monthly roundup

A quiet news month masked much deliberate state planning. By convention, the CCP puts its stamp on only the most far-reaching policies, roughly a dozen per annum. September counted a rare five such pronouncements, among them the long-awaited, if underwhelming, SOE reform plan and an overhaul to the state’s science and technology regime.

Each replete with clashing appeals to market principles and Party command, the texts, taken together, present a coherent image of China’s future. Far from ceding control, the state is redoubling its grip on pillar industries of the future. Beyond core technologies and manufacturing, the texts suggest, a dynamic private economy will facilitate the rise of a consumer class, meet employment demand through small business, and pick up slack in social services.

The emerging grand plan assumes ‘all other things being equal’. In September, upsets external and internal revealed this clearly to not be the case. TPP overshadowed China’s own international financial club, the AIIB. A new white paper on Xinjiang hopes to secularise the tense province by banning beards and Islamic garb in the capital. The increasingly vocal legislature pushed back against marginalisation as a rubber stamp. Market sentiment continued to digest estimates of record setting capital outflows during August.

Assuming reform goes forward, the next step will be a massive sorting game of SOEs. A new vision of foreign trade, due from the Ministry of Commerce by year’s end, will be carefully weighed, avoiding both falling short of TPP inclusion, and brokering the East Asia-centric alternatives, FTAAP and the RCEP.

featured analysis
community of shared destiny

SOE reform: more plans, more pilots

The top-level plan for fixing China’s bloated and inefficient state sector, 22 months in the making, disappoints. The November 2013 Third Plenum Resolution represented a progressive blueprint for breaking policy gridlock, but the Party’s determination to retain control of economic management shows no sign of abating. The new document restates key Third Plenum principles. full post open access →

policy movers

can’t put a name to the face? go to page footer

1. Promoted to lead the Central Political-Legal Commission at the 18th CCP National Conference yet not as Politburo Standing Committee member, I’ve since earned Xi’s trust in his purge of Zhou Yongkang’s 周永康 loyalists and have been appointed to manage the new National Security Commission on his behalf, hence my latest visit to the US on cyber issues. I’ve also secured the reputation as a reformer in my domestic judicial portfolio, despite an unhelpful political climate, providing political cover for Zhou Qiang’s 周强 judicial reform agenda and occasionally stepping forward to arbitrate inter-agency disputes.

2. Created in 2003 to centralise supervision of state-owned assets, I’ve been accused of being an overprotective nanny. But no longer so, according to the latest state-owned enterprise SOE reform plan. I will stand back, managing capital only, rather than operations and personnel. According to the plan, it is not clear whether I will be investing to earn returns or advance policy objectives.

3. The most prominent scholarly voice promoting pension reform, I lead the Institute of Latin American Studies at CASS. My 2012 report set the stage for reform, exposing the failure of individual retirement account pilots, and a widespread ’empty account’ problem whereby retirement savings accounts are filled with IOUs. The new pension plan draws directly from my proposals, first voiced 25 years ago, to pool pension funds toward the national level and invest in stock markets and fixed-assets. It will be my research and advice that guides how to put the latest pension reform into action.

consumer finance


mid september position:

  • e-commerce techno-cure: fuel for village employment and consumption

end september position:

  • SOE reform plan underwhelms: despite long wait, direction remains unclear

capacity cooperation large-diameter pipe plants, like this one in Hebei, are planned for Kazakhstan, says CNPC


‘сapacity сooperation’: going global 2.0

Learning from a slew of poor-performing overseas investments, ‘going global’, rebranded as ‘Сapacity Сooperation’, will insert Chinese capital and know-how into partner ventures rather than dominate whole value chains. Rolling out ahead of Belt and Road, it will take a more calibrated approach to exporting capacity. full signal client access →

mid september position:

  • big parade wins domestic hearts and minds: spiritual victory over Japan no game changer

end september position:

