roundup from our portfolios

COVID-19 vaccinations are set to begin with Sinopharm’s vaccines approved, and free for all. First will be those at high risk of exposure and those who may be vulnerable after infection. Emergency use of vaccines began in July 2020; over a million have been vaccinated.

In other medical developments drug reforms are continuing; the latest candidates to enter the Reimbursable Drug List saw prices drop by 50 percent.

Despite 2020’s pandemic, Xi proclaimed ‘major victory’ over poverty to the Politburo Standing Committee at its 3 December meeting. Poverty may, by some metrics, be eradicated, yet unremitting calls to prevent relapses hint at remaining uncertainty. National security must become ‘holistic’; Chairman Xi and his commentariat insist on checking security everywhere and at all times.

New buzz-phrases were rolled out in year-end planning meetings. Underscoring domestic demand, leaders urged ‘demand-side reform’ (a seeming advance on ‘supply-side’ reform, dominant since 2015) at a Politburo meeting on the economy. ‘Demand-side’ management was also trending at the CEWC (Central Economic Work Conference). A work in progress, the new buzz-language signals urgency in stimulating demand. Monopoly phobia was on display with CEWC listing ‘reinforcing anti-monopoly and preventing the disorderly expansion of capital’ as a priority. Regulators reacted quickly, launching probes into Alibaba and Ant Group. Instructed to revert to payments, its core business, Ant Group must also meet capital and licensing requirements.

Tech autarky and supply chain security topped the CEWC agenda, channelling the 5th Plenum: further hinting they will be central in the coming 5-year plan. A heavy-handed approach can be expected from industry policy officials. Expect also action plans to shore up the manufacturing environment—e.g. internet powerhouse and basic research—and special industrial campaigns. For now, IC firms like SMIC, newly added to the US Entity List, will face uphill battles, regardless of state support.

An investment deal with the EU affords Beijing cards to play in its rivalry with Washington. Analysts urge mending fences with Biden, lest the chance pass. Yet Trump is deemed capable of last-act diplomatic vandalism, like a visit to Taiwan. Talks with Belarus and Ukraine have begun, part of the strategy to sign more trade deals with Belt and Road partners.

Addressing the Climate Ambition Summit on 12 December, Xi announced stronger 2030 targets for Nationally Determined Contributions. Heightened climate ambitions also made their way into next year’s economic agenda, with the CEWC listing carbon peaking and neutrality among its eight priorities. An action plan to peak carbon emissions before 2030 will be the overarching text guiding next-phase climate activity and green transition. The Yangtze River Protection Law, the first protecting a particular catchment, was passed on 22 December.

The ‘three rurals’ (interpreted by Xi on 1 January as food security) is back at the top of ag and rural work. A shift is also evident from poverty alleviation to broader ‘revitalisation’, reiterated by the Central Rural Work Conference of 28-29 December. High-quality and -efficiency agriculture, liveable and workable rural areas, and prosperous farmers are promoted. The CEWC, mentioned above, also talked up ’storing food in the ground’ a strategy prominent in 2016, stepping up research in seed technology and farmland conservation.

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featured analysis

container supply shortage: shipping costs out of China soar

14th 5-year plan outlook: trade priorities

Trade policy planning is not short of clashing priorities in search of solutions, including: positioning for rival trade agreements; building ties/reducing risk across BRI; adopting overseas standards vs. promoting Beijing’s own. full post open access →

december policy movers

policy professionals in and out of the establishment

Shen Xiaoming 沈晓明 | Hainan Party secretary

Promotions in the provinces in advance of a National Party Congress help tip Politburo prospects. Prior to his appointment, Shen was Hainan’s governor, credited with local health system upgrades, and reducing reliance on real estate. His earlier experience was in reforming Shanghai’s health sector. Praised by official media as a ‘scholar–cadre’, i.e. both red and expert, he is the first provincial Party secretary to hold a PhD in medical science. With Hainan receiving increasing attention from Beijing, Shen’s promotion is definitely one to watch.

Huang Yiping 黄益平 | Peking University professor

Australia-trained economist with experience on the PBoC Monetary Policy Committee, Huang works with several prominent think tanks, e.g. the China Finance 40 Forum. Amendments to the People’s Bank of China Law concern him: they leave much unclear, e.g. whether expanded policy functions are transient or long-term, meaning relations between PBoC and the State Council’s Financial Stability and Development Committee are poorly defined. They fail to spell out implications of the bank’s mandate over monetary policy, credit policy and macro-prudential regulation, or which institutions are deemed systemically important, hence qualify for the bank’s liquidity support.

