China and the US reached a ‘ceasefire’ on trade in a meeting in Washington 17-18 May. Vice premier and delegation lead Liu He 刘鹤 proclaimed a breakthrough agreement to avoid a trade war and stop additional tariffs, noting key intervention from the two heads of state. They reached in-principle agreement to reduce trade imbalances and cooperate on IPR, but experts warn that working out detailed agreements will remain challenging.
Factories across all industrial sectors used to dodging environmental regulation must now take them seriously. Enforcement of environmental regulations is becoming stricter, and inspections more frequent.
China is investing massively in integrated circuits (ICs). The central state set up a National IC Industry Investment Fund (hereafter ‘the big fund’) in 2014 to make equity investments in the domestic industry. With Ministry of Finance and China Development Bank as major backers, the big fund has been instrumental in attracting local government and other capital to the industry. Having pledged most of its initial capital, the big fund announced plans in early May to raise C¥150 to C¥200 bn.
After a sharp dip in 2017, overseas direct investment (ODI) has resumed growth in 2018. But under an emerging management system, planners will channel it into strategic areas. The state and its banking system will continue to push investments deemed ‘rational’ by commercial and strategic standards, while lawmakers develop rules to manage ODI and protect the interests of rational investors overseas.
State Council seeks to ease consumers’ access to high-quality drugs and lower prices, especially for high-demand products like anti-carcinogens. It has promised to cover more types of expensive imported drugs under public health insurance, and to negotiate with pharma companies to control costs.
The Hong Kong–Macau–Guangdong Greater Bay Area (GBA) aims to put China’s southeastern region in pole position as a global tech innovation hub. Under a master plan signed 1 July 2017 by regional governments, stronger transport links and softer borders will bind the Pearl River Delta into a single vast region spanning nine mainland cities and the autonomous territories of Hong Kong and Macau.
Beijing’s geopolitical outlook shifted abruptly in April. A series of breakthroughs on the Korean peninsula reconfigured relations with North Korea; escalating trade tensions with the United States persuaded many domestic observers that a long-feared struggle for dominance has begun.
China’s evaluation of trade tensions with the US took a sharp turn in early April. Only weeks earlier, commentators expected terms to be set over the balance of trade. They saw room for negotiation: China, its economy maturing, had already decided to step up imports and open its market further to investment from the US and the world. But when the Trump administration ignored its conciliatory signals, Beijing concluded that the goal was not economic but strategic: a struggle for global dominance, summed up in the notion of Thucydides’ trap. If the US goal was hegemony, Beijing could not compromise. According to Fudan University professor Wan Guanghua 万广华 official policy is now to ‘make war to make peace’.
China’s win–win and anti-hegemony solutions are far more appealing than the zero–sum antagonism of the Cold War, writes Xu Zhengyuan 徐正源 Renmin University of China School of International Studies, drawing out the strategic implications of Xi’s address to the 8 April Boao Forum. If the US declines world leadership, he signaled, China will accept it, not least in global security governance.
Dalian Commodity Exchange (DCE) released technical details for international investors participating in iron ore futures on 27 March, bringing the DCE iron ore futures market closer to opening to international players. This follows China Securities Regulatory Commission’s (CSRC) approval of the plan in February, and opening of RMB-denominated crude oil futures on 26 March.
The Party grasped the initiative on domestic and international challenges in March. On the domestic front, the National People’s Congress approved a plan to restructure the national government 17 March. Part of larger Party-state reform plans that transfer a host of State executive functions to the Party, it heralds a return to decisive central control, intent on limiting domestic risks while moving up the global value chain.