watching for

  • results of 21-24 Feb 2019 trade talks in Washington
  • third review of Foreign Investment Law and passage at Two Sessions
  • provincial and municipal implementation rules following the GBA plan

GBA plan unveiled as trade talks accelerate

US-China trade negotiations are nearing their 2 Mar 2019 deadline before another tariff hike. After China promised to import more US products at a late January meeting, the two sides met again 14-15 Feb 2019 in Beijing before moving to Washington. Taking heart from these meetings, state media are playing up mutual desire for a deal.

Mid-February talks ended on a positive note. For the first time, a memorandum of understanding was mentioned in official reporting. While US media view the MOU as nothing more than a mechanical combination of each sides’ offers, Xinhua surmises that the talks are inching towards conclusion. Discussions over an enforcement mechanism, as demanded by the US, are also underway.

The good vibe of the mid-February meeting continued into the latest talks starting on 21 Feb 2019. The extension of talks by two more days hinted that negotiators have begun drafting an agreement, supposes state media, noting the leaders’ role in changing the trajectory of the trade talks, including Trump’s insistence on a ‘trade agreement’ rather than an MOU. Structural issues remain central, particularly over intellectual property rights (IPR) and technology transfer. Experts from a Chinese think tank note that the US government has shifted focus from trade deficits to IPR and technology, responding to pressure from China’s rapid development in artificial intelligence and other emerging technologies. In response, China should aim for a mutually beneficial deal instead of accepting agreement at any cost, argues Zhou Xiaoming 周小明 Permanent Mission of China to the United Nations former deputy representative.

A long-anticipated development plan for the Guangdong–Hong Kong–Macao Greater Bay Area (GBA) was unveiled 18 Feb 2019, aiming to cultivate a new growth engine for the slowing national economy, along with plans to promote Yangtze River Delta integration and set up the Hainan Free Trade Port. According to Ding Li 丁力 Guangdong Academy of Social Sciences director, the focus is primarily political: integrating Hong Kong and Macao with development in mainland China. Hong Kong is expected to dominate regional growth with its advantages in modern services, matching the mainland’s manufacturing power.

Technological innovation is a major theme of the GBA plan, resonating with the Party’s reliance on innovation as a developmental driving force. Integrating sci-tech resources will be vital, notes Lin Jiang 林江 Sun Yat-Sen University FTZ Research Institute, but it will take years to harmonise IP protection, research ethics and scientific standards. Compared with other celebrated bay areas, GBA’s unique feature—one country, two systems—poses hurdles to regional integration. Different customs, financial and legal systems hamper the free flow of people, capital and information in the region. The GBA plan hence incorporates schemes to attract human capital and facilitate trade and investment.

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

in other developments…

  • China’s January trade data beat forecasts, driven by exports to the EU and emerging markets, but the uptrend may not be sustainable considering inconclusive outcome of US-China trade talks
  • Spring Festival sales broke records amid slowing consumption growth; to sustain consumption’s role in generating economic growth, MofCOM plans a national conference in April to guide stimulus measures

six localities to pilot on-demand nursing services


watching for

  • the Two Sessions
  • third round of ‘talent war’ heating up
  • medical device registration process streamlining

state pushes hospital reform and affordable cancer and rare disease therapies

State Council proposes new performance criteria to evaluate third-tier public hospitals. The scheme seeks to ensure fairness, profitability, and effective management in public care providers plagued by both market and government failures for decades. Among major change, a 30 percent cap on prescription drug revenue as a ratio of total income is replaced with requirements on ‘rational’ prescribing and dosage. This rule was unsuccessfully initiated to curb over-prescription resulting from the 15 percent markup policy. In practice it exacerbated the situation, hindering patients’ access to expensive patented drugs. A better approach to budget control may include routine prescription cost analysis and insurance payment based on diagnosis-related groups (DRGs), says Jin Chunlin 金春林 Shanghai Healthcare Development Research Institute.

Also featured is an unprecedented push for performance-based compensation of clinical practitioners, notes Zhang Zongjiu 张宗久 National Health Committee (NHC) Department of Healthcare Policy director-general. Hospitals are to invest in staff training, maintain balanced nurse-to-physician ratios, and recruit specialists in short supply (particularly anaesthetists, paediatricians, pathologists and intensive care physicians). Doctors are encouraged to generate income from caring for patients and practising in multiple care facilities.

State Council’s 11 Feb executive meeting urged early screening and affordable treatment of malignant tumours and rare diseases (RD). According to Wang Ping 王平 National Medical Product Administration (NMPA) Department of Drug Registration director, the average wait for anti-cancer drug approval was halved to 12 months in 2018; 18 new anti-cancer drugs were approved, well over 50 percent more than 2017 approvals. Next, NMPA will identify a second batch of urgently needed anti-cancer drugs for fast-track approval and reimbursement. NHC is building a national rare disease (RD) diagnosis and treatment hospital network consisting of 324 member hospitals, led by Peking Union Medical College Hospital (PUMCH). The network will work to standardise screening, diagnosis, treatment and follow-up for RDs; it will also facilitate patient referral, remote diagnosis, orphan drug supply and RD cohort studies, says Zhang Shuyang 张抒扬 PMUCH vice president.

tags: public hospitals, service agencies, pharmaceuticals, health insurance

in other developments…

meeting of China Society for Economic Reform Research Institute 24 Jan 2019


watching for

  • attacks or support for policy-making speech at China Economists 50 Forum
  • strong restatement of need for Party leadership over law
  • further personnel changes in Xinjiang

new disturbances at the top, persisting difficulties below

The process of decision-making—above all, the way policy documents are drafted—has become a subject of disquiet in the upper echelons. Of particular concern is the ‘excessive’ discretion of administrative departments in determining the bounds of debate. Airing unhappiness outside authoritative Party media usually signals tension among political leaders, and this is likely no exception.

