi Keqiang devoted ample meeting time to discussing measures to stabilize the pig farming sector.
ICYMI: Pig farmers have had a hell of a few years.
- African swine fever (ASF) wiped out about half the national pig herd in 2018 and 2019.
- As farmers learned to manage the disease, the pig population rebounded.
- Now, pork prices have collapsed – and most pig farms are making losses.
This caught our eye in the meeting’s readout:
- “It is necessary to follow economic laws and use more market-oriented methods to ease fluctuations in the ‘pig cycle.’”
That’s weird: Regulators have been working against the market to prop up pork prices through reserve purchases for the last month.
What gives? The State Council elaborated that they want to see more preferential fiscal, finance, and land use support to pig farms.
Then they listed some stuff they don’t want to see, including:
- Financial institutions cutting off loans to, and calling in loans from, pig farming companies
- Local governments randomly expanding zones where livestock production is banned
Get smart: Financial institutions were all too happy to loan to pig farming companies when pork prices were at record highs – but now that times are tough they’re apparently a little less enthusiastic.
- That sounds pretty market-oriented to us.
Get smarter: Pork reserve purchases are yesterday’s strategy – cheap land and fixed lines of credit are next on the agenda for propping up piggies.