monthly roundup

A convergence of three tough measures—de-leveraging, de-stocking and de-capacitising—sees ‘3D’ economic policy the focus for 2016. Pushing e-commerce to kickstart trade and promote consumption is high on State Council’s list of New Year’s resolutions with the approval of 12 new cross-border e-commerce pilots. In mid February Zhou Xiaochuan 周小川 PBoC chairman broke six months’ silence to talk up the renminbi in the face of mounting devaluation pressures. Debt risks were once again subject to speculation.

Rural/urban reform made headlines, if not headway, with healthcare and small-town urbanisation top of the list. Full-value urban hukou is not on offer in a new Opinion on upgrading the residence permit system, with some speculating dissolving housing oversupply rather than increasing rural livelihoods is its raison d’etre. Industry policy is likewise recalibrating for overcapacity. Measures are likely to be gradual, however, amid a strengthening security mindset that sees unemployed workers a risk.

International engagements continue with Xi Jinping’s visits to Riyadh, Cairo and Teheran building up political capital in the Middle East. Belt and Road and its steerage passenger, International Capacity Cooperation, continue to gain high marks for aspiration.

featured analysis

choice cuts: Chinese popular music

choice cuts: Chinese popular music

Speaking to the spirit, music leaps walls of space, time and culture. Take a little time out to explore our kaleidoscope of contemporary music and ideas. Welcome to the year of the monkey! full post open access →

policy movers

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

1. I masterminded internationalising Chinese finance, including the RMB. I learnt from veteran reformer Wu Jinglian 吴敬琏, and pursue a long-term, global vision. In my widely read essay, penned after the global financial crisis, I argue for an end to dollar-dominance, and setting up a global reserve currency. Domestically, I have championed financial liberalisation, allowing capital account opening, meeting international prudential standards, marketising interest rates and moving away from policy-driven lending and soft budget constraints. In the lead-up to SDR inclusion, my advocacy of faster capital account opening was viewed sceptically by other authorities. Agreed on the goal, they diverge on the timetable and sequencing.

Look to my speeches at key political junctures, particularly the upcoming NPC in March 2016, for the next major reforms to the financial system.

2. At a recent State Council Information Office briefing, MofCOM ministerial assistant Zhang Ji 张继 demonstrated this six-month-old pilot’s success: international e-commerce grew from less than US$20 million in 2014 to US$3 bn; 4,000 foreign trade companies registered for it. The pilot represents a new nexus that brings together local governments, private firms, and commerce regulators, bypassing normal channels of authority. Ministerial policy supports include MofCOM and MIIT national plans for e-commerce logistics networks, SAIC policy on upgrading goods inspection system, and PBoC, MIIT and others’ policy supporting electronic financial transactions.

3. Mayor of Chongqing since 2010, I have received widespread praise for leading the city that boasts China’s highest economic growth rates. In addition to creating a favourable business climate for the electronics industry, I have successfully promoted a ‘land ticket’ system to compensate peasants who convert homestead or commercial land plots back into arable land. My economic stewardship has stoked rumours that I will be promoted to financial advisor for the top central leaders.

short selling RMB
Offshore market: an important venue for short selling RMB


tightrope exchange rate policy

PBoC is seeking to devalue the RMB without eroding confidence in its stability. Devaluation pressure is forcing China to backpedal on the long process of internationalising the RMB. full signal client access →

mid january position:

  • told you so: CSRC calls off circuit breakers after four days

end january position:

  • SOE reform: baby steps, as the Party eases off rhetoric

site of State Grid joint project
interests in both Sunni Saudi Arabia and Shi’ite Tehran require balancing in Xi’s state visits


President Xi’s mid-January visits to Saudi Arabia, Egypt and Iran were carefully planned. The first by a Chinese leader in twelve years and Xi’s first for 2016, it was a swift response to the UN settlement lifting sanctions on Iran, but coincided with escalating Saudi-Iranian hostilities.

mid january position:

  • minimising gaps: new Africa model; offering global security services

end january position:

  • negotiating minefields: Xi-style diplomacy targets the Middle East

land reform
land reform to improve efficiency and fairness of collectively owned rural land

social policy

land reform: two steps forward, one step back

The ‘three land reforms’ aims to marketise the countryside. 2015 saw progress in construction land market pilots, while land requisition from peasants continued. Promoting and revising land reform pilots will be key in 2016, but any structural change will be delayed until 2018 at the earliest. full signal client access →

mid january position:

  • a maodun: how to make social insurance sustainable

end january position:

  • health insurance: bridging the divide

conflicting incentives to push financial burden to rural households
conflicting incentives to push financial burden to rural households

agriculture and marine

agriculture insurance: households bear risk

The transition from subsidies to target prices for ag commodities is at risk from the small scale of farming and embryonic futures and reinsurance markets.full signal client access →

mid january position:

end january position:

  • empowering maritime power: adapting nuclear technologies

1 June 2015 Beijing mandates no more puffing outside
Hualong no.1: a peek into the future

energy and environment

China will speed up civil nuclear technology exports by forming a new joint venture between SOE nuclear giants CNNC and CGN, to be called Hualong International.

mid january position:

