Significant external challenges face Belt and Road (B&R), according to a report by Fu Mengzi 傅梦孜 vice president and Xu Gang 徐刚 doctoral candidate at the highly influential China Institutes of Contemporary International Relations (CICIR), a think tank with close links to Chinese intelligence services. Chinese firms need to understand local conditions, says a second report by Li Ziguo 李自国 Department for Eurasian Studies deputy director at the China Institute of International Studies (CIIS), the think tank of the Ministry of Foreign Affairs.
governance: finding balance in US trade relations, agreement on CoC for South China Sea, boosting rural support, corrupt officials under fire
US trade relations are moody after Trump signed an executive memorandum authorising a probe into alleged theft of US IP by Chinese citizens and companies. Evidence collection will be protracted but the investigation will potentially impact China’s high-tech industries, including mobile phones, computers and integrated circuits, says Zhou Shijian 周世俭 Tsinghua University Sino–US Relations Research Centre.
China is plagued by food safety scandals. Causes range from toxic industrial pollution in soil, to dangerous or inappropriate additives—from melamine to cardboard—to faked brands, labels and expiration dates. Making matters worse are fragmented supply chains, made up of small farms and food processors, as well as understaffed and uncoordinated food regulatory agencies.
An April working plan on cleaning up irregular aluminium capacity aims to wrap up by mid-October. Strict monitoring and enforcement has prompted Shandong, Xinjiang and other big production provinces to axe over 5 million tonnes of irregular capacity. Government has halted the approval of captive power plants has been halted, as having a plant gives producers a big edge over have-nots.
Offering access to low-interest loans and deposit-free services, private social credit systems—which rate individual trustworthiness—have eclipsed the state version. National Development and Reform Commission (NDRC) advocates integration of public and private systems, but the central bank (PBoC) has so far refused to endorse Sesame Credit, the lead commercial agency and its peers.
governance: rental housing boost, DPRK under scrutiny, trade facilitation, administrative regs revision
The state will make more rental housing available in cities with large migrant populations, advises a joint notice from Ministry of Housing and Urban-Rural Development (MoHURD) and eight other ministries. The move aims to lower housing prices in migrant cities and defuse the rising middle-class angst that has provoked recent street protests. Local governments are urged to transform some SOEs into rental agencies to help formalise the market, and to ensure that real estate developers build both commercial housing and rental housing when they lease construction land for development.
State Council’s new Financial Stability and Development Committee will address ill-coordinated regulatory bodies. These, claim many, cause market irregularities, opening the floodgates for some prime threats to stability: rogue wealth management and internet finance. The general office for the Committee is the central bank (PBoC), underlining its role as top regulator.
The National Financial Work Conference, held every five years, convened in July. Speeches from Xi Jinping 习近平 and others amplified concerns of the past year: restoring real-economy priorities in the financial sector, enhancing central macro control, and targeting financial risk. A new Financial Stability and Development Committee within State Council will provide a top-down coordinating mechanism, intended to resolve competition and conflict between different regulators. Pundits interpret it as an interim measure anticipating full-blown regulatory consolidation, betokening reluctance to shake up the established power structure.
Environmental justice came to the fore this week, with Supreme People’s Court releasing two key documents. The first, a white paper on environmental litigation, revealed a vast rise in the number of cases in 2016–17. The second, based on an analysis of 94 cases, showed the prosecution hit rate has been rising since 2015. In finance, Deng Jianpeng 邓建鹏 China Minzu University School of Law professor called for improved e-finance laws, noting that current measures do not even cite the banking regulator’s (CBRC) Banking Supervision Law.
The Land Management Law, last revised in 2004, underpins the time-worn split between rural and urban land and society. With no private land ownership, almost all rural land in China is collectively owned; urban land is state-owned. Rights over land are ‘leased’ out for fixed periods of time. Usage rights to state-owned land can be sold, transferred and leased in the market. Collectively owned land rights, however, have a severely limited market: land use is restricted to farming, homestead plots for households, land for collective village enterprises and land for collective public use (the last three all forms of collective construction land).
SOE über-agency SASAC, sidelined in the 2015 reform plan, has been making a comeback. The plan had reduced SASAC’s functions to Temasek-style management of capital, and corporate conversion pilots. Ministry of Finance’s (MoF) star was on the rise, given charge of ‘state capital investment and operation pilots’, an initiative to shift state capital to more profitable sectors. With MoF cast as a more effective reformer than the conservative SASAC, this was welcomed. But SASAC has managed to wrest control of the initiative, announcing a series of pilots in 2016 and 2017 and setting up new bureaus to oversee them.
The National Financial Work Conference 14–15 July, held every five years, chimed with the regular themes of the past year: making the sector better serve the real economy, greater Party control over financial affairs, and tamping down on financial risks. Regulatory consolidation, long called for by commentators, was deferred at least, in favour of a new, underwhelming Financial Stability and Development Committee under State Council. The central bank (PBoC) is to have a greater role in macroeconomic management.