  • cybersecurity looms large in lead up to Xi state visit: ‘win-win’ efforts met with resistance from the US

pensions embrace market returns following reforms, pension funds still face uncertain future

social policy

pensions embrace market returns

New rules give the go ahead to invest a portion of pension funds in stock. Cleaning up a fragmented system is needed, but the reforms are not enough to either make a dent in pension shortfalls or stabilise the stock market. full signal client access →

mid september position:

  • pension funds to the market: investment of pooled funds in stocks and infrastructure approved

end september position:

  • healthcare goes digital: can mobile technology and big data solve healthcare’s big problems

agricultural reform clearing the way for agricultural reform

agriculture and marine

mid september position:

  • yet another food safety law: and yet another reorganisation slated for 2017-18

end september position:

  • reshaping farms: target prices replace price support

tax bureau draft EPT Law promotes switch from arbitrary fees to tax

energy and environment

end september position:

  • Energy Law and Environment Protection Tax Law: both short on coordinating regulatory reforms

Budget Law Implementation National Audit Office Chief, Liu Jiayi 刘家义 delivering 2014 fiscal year budget review to NPC

governance and law

NPC is more than a rubber stamp

The National People’s Congress is becoming more willing to challenge the State Council on some issues in the public spotlight, notably environmental protection and public finance.

NPC’s push to increase its influence, however subtle, is significant. For a long time, the NPC passively approved new laws. Now, the Party may no longer be able to take for granted that the NPC will approve legislation—exposing tensions as ministries fight its larger role. full signal client access →

mid september position:

  • reversing NPC’s rubber stamp status will be slow: state and party authority will trump stronger budget oversight

end september position:

  • thou shalt be an entrepreneur: old ways for ‘new normal’

policy ticker highlights

capacity cooperation reaches the US
Xinhua | 21 september
The Xi-Obama meeting will kickstart Sino-US capacity cooperation in high-speed rail and alternative energy, reports Xinhua as well as reveal more details of the bilateral investment treaty (BIT).

new survey finds wide discontent in business
Unirule Institute | 18 september
The Unirule Institute, a private liberal think-tank, published on 15 September the result of its survey on the ‘survival and development’ of private entrepreneurs.

Ningxia electricity reform looks to independent retailers
NDRC | 8 september
Ningxia’s electricity transmission and distribution price reform plan is the second to gain NDRC approval.

social insurance underpayment jeopardises retirement system
China Times | 6 september
Enterprises underpaying into social insurance funds will lower replacement rates and affect the future of the social security system, commentators say.

milk powder policy open for comment
Economic Information | 2 september
China Food and Drug Administration (CFDA) proposes a stricter regime for regulating milk powder based on provisions in the new Food Safety Law.

PBoC puts damper on RMB speculation
China Business News | 1 september
Two announcements from PBoC aim to reduce speculation against RMB, and increase liquidity in the onshore forex market respectively.


capacity cooperation 产能合作 chǎnnéng hézuò

with few exceptions, hospitals buy drugs from a list of items approved by their provincial government. Bidding for inclusion is managed by a procurement agent­­­­, usually a government-established firm. Bidding competition and price ceilings help drive down prices. Manufacturers and hospitals are, however, adept at finding ways collude in price-fixing after the bidding winds up

in the media

China’s bumpy ride along the new Silk Road
The Global and Mail | 1 sep
“If you chart a line from the era of Deng Xiaoping, you have ‘hiding and biding.’ You then go through ‘peaceful rise’ at the turn of the millennium,” said David Kelly, research director for China Policy, an advisory firm in Beijing. The changes since don’t yet rise to “assertive” or “aggressive,” he said. He prefers “pro-active” as a descriptor of current Chinese security and foreign policy.

quiz answers: 1. Meng Jianzhu 孟建柱 secretary of the Central Political and Legal Affairs Commission 2. State-owned Assets Supervision and Administration Commission 国务院国有资产监督管理委员会 3. Zheng Bingwen 郑秉文 director of the Institute of Latin American Studies, CASS

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