Yang Yansui 杨燕绥 | Tsinghua University Research Centre for Employment and Social Insurance director

Yang has been calling for pension reform since 2012. Central policy favours gradual rollout, yet as a spike in retirement will hit in 2023, placing a huge burden on pension funds, delayed retirement, she argues, must be brought in immediately. A fixed age should be set for pension eligibility. Those retiring earlier will receive less; they could gain by waiting. Jobs will not decline if retirement is delayed, argues Yang: there will be many more health and aged care jobs to be filled.

policy ticker highlights

gems from our feed of policy releases and domestic debate

global impact

proposals to improve China–US ties

Weixin (1), Weixin (2) | 8 December

context: Analysts are eager to seize the opportunity to push for more proactivity from Beijing, despite knowing that US hostility will not decrease from a Biden administration.

China should be proactive in reshaping bilateral ties in order to showcase diplomatic confidence, argues Li Wei 李巍 Renmin University professor of international relations. Li proposes

  • sending a high-level representation (ranked at least at the vice-national level e.g. vice-premiers, Politburo members, etc.) to Washington within three months of the inauguration
  • preparing a detail list of tasks seeking cooperation, particularly in global pandemic control
  • seeking consensus on climate change
  • preparing a plan for economic cooperation to address US pressure to deliver economic recovery

The two countries should establish a crisis management system to prepare for a worst-case scenario in bilateral relations, argues Yuan Zongze 阮宗泽 CIIS (China Institute for International Studies) Centre for Xi Jinping Thought on Diplomacy vice-director. The system should clarify ‘who will pick up the phone’ in an emergency situation in order to keep communications clear at all times.


outline on building a ‘rule of law’ society released

State Council | 7 December

context: Rules-based governance is deemed crucial to building a ‘basically modernised socialist system’ by 2035. Efforts to buttress legal processes under heightened Party leadership have been an essential feature of Xi’s political agenda, an approach recently crystallised under Xi Jinping Thought on the Rule of Law.

CCP Central Committee issued ‘Implementation outline for building a rule of law society (2020-25)’ on 7 Dec 2020. The ‘Implementation outline’ specifies

  • targets
    • 2025: providing a solid foundation for 2035 target by
      • bringing current efforts to popularise legal work to completion
      • further integrating core socialist values with legal work and social governance
      • ensuring that the legitimate rights and interests of citizens, legal persons and organisations all benefit from solid guarantees
      • building a law-based system suited to national conditions and the current times, and satisfying the people
  • strengthening public awareness of legal affairs
    • protecting and publicising the authority of the Constitution
    • consolidating legal understanding of all citizens
    • enhancing responsibility system targeting relevant cadres and agencies
    • shaping a socialist legal culture
  • buttressing institutional norms across society
    • completing legislative work in key sectors of society
    • promoting societal norms building
    • integrating moral and legal norms
    • reinforcing social integrity and social credit system
  • heightening rights and interests protection
    • expanding public participation channels in socio-economic policymaking
    • guaranteeing rights of all involved parties amidst administrative and law enforcement
    • ensuring judicial protection of legitimate rights and interests
    • streamlining legal public service provisions
    • building a legal duty responsibility system targeting social entities
  • promoting rules-based social governance
    • upgrading social governance mechanisms, expanding co-governance channels
    • broadening rules-based governance across all levels and sectors
    • stressing the role of social organisations in shaping a ‘rule of law’ society
    • heightening sense of security
    • enhancing the efficiency of rules-based approaches to solving social conflicts
  • bolstering cybersecurity
    • boosting cybersecurity legal system
    • fostering cyber law awareness
    • providing legal guarantees for safe internet use


Central Economic Work Conference sets out eight key tasks for 2021

Xinhua Net, Shanghai Securities News, China Economic Daily | 21 December

context: The annual CEWC (Central Economic Work Conference) is the main agenda-setting event for the upcoming year. Answering debates on whether or not to extend COVID-time support policies, CEWC gave reassurances that necessary support for the economy would be continued, but more efficiently and precisely. Among concerns, expanding innovation and domestic consumption figure prominently.

