At the Boao Forum, new PBoC governor Yi Gang 易纲 not only signalled marketising interest rates but laid out a roadmap for financial sector opening. He promised 12 measures on market access for foreign financial institutions—six to be completed within the next few months and six by end 2018.
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.
Kim Jong-un displayed deference to Xi Jinping during his surprise trip to Beijing 25-28 March. President Trump’s 8 March commitment to hold talks with Kim this May boosted Kim’s profile.
During the National People’s Congress (NPC), the Party released a plan to restructure the government. It has now announced most of the people who will run the new system. The names of the incoming cohort of ministers and other appointees who report directly to the State Council were published the week of 19 March. They will take the helms of agencies that are slated for reorganisation under the NPC plan, passed 21 March. This report introduces the 28 people who sit at the peaks of China’s bureaucracy. They will work under the new State Council Executive Committee, whose members will also take on new roles after reorganisation. China Policy will continue to track and explain these new roles as information becomes available.
Trump proposed tariffs on some US$50 bn worth of Chinese imports on 22 March, after a US Section 301 investigation charged China with violating IPR and forcing unfair technology transfers. Targeted sectors are to be announced in the next ten days, and will likely target Made in China 2025 sectors, including aeronautics, modern rail and new energy vehicles.
The March 17 Ministry reshuffle attempts to design a streamlined government able to carry out Xi Jinping’s blueprint for a ‘new era’. It will reshape how government deals with the Party, the market and the world. Read this overview, then read the full report online (subscriber only). If you’d like a copy of the report, please contact firstname.lastname@example.org.
The National People’s Congress (NPC), will review 13 March a monumental restructuring of the Chinese state. Far from an arbitrary or sudden power grab, this rethinking of how China governs itself is the fruit of five years of painstaking work during Xi’s first term. With his authority renewed by the 19th Party Congress and the recent Third Plenum, Xi and his team are now ready to uproot the Byzantine network of overlapping responsibility that has defined Chinese governance for decades. Replacing it are ministries that are bigger, fewer, and, above all, have sole responsibility to implement the Party’s political agenda in their fields of competence.
China plans to import more—a lot more. The aim is to secure key economic goals: transition to higher-end manufacturing, and to consumption-led domestic growth. Some advisors have even recommended pursuing trade deficits.
The November 2018 China International Import Expo (CIIE), a centrepiece announcement of the 2017 Belt and Road Forum, is the first major step in this strategy. Countries that want to sell more into China’s domestic markets are lining up for exhibition space. But participants must prepare to manage the geo-economic challenges associated with the move to imports: Beijing is not looking for a new role in the established global trading system, but a leading role in a new system and global order envisaged by its strategists.
Regulators came down on outbound investment like a tonne of bricks in February despite signalling tolerance for capital outflows. SAFE and insurance watchdog CIRC tightened control over ‘offshore borrowing with onshore guarantees’ in a 12 February joint release. This has in recent years allegedly been a key instrument used by Chinese firms to bypass capital control measures, allowing them to finance overseas M&As and disguise capital flight. CIRC announced a temporary seizure of Anbang Insurance Group 23 February, a once avid shopper for overseas assets. Anbang founder Wu Xiaohui 吴晓晖 is currently detained for investigation of ‘economic crimes’. CIRC also reprimanded three other insurers for non-compliant overseas investments. But regulators insist that they are not trying to limit capital outflow.