watching for

  • public reaction to first draft of regulations of online pharma sales
  • reactions to compulsory ed reforms and moves to encourage talent back to rural areas

pension reforms to improve elderly care

National Bureau of Statistics’ year-end data shows the population aged 60 and older is some 250 million—18 percent of the total. Rapid ageing, longer lifespans, and rising chronic illness highlight pension shortfalls and the need to improve aged care services.

Sustainability of the three-pillar pension system—the pay-as-you-go basic pension insurance (BPI), enterprise and occupational annuities, and personal pension products—is the biggest issue. To consolidate the BPI schemes, 15 localities have moved their pension asset management to the National Council for Social Security Fund (NCSSF). Central state-owned enterprises (SOEs) are directed to transfer assets to support the NCSSF, which has received a combined 20 bn payment from three central SOEs and 10 percent of shares of two central financial SOEs. The second batch of 15-20 central SOEs have been tapped for the transfer scheme. By 2020, NCSSF will manage national pension reserves of 10 tn if all central SOEs complete transfers as planned, says Dong Dengxin 董登新 Wuhan University of Science and Technology.

A central pension adjustment system will also unify fragmented provincial BPI pools. According to Jia Kang 贾康 Society of Public Finance, this enables transfer of surplus funds from coastal to inland provinces that cannot afford pension payouts due to ageing and population outflow. Zheng Bingwen 郑秉文 Chinese Academy of Social Sciences explains the fairness of such transfers: wealthier regions who profit from cheap migrant labour should help support their regions of origin.

The state is also actively promoting third-pillar commercial pension products. The tax-deferred individual income pension scheme will be rolled out nationwide starting May 2019, after one-year pilots in Shanghai, Fujian and Suzhou Industrial Park; the third batch of 14 pension target funds has been approved and an additional fund was recently released for comment, bringing the total to 41.

Once better pension packages are available, argues People’s Daily, the next step is to boost delivery of aged care services via a three-tier system distinct from hospital-based acute care services. Most needed are home-based services (doctor and caregiver visits), community-based adult daycare services, and long-term geriatric care and nursing for chronic conditions.

tags: pension, aged care

in other developments…

  • State Council authorised the centralised pharmaceutical bidding and procurement pilot scheme. The new bidding process will revamp healthcare provision by changing provider payment methods, increasing remuneration to health practitioners, and promoting clinical use of low-cost generics
  • National Medical Insurance Administration’s annual work conference stipulated rollout for prospective payment methods such as global budget, capitation, case-based and diagnosis-rated group (DRG) payment to complement retrospective fee-for-service payments
  • MoHRSS diagnosed university graduates’ difficulty finding jobs as structural unemployment, whereas recent layoffs of unskilled migrant workers result from demand-deficient cyclical unemployment resulting from trade war. Prescriptions focus on skills-matching and labour market optimisation for the former, and economic stimulus for the latter
  • State Council now requires all urban residential communities to run an affordable kindergarten by end 2020, with a timeline for converting high-cost community-affiliated kindergartens into nonprofits

Hebei cadres study recent Xi speech


watching for

  • local responses to Xi’s ‘growing risks’ speech
  • discontent with some provinces’ lax attitude to anti-corruption
  • Party pushing military to deepen and broaden changes

protecting reform with Chinese characteristics

Concerns about threats to reforms underway have prompted a set of initiatives from Beijing. Xi Jinping warned Party cadres and government officials of challenges to reform posed by an uncertain international situation and more signs of slowing economic growth.

Xi stressed anxieties about political security more than social stability, indicating increasing attention to maintaining consensus among the leadership. An editorial accompanying Xi’s lecture struck a more worrying tone, underlining that officials need to understand not only the risks but also the danger of inaction.

Fighting corruption remains a priority, noted Xi in another major address, and People’s Daily cautioned cadres harbouring doubts about Beijing’s commitment to that crusade.

But not all is toughening and tightening: Xi’s keynote speech to the Central Political and Legal Work Conference on 15 Jan 2018 called for updating and improving social governance by broadening participation while still following Party leadership and central directives.

tags: accountability, personnel, anti-corruption

in other developments…

Wang Qishan vice president’s speech defends economic globalisation at Davos


watching for

  • results from the senior-level trade talk with the US
  • China’s official stance on new global e-commerce rules
  • release of reform plans for national economic and technological development zones

CPTPP accession discussion heat-up ahead of the trade talk

As members of CPTPP (Comprehensive and Progressive Trans Pacific Partnership) gathered on 19 Jan 2019 to discuss expanding its membership, scholars urged China to join the treaty. Li Chunding 李春顶 China Agricultural University International Economic Research Institute director forecasts positive spillovers even if China does not join—increasing GDP, manufacturing employment, exports and imports—but much more if it does. Beijing maintains an open but cautious stance, and Gao Feng 高峰 MofCOM spokesperson endorsed CPTPP as ‘in line with China’s stance on free trade’.

A feasibility study of China’s CPTPP accession by China Academy of Social Science—detailing provisions with varying compliance difficulties—predicts long and difficult negotiations if the centre decides to join. Despite that, Chen Fengying 陈凤英 China Institutes of Contemporary International Relations World Economy Institute director claims that China can reach CPTPP standards under the pressure of the 90-day truce. Chen also notes positively that constituting 50 percent of the total economy of Asia grants China a larger say in negotiations with a Japan-led CPTPP than with the US. Wang Yaohui 王辉耀 Centre for China and Globalisation director agrees that accession before the US not only saves China the trouble of confronting the US but also avoids risks of exclusion in case the latter includes a restriction provision in the coming US-Japan bilateral trade treaty.

