1. A new exchange for Beijing
On Thursday, Xi Jinping said China would set up a new stock exchange in Beijing dedicated to small and medium-sized firms (SMEs).
Speaking at the China International Trade in Services Fair, Xi said that:
- The Beijing Stock Exchange will create a platform for innovative SMEs
- The authorities will also further deepen reform of the National Equities Exchange and Quotation (NEEQ) board
In a statement following Xi’s speech, the China Securities Regulatory Commission (CSRC) said that certain innovative firms currently listed on NEEQ will move across to the new Beijing exchange.
Some context: The Beijing-based NEEQ – otherwise known as the New Third Board – is an over-the-counter securities trading platform for equity in small companies.
- It differs from traditional exchanges in that firms can’t raise capital via traditional IPOs.
Neither Xi nor the CSRC indicated when the new exchange will launch or how its rules might differ from the exchanges in Shanghai and Shenzhen.
Get smart: Ensuring that SMEs have adequate access to funding has been a long-standing concern for the authorities.
- This has assumed even greater importance with SMEs struggling to bounce back from the pandemic.
Get smarter: Beijing sees innovation as central to China’s future economic wellbeing.
- Banks have proven themselves ill-suited to the task of funding innovative private-sector firms – regulators are looking for new channels to ensure bright ideas get the capital they need.
2. Sugar baba
It looks like someone’s feeling the love.
On Thursday, Alibaba Group Holding Ltd. pledged RMB 100 billion to fund “common prosperity” initiatives.
Some context: On August 17, Xi Jinping delivered a speech at a meeting of the Central Commission for Financial and Economic Affairs (CCFEA), in which he vowed to tackle inequality and promote “common prosperity.”
Ali will focus its charity on 10 key initiatives:
- Investing in science and tech innovation, particularly in underdeveloped regions
- Supporting the growth of small and medium-sized enterprises (SMEs)
- Boosting agricultural industrialization
- Supporting SMEs’ export operations
- Bolstering “high-quality employment,” including through vocational training
- Improving the welfare of gig and flexible-economy workers
- Promoting digital equality between urban and rural areas
- Strengthening services for vulnerable groups, such as the elderly and ill children
- Improving basic medical services, particularly at the village level
- Establishing an RMB 20 billion “common prosperity fund” to invest in common prosperity pilot zones throughout China
Ali isn’t the first tech giant on the common prosperity train:
- Tencent has pledged RMB 100 billion for a raft of social responsibility programs.
- Pinduoduo has pledged RMB 10 billion for farmers.
- The founders of Xiaomi and Meituan both donated over RMB 10 billion in equity shares.
Flashback: Former Paramount Leader Deng Xiaoping, 1985:
- “Let some areas and some people get rich first and lead other regions and people to gradually achieve common prosperity.”
Get smart: Some got (very) rich first.
Get smarter: Now, companies are lining up to show they’re sincere in helping to achieve the second part of the bargain.
- They don’t really have much choice.
3. Respect (just a little bit)
On Thursday, China’s top diplomat Yang Jiechi spoke to US special climate envoy John Kerry via videolink.
ICYMI: Kerry is in Tianjin this week for climate-focused meetings with Chinese officials.
During their meeting, Yang reiterated Beijing’s refrain that trust is a prerequisite for climate cooperation (MoFA):
- “China and the United States can strengthen…cooperation in a wide range of bilateral fields such as climate change.”
- “At the same time, cooperation must be two-way and mutually beneficial.”
Predictably, Yang laid the blame for strained ties squarely at Washington’s feet:
- “China-US relations have encountered serious difficulties because the United States has…interfered in China’s internal affairs and harmed China’s interests.”
- “Confrontation between China and the United States is not in the interests of either side.”
- “It is hoped that the United States…[will] pursue a rational and pragmatic policy towards China, and work with China to push China US relations back on track.”
Get smart: China’s position is clear. Washington can’t expect Beijing’s full cooperation until fraught US-China ties stabilize.
Get smarter: The US has been inconsistent in its climate policy from administration to administration.
- Beijing doesn’t want to put all its cooperation eggs in the climate basket only to have said basket yanked away by the next US President.
4. Trader Zhou’s
On Thursday, Xi took to the podium (okay, sat at a desk on videolink) to kick off the Global Trade in Services Summit of the 2021 China International Fair for Trade in Services (see entry #1).
- Look, we didn’t pick the name.
Xi’s speech was barely 350 words (translated).
Nonetheless, he pledged further opening up to the world, and squeezed in a long list of interesting promises – including that China will:
- Implement nationwide a negative list for cross-border services trade
- Explore the creation of a national service trade innovation demonstration zone
- Support the development of a digital trade demonstration zone
- Expand the role of trade in services under the Belt and Road
- Support the growth of service-oriented SMEs
- Establish the Beijing Stock Exchange
Get smart: That’s a lot of agenda crammed into a short speech.
- With Beijing working overtime to move China’s economy up the value chain, it makes sense that Xi is wasting no time to drum up interest in every possible avenue of innovation.
5. Han Zheng talks to Kerry on climate
ICYMI: US climate envoy John Kerry was in Tianjin, China, for the past two days for talks to save the world.
On Thursday, Kerry had his most senior “meeting”.
- Via videolink, he spoke with Politburo Standing Committee member and Executive Vice Premier Han Zheng – the 7th most powerful man in China.
Some context: On this trip, Kerry had also spoken to:
- Beijing’s highest-ranking diplomat Yang Jiechi
- Foreign minister Wang Yi
- Climate envoy Xie Zhenhua (in person)
More context: Wang talked to Kerry by video link on Wednesday, rather than take the short train ride to Tianjin, sparking speculation that Beijing was snubbing the US envoy.
Our take: The fact that Han was made available for talks signals China’s top leadership still wants a working relationship with Washington.
But warm relations won’t be easy: While in China, Kerry called for a “dramatic turnaround of China’s coal trajectory” and said (WSJ):
- “[A]ny efforts will be insufficient as long as China continues to build the coal-fired power plants.”
The problem: Beijing still sees coal as an integral part of China’s energy mix and thereby essential to China’s national security.
Get smart: The US asking China to up its climate game is arguably counterproductive. The last thing that Beijing wants is to look like it is acting at the behest of Washington.
What to watch: All eyes are on COP26, which starts on November 1. If China is going to announce more ambitious climate targets, that’s the venue in which we would expect it to happen.