  • energy market: nuclear goes global, grid inches towards reform

property rights registration
NDRC anti-monopoly guidelines against IPR abuse open for public comment

governance and law

Much-anticipated draft NDRC anti-monopoly guidelines against IPR abuse were issued on the last day of 2015. The document puts IPR holders at a disadvantage on several counts: MNCs in China, fearing discriminatory application of the measures, will push back to safeguard their technology.

mid january position:

  • government within the law: compliance by 2020

end january position:

  • Baidu censured: firm promises clean-up of illicit content

policy ticker highlights

MLR to use land allocation power to promote housing and urbanisation reform
China Business Journal | 23 january
Ministry of Land and Resources will try to use its ability to approve new construction land to reward cities welcoming more rural migrants while ‘penalising’ those with excessive housing stock, an official disclosed. This policy, termed ‘linking land and people’ (人地挂钩) has been finalised but not publicly released, local officials report.

Social Security Fund will diversify into riskier investments
Beijing Business News | 22 january
The National Social Security Fund (NSSF) exceeded 16 percent returns in 2015, preliminary figures suggest.

perfect an agricultural price insurance system
China Economic News Network | 22 january
3rd party insurance assessment institutions should be part of a suite of policy tools for setting up agricultural insurance, says Tian Hui 田辉 State Council Development Research Centre Institute of Finance.

New Middle Eastern diplomatic highlights
Zhongguo qingnian | 19 january
The Middle East is the best example of China’s ‘Belt and Road’ initiative, says Zhu Weilie 朱威烈 Director, Institute of Middle East Studies, Shanghai International Studies University, as both the Silk Road Economic Belt and the 21st Century Maritime Silk Road pass through the region.

NDRC adds floor for refined oil pricing mechanism
People’s Daily | 13 january
NDRC announced a strict domestic refined oil price floor of US$40 per barrel; if international prices fall below that line, domestic prices will not be cut. The previous pricing mechanism, from 2013, set a US$130 per barrel ceiling for domestic refined oil.

cyber administration: ‘websites are all responsible for their content’
CAC | 11 january
Cyber Administration of China issued a rebuttal to the idea of ‘technological neutrality’, saying that all websites are by law responsible for all content on their platforms and are obligated to censor information that violates the law, including pornography, piracy, counterfeit items, or anything deemed illegal and harmful.


three land reforms
三块地 sān kuài dì

Literally ‘three plots of land’, sankuaidi 三块地 refers to three major reforms to improve efficiency and fairness of collectively owned rural land: local government requisition rights, and transfer rights on construction and homestead land. Central Deepening Reform Leading Group first grouped the the land reforms together in Dec 2014 with pilot areas announced in Feb 2015. Ministry of Land and Resources has pushed reforms forward separately and at varying speeds

modern agriculture
现代农业 xiàndài nóngyè

Applying modern science and technology to agriculture, a development priority since the 2012 18th Party Congress. Over the 13th 5-year plan period, agriculture is to be transformed from a primary sector industry to a ‘comprehensive’ industry, integrating primary, secondary and tertiary sectors. In the graphic, modern agriculture is supported by science, commerce, intensification and industry

10 national clauses
国十条 guó shí tiáo

Issued in 2006 by the State Council as a blueprint for a modern insurance, to be observed by the industry. The original set was replaced by ’10 new national clauses’ in August 2014. Full text (see section 4)

keep food in the ground and manage it with technology 藏粮于地、藏粮于技 cángliángyúdì, cángliángyújì

Ending customary over-production and -storage of foodgrains, this transition strategy for the 13th 5-year plan period addresses distorted markets and land deterioration. Demand must drive the market, and productivity and sustainability must be raised through ensuring production capacity with science and technology

the senary sector
第六产业 dì liù chǎnyè

Integrating and developing agricultural primary, secondary and tertiary sectors will create production-to-sale value chains for agricultural products. Equivalent to vertical integration, the term was first coined by agronomist Naraomi Imamura to imply superimposing the three sectors (1+2+3=6)

in the media

US Secretary of State John Kerry arrives in Beijing on mission to pressure China on North Korea’s nuclear tests
South China Morning Post | 22 jan

Benjamin Herscovitch, a research manager at Beijing-based consultancy China Policy, said Kerry’s effort was unlikely to persuade China to change its North Korea policy.

What’s behind China’s stock market meltdown?
Al Jazeera | 14 jan

Charles Horne, an economy portfolio manager with consultancy firm China Policy, joins Counting the Cost to discuss the currency devaluation and the general lack of confidence in the Chinese economy

China Reverses Planned Surrogacy Ban to Encourage More Births
Voice of America | 1 jan

‘The two-child policy could create greater demand from families to turn to surrogacy if they cannot have children themselves,’ Joshua Freedman, research manager at consulting firm China Policy, said. ‘Legislators seem more concerned with dealing first with the two-child policy and pushing questions about surrogacy to a later date after further discussion.’

quiz answers: 1. Zhou Xiaochuan 周小川 PBoC 2. Hangzhou comprehensive e-commerce pilot zone 中国(杭州)跨境电子商务综合试验区 3. Huang Qifan 黄奇帆 Mayor of Chongqing

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