1. Ministries push more support for brick-and-mortar businesses
On Thursday, six administrative agencies issued a notice calling on financial institutions to better support offline businesses.
The issuing agencies:
- The People’s Bank of China
- The Ministry of Commerce
- The Ministry of Finance
- The State Taxation Administration
- The State Administration of Foreign Exchange
- The Banking and Insurance Regulatory Commission
Specifically, they want to direct help to businesses engaged in:
- Offline retail
- Foreign trade
Some context: While some sectors of the Chinese economy have emerged from their post-COVID slump, these industries have continued to struggle.
- Strict lockdown measures to quash sporadic outbreaks have worked from and epidemiological perspective.
- But they’ve hurt from an economical perspective.
That’s why Beijing wants to give companies in these sectors a fighting chance. Thursday’s notice calls on financial institutions to:
- Strengthen inclusive finance services and make use of government financing guarantees to increase credit
- Refrain from cutting credit lines or withholding financing without sufficient reason
- Make adequate use of export credit insurance
- Increase awareness around exchange rate risk
- Consider reducing hedging costs for small and micro enterprises
Get smart: As long as offline retail and export companies continue to struggle, employment growth will lag behind the broader economic recovery.
Get smarter: Regulators have repeatedly leaned on financial institutions to help struggling businesses.
- The fact that they’re doing it again suggests these sectors still aren’t getting the help they need.
2. A pie maker not a goose killer
Rich folk calm down.
On Thursday, Han Wenxiu, Vice Premier Liu He’s right-hand man on econ policy, used a presser to explain a bit more about the Party’s efforts to achieve “common prosperity.”
Some context: Achieving common prosperity is all about reducing inequality. On August 17, the Party’s top economic policymaking body discussed a broad roadmap to achieve common prosperity, signaling that efforts on this front are set to accelerate.
More context: The August 17 meeting freaked out China’s rich and business elites..
Han tried to reassure them.
This isn’t about government handouts, according to Han: (12371.cn)
- “We won’t raise lazy people.”
Growing the pie remains the priority:
- “The ultimate path to common prosperity is to work hard together.”
- “[We would] encourage getting rich through hard work and innovation…and allow some people to get rich first.”
- “Those getting rich first should help the rest to get rich later. [But]We will not ‘kill the rich to help the poor’.”
Officials have said that “tertiary distribution,” i.e. having the rich donate more to charity, would play a major role in the common prosperity push.
- Han promised China’s wealthy that giving to charity will not be compulsory.
- But the government will encourage charitable giving via tax incentives.
Get smart: The Party wants go grow its cake and share it too.
3. Don’t forget, we’re here to serve
On Thursday, the Central Propaganda Department released an important new doc outlining the Party’s mission and contributions.
As you’d expect, it’s a riveting read.
Party leadership has been central to the success of the people’s republic (Xinhua 2):
- “It is the [CCP’s] solidarity and unity, its firm leadership, and its strong governance capability that have rallied and united hundreds of millions of the Chinese people and overcome a multitude of difficulties and crises.”
That’s because the Party exists to serve the people.
- “Of the people, by the people, for the people – this is what has guided the [CCP] from victory to victory over the past century.”
It’s also because the Party got some good practices going, by:
- Insisting on strong centralized leadership
- Practicing strict self-discipline and seeking self-improvement
And what was all this hard work for?
Why, the rejuvenation of the Chinese nation of course.
Here’s what to expect going forward:
- “The [CCP] will…overcome any obstacles and break any shackles hindering common prosperity, equity and justice.”
Get smart: The central leadership remains convinced that the happiness and well-being of the Chinese people go hand in hand with leadership by the Party.
- This doc is about ensuring everybody else makes and remembers that connection.
4. The greater good
At his presser on Thursday (see entry #2), Han Wenxiu was also keen to clear up confusion around China’s anti-monopoly crackdown.
In case you’ve been living under a very large rock: Regulators in Beijing have been on a mission to constrain the market dominance of China’s tech behemoths for months now.
Han said that the crackdown is for the greater good, and aimed at:
- Promoting fair, market-based competition
- Creating development space for “all kinds of companies”, especially SMEs
- Protecting the rights and interests of consumers
Besides, Han said, everybody’s doing it (Yicai):
- “Over the past few decades, the US, Europe, and other countries have consistently pushed anti-monopoly measures.”