Senior-level trade talks led by Liu He 刘鹤 vice premier are set for end January, and experts are optimistic they will reach agreement on technology transfer and intellectual property rights protection, both areas where China has accelerated reform. However, they also warn China against sacrificing long-term development for a trade war truce, particularly concerning US restrictions on high-tech exports to China.

In advance of talks, the US is building leverage by pushing ahead on bilateral trade initiatives. Long-shelved negotiations over the US-EU free trade agreement may soon restart after both sides evaluate its impact on industrial goods. Disagreements on agriculture, however, will remain the biggest hurdle, nor least concerning provisions on genetically modified food.

tags: trade agreements, trade in services,duties and tariffs, trade facilitation, trade barriers

in other developments…

Tsai Ing-wen addresses US audiences in LA in August, 2018


watching for

  • an increase in trade with Iran via Central Asia
  • renewed warmth in China–EU relations following Davos meetings
  • pushback against recent large scale Indian navy exercises

China–US relations beyond the trade war

While China–US trade war tensions grab headlines, Taiwan tensions and wins in space cooperation are attracting the attention of PRC analysts. Reports of potential US–Taiwan bilateral investment negotiations are not in Taiwan’s interests, argues professor Tang Yonghong 唐永红 Xiamen University Taiwan Research Centre deputy director. The US would disproportionately benefit from such a deal, while Taiwan needs closer cooperation with the mainland to weather international and domestic pressures.

January began with rhetorical standoffs between President Xi and Tsai Ing-wen; while Xi hailed cross-strait relations as unshakeable, Tsai publicly stated that Taiwan would welcome a British naval base in the South China Sea to rebuff mainland encroachment. Despite this, Ma Xiaoguang 马晓光 State Council Taiwan Affairs spokesperson affirmed improvements in bilateral relations and stressed China’s commitment to the ‘1992 Consensus’. Activism for ‘Taiwan independence’, he cautioned, counters Taiwan’s interests and must be resolutely opposed.

Meanwhile, experts have praised new opportunities for cooperation in space. This would promote global technological advancement and benefit the world, writes Wu Zurong 吴祖荣 China Foundation for International Studies researcher. Although it is the current leader in space technology, US dominance is unsustainable. The world needs cooperation in exploring space, a shared global resource, by both the US and China. China’s recent Chang’e 4 moon landing operation provides data to both China and the US, creating a positive environment for further cooperation.

tags: institutional voice, Taiwan/HK/Macau, foreign policy rhetoric

in other developments…

  • in continued analysis of Belt and Road Initiative impacts after five years, analysts write that it has given voice to practical elements of the ‘China solution’ and that 2019 will be a crucial period for BRI to expand in scope
  • reports indicate that Japan will purchase an uninhabited island south of Kyushu for US–Japan military exercises, drawing concern from Chinese analysts who argue it violates the pacifist elements of Japan’s constitution


Weng Tiehui 翁铁慧 | former Shanghai deputy mayor

Weng recently appeared at a high-level Ministry of Education (MoE) meeting; WeChat Account Zhengzhijian suspects she has been appointed to ‘a crucial post’ in charge of higher education. A Fudan alumni, Weng spent 22 years teaching and working at her alma mater before joining the Shanghai government in 2003 to oversee education. She was deputy mayor of Shanghai from 2014 to Jan 2019 and recently made an unusual appearance in a promotional video for popular video game DOTA 2, thanking the developer for choosing Shanghai to host its annual tournament (last year’s prize pool exceeded USD$25 million).

Wu Yingjie 吴英杰 | Tibet Autonomous Region Party Secretary

An exception to the rule that Tibet Party leaders parachute in from other regions, Wu has spent his entire political career there. He does not depart from the standard lines about Buddhist patriotism, guarding ethnic unity, and fighting against religious cliques, but he has been publicly supportive of preserving Tibetan heritage and finding funds for temple reconstruction. Wu has in recent weeks criticised local officials for failing to attend to residents’ basic needs and being out of touch with their daily lives.

Gao Zhanjun 高占军 | Harvard University visiting scholar & CITIT Securities manager

The trade war reflects a fundamental shift in US trade policy towards questioning globalisation and free trade while emphasising fair trade. Not only slowing growth in global trade and manufacturing, this also increases price fluctuation in such assets as stocks, bonds, currencies and commodities. The revamped NAFTA offers another perspective on Trump’s trade policy. Its tough requirements regarding labour standards and country of origin rules, liberalised agricultural markets and curbed investor-state dispute settlement mechanisms will serve as a template for future negotiations.

Wu Zurong 吴祖荣 | China Foundation for International Studies researcher

As a China–US scholar focused on military and technical development, Wu has condemned America’s military strategy. He argues that a variety of changes in American military logic threaten global stability, including the uptick in US military spending, lowered threshold for use of nuclear weapons, and the US’ strategic shift from combating terrorism to maintaining US power. Wu is equally critical of the Trump administration’s ‘space forces’, arguing that its creation exacerbates a mindset of conflict and strife over a vital shared resource.

in case you missed it…

cp.signals—domestic policy movement
gaokao: reform and reality clash
ceasefire: growth/de-leveraging

cp.positions—audit of shifts across policy sectors
governance: civil servant oversight and more…
economy: MIIT work conference and more…—monthly roundup
december: CEWC and more…
november: summit season