Warnings aimed at local governments continue, with one major city’s Party secretary cautioning cadres to rein in unrealistic ideas and promises, and a provincial head telling mid-level administrators to stop bothering officials with inspections and meddling in work for the masses. In some locations, the Party is reassuring officials that new approaches and more initiative are welcome and will result in promotion.

Rural governance challenges are also receiving more attention in Party media, underlining Beijing’s concern with administrative obstacles in the countryside and its consent to experiments designed to deal with them. Problems in poverty alleviation programs, including corruption by local officials, continue to trouble central authorities. Graft as a recurrent problem has led one city district to plead for more personnel and realign its administration to cope.

tags: accountability, personnel, anti-corruption

in other developments…

P5 conference in Beijing on 31 Jan 2019


watching for

  • Beijing’s reaction to forthcoming Trump–Kim summit in Vietnam
  • questioning of BRI as Beijing begins taking security measures
  • tension among Islamic states over Xinjiang following criticism by Turkey and endorsement by Saudi Crown Prince in Beijing

security disquiet: regional challenges, global implications

Announcement of US withdrawal from the Intermediate-Range Nuclear Forces (INF) Treaty prompted anger and disappointment from Beijing, drawing negative reactions from analysts. Questions loom over whether a US–Russia nuclear arms race will influence Korean denuclearisation efforts. Beijing sits in an awkward position: despite reaching consensus and increasing its proactivity in international arms control, it does not intend to multilateralise the INF Treaty.

Beijing remains watchful in the South China Sea as threats appear to multiply. US Freedom of Navigation Operations (FONOPs) are not the only challenge in the waters. In the long run, Australia is likely to deploy its 12 just-ordered submarines there, raising regional tensions, argues a recent PLA study. Joint US–Australia–Japan operations are also on the cards, pursuing the US Indo-Pacific strategy.

Japan, for its part, launched a new series of joint maritime initiatives involving Southeast Asian nations. In addition to consolidating and strengthening Japan–ASEAN relations, Japan will impart its ‘war experience’ through the Japan Coast Guard, likely to extend China–Japan maritime competition from the East China Sea to Southeast Asia.

tags: maritime power, South China Sea, North East Asia, Australia/NZ, belt and road, US/Canada, Russia

in other developments…


Zhou Xiaoming 周小明 | Permanent Mission of China to the United Nations former deputy representative

A veteran diplomat with experience in Australia, the UK and Geneva, Zhou is currently a senior fellow at the Centre for China and Globalisation, commenting extensively on China’s economic and commercial issues. A trade agreement can hardly clear up differences between the two countries, he argues: it will not stop US containment on the political, security and technological fronts. One-sided compromises on China’s part only weaken its competitiveness in the long run. On the other hand, walking away from a bad deal is unlikely to start a cold war, given US and its allies’ strong economic dependency on China. Failure to reach a deal is not entirely bad for China; it is more important to reach a deal that benefits China than to reach a deal at any cost, he stresses.

Xiong Xianjun 熊先军 | National Medical Insurance Administration (NMIA) Department of Pharmaceutical Services director-general

Xiong is among the key decision-makers behind China’s national health insurance system. Appointed coordinator of NMIA’s healthcare division in May 2018, he took charge of the Pharmaceutical Service Department in late October. He holds a Ph.D in medical sociology from University of Hamburg, and has overseen reforms of basic medical insurance schemes in the Ministry of Human Resources and Social Security since 1998. His main tasks at NMIA will be to push case-based and DRG-based payment system reform and adjust the Reimbursement Drug List (RDL) to improve patient access to medications.

Zhang Lei 张雷 | Shenyang Party Secretary and Liaoning Provincial Standing Committee member

Zhang believes that a dearth of new ideas is the greatest obstacle to development, and that local officials are falling prey to conventional thinking. Some cadres, he argues, fail to realise economic growth needs many kinds of enterprise. They are often too impatient, making exaggerated claims and relying on property sales to develop their area instead of proceeding in a practical, orderly manner. Party members need to work on self-renewal and recognise the connection between success and taking initiative, both for cadres themselves and the residents for which they are responsible.

Fu Cong 傅聪 | Ministry of Foreign Affairs (MFA) Arms Control Department Director

Fu spent several years (2005-12) on China’s UN team in Geneva, focusing on security affairs. From 2013 to 2015 he was the MFA Cyber Affairs coordinator, before being promoted to direct the MFA Arms Control Department in 2018. Fu has since been involved in bilateral and multilateral dialogues on arms control, proliferation, and terrorism. He is likely to be at the centre of future dialogues between China, the US, and Russia following US withdrawal from the INF Treaty.

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