1. Expect austerity in H2
All signs point to more austerity in H2.
On Wednesday, the Standing Committee of the National People’s Congress reviewed a budget execution report from the Ministry of Finance (MoF).
This will make the budget hawks happy:
- From January to July, government revenue totaled RMB 13.77 trillion, up 20% y/y
- Across the same period, government expenditure totaled RMB 13.79 trillion, up 3.3% y/y
According to the report, work for H2 will focus on six areas:
- Improving policy effectiveness
- Controlling spending
- Improving fund management and monitoring
- Resolving local government debt risks
- Reforming the fiscal and taxation systems
- Strengthening financial and accounting supervision
A key theme: The government is looking to tighten its belt.
Beijing has been pretty clear of late that it’s not looking to open the fiscal taps:
- The Politburo’s July meeting was clear that there would be no additional government spending in H2.
- On Wednesday, the Chinese Academy of Fiscal Sciences – the MoF’s think tank – advocated for less government spending in its annual blue book on China’s fiscal policy.
Get smart: With no new spending planned, the upside for growth in H2 is capped.
2. Authorities urge SOEs to innovate
On Thursday, the Party Committee of the State-owned Assets Supervision and Administration Commission (SASAC) got together to discuss priorities.
Quick refresher: SASAC, established in 2003, oversees most of China’s centrally-owned non-financial state-owned enterprises (SOEs). It’s responsible for:
- Drafting SOE-related legislation
- Appointing top execs
- Approving mergers
- Generally making sure the state-owned sector runs smoothly
At the meeting, the commission vowed to do a whole bunch of things, including:
- Optimize the layout of state-owned capital
- Strengthen financial supervision of SOEs
- Elevate the position of science and tech innovation
- Promote central SOEs to more actively integrate into the national research system
- Encourage SOEs to shoulder the responsibility of “supply chain leader”
- Clarify SOEs’ path toward achieving China’s carbon goals
- Focus state capital on strategic emerging industries
The “emerging industries” mentioned were:
- Industrial machinery
- High-end chips
- Advanced materials
- New-energy vehicles
Get smart: Beijing is pressing SOEs to help China hit its ambitious goals vis-à-vis climate and tech self-sufficiency.
What we’re wondering: How much space is there for the private sector in those plans?
3. Seeing as you’re here…
On Wednesday and Thursday, Foreign Minister Wang Yi made calls to:
- British Foreign Secretary Dominic Raab
- Pakistani Foreign Minister Shah Mahmood Qureshi
- Turkish Foreign Minister Mevlüt Çavuşoğlu
Guess what was on his mind?
Wang wants the Taliban to step up:
- “[W]hat will happen next [in Afghanistan] depends on the policy of the Afghan Taliban.” (MoFA 1)
- “[T]he Afghan Taliban needs to make a clear break with all terrorist forces and…crack down on the international terrorist organizations.” (MoFA 2)
But he also emphasized that stability and non-interference should be a priority:
- “[T]he Afghan people yearn for stability and do not want another war or chaos.” (MoFA 1)
- “[T]he international community should encourage and guide it in a positive direction, instead of exerting excessive pressure.” (MoFA 1)
Wang said China was there to lend a hand:
- “[China will] strengthen communication and coordination under the current circumstances and play a constructive role in supporting Afghanistan’s stable transition.” (MoFA 3)
Get smart: Beijing isn’t psyched that the Taliban is back in power. But Chinese leaders want to stay relevant by keeping communication open and cooperation on the table.
Get smarter: Looks to us like China is laying the groundwork to recognize the new Taliban government.
4. Li’s here to help
On Thursday, Premier Li Keqiang convened a special meeting on disaster recovery in Henan province.
Among the attendees were:
- State Councilors Wang Yong (head of the national natural disaster relief committee), and Xiao Jie, Li’s chief of staff
- Henan Party Secretary Lou Yangsheng and Governor Wang Kai
ICYMI: Li spent the last few days touring Henan to inspect recovery efforts from catastrophic flooding in late July. Over 300 people died as a result of the flooding.
What he saw: Li’s itinerary included a flood-hit village, damaged infrastructure and the site of a deadly flash flood in the Zhengzhou city subway.
Li told local officials they must make progress on an arduous recovery task list, including:
- Planning reconstruction of hard-hit areas
- Shoring up agriculture and getting fall crops in the ground
- Repairing flooded schools and hospitals
- Getting companies back to work
- Fixing infrastructure so future floods do less damage
But never fear, Beijing will also lend a hand (Gov.cn):
- “Central reserve funds and other fiscal and financial policies will provide strong support.”
Get smart: Henan leadership is now under a huge amount of pressure to explain how such devastation happened – and how they can prevent it from happening again.
5. Fifth Expo’s a charm
On Thursday, Xi Jinping sent a congratulatory letter to the Fifth China-Arab States Expo, highlighting the “traditional friendship” between the regions.
Some context: The China-Arab States Expo is a four-day, China-hosted event featuring trade fairs and forums on a range of economic and environmental issues.
- It opened on Thursday, with both online and in-person elements, in Yinchuan, Ningxia.
That “traditional friendship” certainly has its benefits:
- As Xi noted, China remains the region’s largest trading partner.
But Xi is ever the Casanova:
- Never resting on laurels, Xi made clear he’s looking to take economic relations up a notch through expanded Belt and Road cooperation.
Get smart: In addition to economic cooperation, China is also using some vaccine diplomacy to win friends in the Middle East.
- China has so far exported 72 million vaccine doses across the region.