1. Please sir, I want some coal
2. Inspecting the financial sector
We told you last month that the Central Commission for Discipline Inspection (CCDI) is busy investigating the financial sector.
Their target: 25 financial regulators and state-owned financial institutions.
Some context: Xi keeps the CCDI busy – this is the eighth round of inspections into state financial institutions in four years.
On Monday, the Wall Street Journal revealed a few details:
- “The inspections… focus on whether state-owned banks, investment funds and financial regulators have become too chummy with private firms.”
- “[E]specially some that have recently landed in Beijing’s crosshairs.”
Guess who: Odds are you’ll find Evergrande, Didi, Ant, and HNA on this list.
Any suspect activity will be followed up:
- “[I]ndividuals who are suspected of having engaged in inappropriate dealings are likely to be formally investigated…and potentially charged later, while any entities found to have gone astray would be disciplined.”
With consequences ricochetingacrossthe top echelon of financial officials:
- “The leadership will also use findings from the inspections to decide whether to slash the compensation of the executives at these state financial juggernauts.”
Get smart: Driving towards Common Prosperity, Xi wants to stamp out the dodgy dealings that have long plagued the economy, and make sure that financial regulators and institutions alike pursue the greater economic good.
3. A test of environmental leadership
On Monday, Executive Vice Premier Han Zheng gave a speech in Kunming to open COP15, the 15th meeting of the Conference of the Parties to the United Nations Convention on Biological Diversity.
The what now?
- COP15 brings together representative parties to the Convention on Biological Diversity to discuss a post-2020 biodiversity framework.
- Covid-delayed several times, it’s finally here (online), in a two-phase format that concludes in-person next May.
This marks a huge opportunity for China to position itself as a global leader in tackling environmental issues.
- Even more so if it gets to name a new deal, à la the Paris Agreement or Kyoto Protocol.
That means showing the world how it’s done, with Han stating that (Reuters):
- “[China] will formulate a national biodiversity protection strategy and action plan… [and] incorporate biodiversity protection in mid- and long-term development plans of all regions and sectors.”
But genuine leadership is also required.
- And China has been passive in its leadership to date, with little public indication Beijing has been hustling worldwide to get others to commit.
Get smart: Global leadership involves more than setting headline-grabbing targets. It also requires diplomatic outreach and juggling sometimes divergent interests. That stretches Beijing’s comfort zone.
What to watch: As we went to press, Xi Jinping was giving a speech at the COP15 leaders’ summit.
4. Let’s hit the beach!
With smoke grenades, sand trenches and shock troops.
On Monday, China’s military said it had recently carried out landing drills on the shore across from Taiwan.
The deets (PLA Daily):
- The People’s Liberation Army Daily newspaper posted the video announcement on its Weibo social media feed.
- The video features soldiers landing by boat and securing a beach “in a certain sea area of southern Fujian.”
- As the closest province to Taiwan, Fujian would be a key launch site for an invasion, and simulates Taiwan’s environment.
- Cross-strait tensions were already sky-high after record-setting incursions by Chinese aircraft into Taiwanese airspace in early October.
Proverbial shots were fired over the weekend (Beijing.gov.cn and VOA):
- Xi: “The complete reunification of the motherland must be fulfilled.”
- Taiwanese President Tsai Ing-wen: “Nobody can force Taiwan to take the path China has laid out for us.“
Get smart: Similar exercises have been common in recent years. Beijing is signaling that military force remains an option, not that invasion is imminent.
Stay smarter: Like we said yesterday, Xi demands reunification, but the Taiwanese people don’t want to be part of the PRC. With no obvious resolution in sight, expect cross-Strait tensions to remain elevated.
5. Higher electricity bills coming
Brace for more expensive electricity bills.
- That’s according to a new policy from the macro planner (NDRC) on Monday, to relax state control of on-grid pricing for coal-fired power generation.
This one’s a bit complicated, so stay with us:
- Authorities have long kept electricity prices low for end-users, partially by capping on-grid pricing (the price power grids pay to generators) to government-mandated benchmark levels.
- In September 2019, NDRC allowed on-grid pricing for coal power to fluctuate upward by 10% or downward by 15% from those prices.
But, but, but: In 2020, on-grid pricing for coal power was only allowed to fluctuate downward, to control end-use electricity prices after COVID hit.
That policy is partly to blame for the power shortages wracking China of late.
- High coal prices pushed up costs for coal-fired power generators, but they weren’t allowed to charge more for the electricity they produced. So many just stopped generating.
On Monday, the NDRC announced that from this Friday:
- Market-traded on-grid prices for coal-fired power can fluctuate 20% above or below the benchmark price.
- Prices for energy-intensive industries can exceed the upward 20% cap.
- Electricity spot market trading is not subject to the price limits.
Get smart: The latest move means electricity prices for end-users are poised to increase, as power grids pass on the increased costs.