Political pageantry usually dominates the annual Two Meetings, with policy coming a poor second. This year the domestic Charity Law was the only significant legislation to pass, though last-minute changes left doubt as to its intention and effects. The 13th 5-year plan, placing innovation at the centre of industrial development, was also given final shape.
Li Keqiang 李克强 announced economy-wide VAT roll-out on 1 May 2016. Lou Jiwei 楼继伟 reiterated the need to ‘improve’ the 2008 Labour Contract Law. Under the ‘new normal’ of lower growth rates, and with the state positioning itself as entrepreneur and SME champion, changes to increase labour market flexibility are likely.
With the theatre over, the policy cycle has entered a time of top-level prescriptions: State Council Guiding Opinions will set the legislative tone, leaving agencies to flesh out details. SOE reform remains in the spotlight, following February moves to tackle steel and coal overcapacity. With Li urging swift action, moves to address corporate debt are anticipated, most likely from CBRC. For now, however, deleveraging is proceeding without central orchestration. Tianjin’s restructuring of Bohai Steel Group’s C¥192 bn debt is a test-bed that will influence an eventual national model.
New regulations give SAPPRFT, responsible for regulating media and press, wider authority over digital content, severely limiting foreign involvement in online publication. In Washington, Xi heralded China’s contribution to nuclear security, having just pledged some C¥73 bn Belt and Road money on a visit to the Czech Republic, now promoted to ‘strategic partner’; locally, fishing rights were testing cooperative policies with neighbours.
The 13th iteration of the world’s largest parallel planning process will be licked into final shape this week. China’s next 5-year plan will be tabled at the 2016 meeting of the National People’s Congress and unveiled by mid-March. full post open access →
Listen to David Kelly’s ABC Saturday Extra interview on the 13th 5-year plan
can’t put a name to the face? go to page footer
1. A State Council researcher for most of my career, I became deputy minister of the Ministry of Industry and Information Technology in late 2015 to oversee the restructuring of ‘zombie enterprises.’ I am the face of the announced C¥100 bn fund for laid-off workers from these zombie companies, which hopes to offset the labour impact of mass closures. I have suggested numerous policy solutions to help address massive industrial overcapacity, including raising environmental and energy efficiency standards and promoting international Capacity Cooperation.
2. As Xi Jinping’s 习近平 close confidant and economic advisor, I helped develop the economic reform blueprint, was central to the November 2013 Third Plenum Decision, and led drafting of the 13th 5-year plan. My brainchild, supply-side reform, has been a Xi mantra since the lead up to the October 2015 Fifth Plenum. In developing the idea, I sought a compromise between pro-reform and pro-stability factions. While my carefully crafted initiatives have failed before, I expect supply-side reform will influence policy direction for years to come.
3. I champion a market-based approach to charity to maximise donation value rather than state control. Chief of personnel of the CCP Youth League in the 1980s, I later ran the successful ‘Hope Project’ to help rural school dropouts in impoverished areas. I insisted that Hope operate in a voluntary, market-based fashion, making a real difference. I’m a harsh critic of state-run charities for stifling civil society and have called for clearer legal status for NGOs, charitable trusts, social enterprises and online donation resources. Thus, I vocally called out the Charity Law draft for failing to clarify these fundamental institutional divisions.
The policy patchwork to support redundant workers amid industrial transformation will do little to ease fears of a ‘wave of layoffs’ threatening stability. full signal client access →
- monetary policy under supply-side reform: standards and approvals to kill zombies
- Lou Jiwei: VAT reform requires government-wide cooperation
- not another bailout: Tianjin a test-bed for restructuring zombie debt
- Chinese diplomacy: drifting into realism
- going global: doubling down
- domestic confinement: global expansion
State Council forbids making housing purchase a condition of granting migrants residence entitlements in small and medium-size cities, exposing tensions between central and local policy agendas. full signal client access →
Proposed changes to the troubled housing fund system avoid fundamental issues, and would do little to boost housing markets or lower financial burdens on workers and firms. full signal client access →
- urbanisation or property markets: which wins?
- working hard or hardly working: labour permeates Two Meetings
- housing reform: thinking outside the box
agriculture and marine
Transitioning from ‘traditional’ to ‘modern’ agriculture, long in the pipeline, will feature in the 5-year plan. Opening up agricultural industrial chains for the first time, this transition requires a comprehensive food security strategy, already presented in Doc 1, and a still under-development food safety strategy.
- COSCOCS: merging and acquiring in high seas stakes
- modernising agriculture: moving to the next phase
- inflation horizon: adapting nuclear technologies
trade and industry
Moves to expand credit for industrial transformation while maintaining macroeconomic stability signal an end to restrained monetary policy. full signal client access →
- moves on overcapacity: can the state have its cake and eat it?