- “Strengthening the supervision of internet platforms and other large technology companies in an effort to prevent monopolies and disorderly expansion of capital is a problem all countries are exploring solutions to.”
Han also sought to reassure jittery foreign investors in light of the swift and far-reaching crackdown, saying that China would:
- Unswervingly promote high-level opening up
- Earnestly implement the Foreign Investment Law
- Protect property and intellectual property rights
- Enhance policy transparency and predictability
Get smart: Han’s argument vis-à-vis creating a fairer market environment checks out with us.
The big money question: Where are investors’ interests aligned with Beijing’s?
5. 996 is still illegal, everyone!
On Thursday, China’s supreme court (SPC) and labor regulator (MoHRSS) reminded companies that “996” is illegal.
Some context: 996 – 9am to 9pm, 6 days a week – refers to the brutal working hours common at Chinese Internet companies.
- Public criticism of 996 really heated up in December when a Pinduoduo employee died due to overwork.
To help workers understand their labor rights, the SPC and MoHRSS published some example legal cases:
- The document detailed ten successful labor dispute lawsuits won by employees and unpacked the legal basis behind the verdicts.
Get smart: Authorities are encouraging workers to take their employers to court for labor abuse.
Internet giants smelled this coming:
- Since June, Tencent, Kuaishou, and ByteDance have started rolling back tough working conditions.
Get smarter: Just about every Chinese tech employee complains about their long working hours, but they also “voluntarily” work these hours to hit KPIs.
- The incentive structure is forcing tech employees to not only out-compete other companies but also their peers within the company.
- 996 may not be legal on paper, but it won’t disappear in practice.
The big picture: Beijing’s voice on labor rights protection is getting pretty loud recently.
- Expect more actions to come.
6. Getting high is not allowed
This has got to stop.
On Thursday, Executive Vice Premier Han Zheng called on officials to snuff out the “two highs”: high energy-consuming, high-emission projects.
Some context: On Wednesday, the Ministry of Ecology and Environment (MEE) announced it had dispatched seven environmental inspection units with a clear focus on scrutinizing high-energy, high-emission projects.
- The teams report directly to Han.
Han ordered curbs against “blind development” of such projects, and strict management of existing projects:
- He called for investigations into projects built in violation of regulations
- And punishments for companies that launched projects without proper approval
More context: In May, the MEE issued guidelines ordering its local bureaus to tighten their management and approval of “two highs” projects.
Get smart: It will be interesting to see what effect Han’s warnings have. Traditionally, local officials have always prioritized economic growth over environmental concerns. But that is changing as Xi Jinping makes achieving China’s climate goals a high political priority.
agriculture and rural affairs
7. Paying for rural development
The central bank (PBoC) wants financial institutions to do more to finance rural development.
- That was the takeaway from a meeting on Thursday between the PBoC, Ministry of Agriculture and Rural Affairs, and Ministry of Finance.
Some context: Around 38% of China’s population still lives in rural areas – that’s over 500 million people.
- But rural financial services lag behind those in urban areas, and rural commercial banks represent only around 12% of the banking system’s total assets.
- Small and medium-sized businesses in villages and townships struggle to secure the credit needed to grow.
The meeting’s readout resolved to address these problems, by:
- Improving basic rural financial infrastructure, like payment and rural credit reporting systems
- Ensuring rural financial institutions (FIs) are focused on serving local small businesses, rather than looking further afield for more lucrative clients
The PBoC also promised a bunch of support measures, including these familiar incentives:
- Offering rural banks preferential re-lending, re-discounting, and deposit reserve ratios
Okay, all sounds pretty standard.
You want to know what really caught our eye? A call to deploy government-held agricultural data to help FIs make credit decisions.
- Pilots of this approach, underway in Heilongjiang province, allow banks to verify loan applicants’ claims to hold collateral like farmland use rights and agricultural equipment.
Get smart: This is a great example of how “public data” can be repurposed as a catalyst for development in places where credit records are lacking.
Get smarter: Improving financial services in rural areas could kickstart development and unlock a vast new market for FIs themselves.