1. PBoC jumps on the common prosperity train
“Common prosperity” is all the rage in Beijing these days.
Some context: The Party has promised for decades that it would achieve common prosperity for all Chinese – but has done little to actually get there.
More context: That’s all changing after an August 17 meeting of the Party’s top economic policy body (CCFEA), at which Xi Jinping declared that promoting common prosperity is now at the heart of his economic agenda.
In the wake of the CCFEA meeting, Party-state institutions have been scrambling to show that they are on board with Xi’s agenda.
The PBoC is no exception.
On Friday, the central bank held a meeting of its Party committee. At the meeting, the PBoC declared that:
- “[We must] make promoting common prosperity the starting point and focus of all of our financial work.”
Okay, cool. But what does that mean in practice?
For now, it appears to mean very little. The readout from the PBoC’s Friday meeting simply reiterated a bunch of policy priorities that will be very familiar to PBoC watchers, including:
- Maintaining reasonably sufficient liquidity
- Keeping the macro leverage ratio stable
- Making sure finance serves the real economy
- Supporting smaller businesses
- Protecting against financial risks
- Ensuring that the financial system aids in rural development
Get smart: For now, the common prosperity push will have little to no effect on monetary policy.
2. State Council gives business a break
File this one under boring but impactful.
On Tuesday, the State Council dropped a regulation on the registration and administration of market entities.
- The reg governs registration and deregistration of ALL businesses.
Some context: The new reg consolidates and rationalizes rules on business registration scattered across other regulations.
Most of the reg is operational, including sections on registration procedures and dossier requirements.
It will affect millions of businesses every year.
More context: China saw close to 24 million new businesses registered in 2020.
The reg codifies the streamlined procedures for business registration underway since 2013 (Gov.cn):
- These require less documents, for a faster, more convenient process.
You may be surprised that market exit was the bigger problem.
- To cut time and costs, the reg sets up a fast track process for entity deregistration.
And businesses are allowed to take a break for the first time:
- A business can suspend operation for up to three years, while retaining their legal entity status, if they hit trouble due to natural disasters or other external events.
Get smart: We can talk about many other business environment problems. But the administrative requirements for business registration and deregistration have definitely improved.
Get smarter: We call it a win for Premier Li and his mission to cut red tape.
3. Xi sees the sights in Chengde
On Tuesday, Xi Jinping kept living it up in northern Hebei.
Xi spent the day in Chengde, a popular tourist spot and prefectural-level city just north of Beijing, visiting:
- The Chengde Mountain Resort – a complex of palaces and gardens used as a summer retreat by Qing dynasty emperors
- Puning Temple – nicknamed the “Big Buddha Temple”
- Chengde Museum – a new facility (2019) with Tibetan elements
- A village market
- A community-based service center for elderly home care
And…that’s about all we know from the snippets of reporting out so far.
Get smart: These inspection tours are meticulously planned – and every visit listed above sends a message about Xi’s areas of focus.
The quick rundown: Topics covered during this Hebei tour to date:
- Ecological civilization
- Green economy
- Religious affairs
- Ethnic unity
- Rural vitalization
- Elderly care services
Get smarter: No surprises here. These are all classic Xi policy initiatives. Expect more detail in the days to come.
4. The only way is Dongbei
Hey, old timer.
On Monday, Premier Li Keqiang presided over a meeting of the State Council Leading Group for Revitalizing the Northeastern Region and Old Industrial Bases.
Some context: Northeastern China, namely the provinces of Jilin, Liaoning, and Heilongjiang, was China’s main industrial hub during the Mao years.
- In subsequent decades, economic reform and the decline of the state-owned economy turned the region into an economic backwater.
- In 2003, Beijing adopted the Northeast Area Revitalization Plan.
Li had thoughts on how to turbocharge the region over the next five years, including:
- Improving the business environment by cutting taxes and fees
- Developing a coastal economic belt to capitalize on foreign trade
- Constructing national grain bases in the region
Li also called for (Xinhua):
- “Deepening the reforms of state capital and state-owned enterprises.”
More context: Last week, the State-owned Assets Supervision and Administration Commission announced a new program promoting cooperation between 111 northeastern SOEs and 100 central government SOEs, to enhance resource sharing and promote industrial integration.
Get smart: The central leadership has been trying to help out the northeast for 20 years. They’ve failed. This meeting doesn’t look like it’s going to change much.
5. Shanghai ed bureau tells kids to chill
On Tuesday, the Shanghai Municipal Education Commission issued the Implementation Opinions on Further Reducing Students’ Homework and After-school Training Burdens During the Compulsory Education Stage.
That’s a mouthful. But listen up, kids.
Some context: On July 24, the Party Central Committee and the State Council released a document laying the groundwork to essentially eliminate China’s for-profit education sector, and, generally make life easier for schoolkids.
More context: “Implementation Opinions” are how local governments put Beijing’s high-level policies into practice.
Shanghai’s document lists six key action points:
- Reduce the total amount and duration of homework, including a 90-minute daily maximum for middle school students
- Improve schools’ after-school service levels, such as offering free online learning
- Standardize off-campus training, including strict limits on training time
- Improve the quality of education and teaching
- Integrate and utilize on- and off-campus resources
- Strengthen governance and supervision
Get smart: Shanghai has long been the epicenter of China’s intensely competitive education culture. If Shanghai can change, so too can the rest of the country.
Catch that “if?”: The letter of the law may have changed, but has the intensely competitive environment?
- We anticipate the emergence of creative workarounds as these rules go into effect.
6. CII metrics remain murky
On Tuesday, the State Council held a press conference addressing questions on last week’s new regulations for Critical Information Infrastructure (CII).
Some context: CII is important network equipment that could pose a danger to national security if hacked or damaged.
More context: There are currently no clear metrics for determining which networks will be designated as CII.
- Since companies have no way to determine if their networks will be given CII status, it is difficult for them to get a head start on compliance.
Sad trombone: The presser failed to shed any more light on the issue, although it did indicate that regulators are gearing up to formulate specific rules for identifying CII.
One thing we do know: Networks owned by both foreign companies and Chinese companies will have an equal chance of being identified as CII. According to Sheng Ronghua, deputy director of China’s cyber security watchdog (Gov.cn):
- “The identification of CII will not take types of business ownership into account.”
Oh goodie: It’s reassuring that foreign companies will not be singled out.
- But that doesn’t make the potential compliance burdens any less burdensome.
Sheng also reiterated that:
- If companies with CII status want to list overseas, they must comply with domestic laws and regulations first.
Get smart: ForChinese companies, pursuing overseas listing before CII regulations are solidified is a dangerous game.