- follow the leader: Hebei moves to cut capacity
- e-comm to get smart: MofCOM releases logistics plan
Regulations targeting foreign operations expand SAPPRFT authority over online and digital content, tightening market entry for foreign firms, and increasing risks for those already present. full signal client access →
- Xi up against the wall: above the law or under it?
- government within the law: compliance by 2020
- Charity Law: state-run civil society?
corn policy to reorient to market
China Grain Online | 29 march
China will promote reforming the state corn purchasing and storage system to reflect market supply and demand, said Liu Xiaonan 刘小南 NDRC Economic and Trade Division deputy director.
fix social security underpayment before lowering contribution rates
Economic Information Daily | 28 march
Social security contribution underpayment is a bigger problem than high contribution rates, finds Economic Information Daily.
central gov’t and capital markets should take on local debt
Tencent Finance | 24 march
The size of local government debt does not pose excessive risk, says Li Daokui 李稻葵 Tsinghua University, because it is largely tied to infrastructure rather than social security (as in the US).
national e-commerce logistics plan released
MofCOM | 23 march
MofCOM has released the national e-commerce logistics development plan 2016-2020.
foreign minister: AIIB, Belt and Road not expansionist
Global Times | 9 march
Belt and Road is neither expansionist nor another ‘Monroe Doctrine’, says Wang Yi 王毅 foreign minister, referring to the 19th century American foreign policy initiative that sought to establish continental dominance.
new web publication regulation leaves too much to SAPPRFT discretion
Caixin | 1 march
Critics are overreacting to clauses targeting foreign investment and user-generated media in the SAPPRFT-MIIT online publication regulations, argues Wei Yongzheng 魏永征 media expert.
selected texts of the month (clients only)
- securitising housing fund mortgages better meets economic goals
- supply-side reform is here to save us from overcapacity
- four meanings of PBoC’s policy tightening
- shifting from ‘shallow’ to ‘deep’ urbanisation
- interpreting the linkage of migrant workers and excess housing
- new-style urbanisation can help structural adjustment in the housing market
- consolidate housing funds into a national housing bank
- housing funds should be designed to help those in real need
trade and industry
- key points of the new internet publishing service management regulations
- internet publishing service management regulations violate higher laws
- what has and has not changed for foreign investment in internet publishing
五险一金 wǔxiǎn yījīn
‘Five insurances and one fund’ is the slate of employment-based social funds for workers. The five mandatory insurance programs—pension, medical, unemployment, workers’ compensation and maternity—are regulated by the Ministry of Human Resources and Social Security. Worker and employer contributions together amount to up to 40 percent of an individual’s salary, sparking debate over both heavy fee burdens and potential fund shortfalls. The ‘one’ fund—the housing fund—is regulated by MoHURD, falling outside the bounds of the 2011 Social Insurance Law
Chinese journalist resigns amid government clampdown on media
SBS News | 30 march
Australian policy consultant David Kelly runs Beijing-based thinktank China Policy. He said the government had always had strict control of the media, but the public’s attitude toward it is changing.
China’s 5 year plan
ABC Saturday Extra | 12 march
China Policy’s David Kelly says the country’s leaders want to ‘digitise the China dream’ to achieve a ‘moderately prosperous society’ in the next half-decade. But it comes at the same time as troubling concerns over censorship and growing authoritarianism are also evident.
The Gamble Behind Xi Jinping’s More Restrictive Media Policy
The Diplomat | 9 march
As David Kelly of the China Policy consultancy told the Financial Times, Ren represents a “trend in society which is totally fed up” with Xi’s divisive and repressive leadership style, and is not afraid to speak out.
flashy slogans for outdated ideas[Dutch]
Trouw | 4 march
According to Charles Horne, economic research manager at China Policy, a think tank in Beijing , these delays are due to disagreements over the leadership’s policy direction, saying ‘the messages from above are often diffuse, there is no unified front.’
Heat rises on China tycoon Ren Zhiqiang
Financial Times | 1 march
David Kelly, director of research at consultancy China Policy, said the affair had shocked Chinese society. “He’s crossed a line which is not just disrespectful to the emperor,” he said. “He represents a trend in society which is totally fed up. I was at a dinner party last night and the tone was disbelief.”
quiz answers: 1. Feng Fei 冯飞 MIIT deputy minister 2. Liu He 刘鹤 Leading Group for Financial and Economic Affairs 3. Xu Yongguang 徐永光 Narada Foundation president
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