Eight key tasks must be carried out in 2021 as per the CEWC readout, including

  • strengthening national strategic scitech capabilities
  • enhancing independent controllability of industrial supply chains
  • expanding domestic demand
  • comprehensively promoting reform and opening up
  • solving the problem of seeds and cultivated land
  • reinforcing anti-monopoly and preventing the disorderly expansion of capital
  • solving the housing problem in large cities
  • carrying out the carbon emission neutrality agenda

Overall directives and expressions of interest include

  • ensuring that macroeconomic policy in 2021 is
    • continuous
    • stable
    • sustainable
  • continuing implementing proactive fiscal policy and prudent monetary policy
    • maintaining necessary support for economic recovery
    • making policies more precise and effective
    • strengthening the financial guarantee for major national strategic tasks
  • concentrating in a timely fashion on promoting reform and innovation in
    • technological innovation
    • transforming the economic structure
    • adjustments to income distribution
    • resolving local government implicit debt
  • stablising and balancing
    • the macroeconomic leverage ratio
    • the RMB exchange rate
    • the growth rate of money supply and the scale of social financing (to basically match the nominal economic growth rate)
  • ramping up
    • financial support for technological innovation, SMEs, and green development
    • reform of interest rate and exchange rate marketisation
    • multi-channel replenishment of bank capital
    • legal construction of the bond market

The gist is to strike a fine balance between economic recovery and managing risks, notes Dong Ximiao 董希淼 Merchants Union Consumer Finance chief researcher. With the emphasis on maintaining the continuity of policies, CEWC has managed to stabilise market confidence and expectations, Dong believes.


‘three rurals’ priority reiterated at Central Rural Work Conference

Farmers’ Daily | 29 December

context: The priority of the ‘three rurals’ (i.e., ag, farmers and rural) in Party work, set out in the 2017 CRWC and stressed in 2018 and 2019, was reiterated at the 2020 conference. The priority depends on the assignment of cadres, allocation of resources, investment of public funds, and provision of public services. The focus of ‘three rurals’ work will shift to rural revitalisation from 2021, aiming for comprehensive revitalisation, beyond ag, in rural areas, as the Party completes its anti-poverty campaign.

The Central Rural Work Conference (CRWC) was held in Beijing 28-29 December, at which Xi Jinping delivered a major speech, stressing that the whole Party must fully understand the importance and urgency of doing “three rural” (sannong 三农) work in the new development stage, make solutions in this work top priority, and promote revitalising the countryside. This work encompasses promoting high-quality and high-efficiency agriculture, liveable and workable rural areas, and making farmers prosperous.

Highlighted core ag working tasks include

  • protecting the farmland ‘red line’ at 1.8 bn mu (c. 120 million hectares)
  • building high-quality farmland
  • protecting black soil resources
  • promoting R&D of core ag tech
  • stabilising and strengthening farmer subsidies
  • increasing grain purchasing and storage capacity
  • insisting on and improving the minimum purchasing prices of rice and wheat
  • expanding ag cost and income insurance
  • implementing the system of responsibility of governors and Party secretaries for food security
  • deepening ag supply-side reform, promoting standardised production, high-quality varieties and branding
  • continuing efforts to recover pig production
  • supporting ag companies to invest abroad
  • curbing food waste

Efforts beyond the ag sector are needed to achieve rural revitalisation. The conference called for

  • developing rural industries based on local endowment
  • improving interest linkages to benefit small household farmers
  • strengthening spiritual civilisation in rural areas
  • strengthening environmental protection and ecological civilisation, controlling ag pollution
  • deepening rural reforms to activate production factors
  • strengthening rural public infrastructure building, improving rural living conditions
  • optimising institutions for county-centric urban-rural integration
  • improving rural governance

CCP and State Council’s ‘Opinions on comprehensively promoting rural revitalisation and speeding up rural and ag modernisation (draft)’ was discussed at the conference.


COVID-19 vaccination to follow two-step plan

Caixin, Yicai | 23 December

context: The momentum for vaccine distribution has slowed as the epidemic has largely remained dormant. Mobilisation is needed to get people vaccinated, and a lack of vaccine trial data has not allayed fears. But recent small-scale outbreaks may accelerate progress.

State Council held two press conferences, on 19 and 21 Dec 2020, on COVID-19 vaccination, reports Caixin. Zeng Yixin 曾益新 National Health Commission vice-director says the vaccination plan consists of two steps, namely

  • vaccination for people at high risk of virus exposure (‘key populations’), including those who work in cold chain logistics, customs, transportation, fresh food markets and healthcare institutions
  • vaccination for people at high risk of serious consequences after infection (‘high-risk populations’), including elderly people and those with existing conditions

Vaccination for others will follow afterwards.

Local governments are already preparing lists of ‘key populations’. But some have declined vaccines as cases remain few and vaccines are yet to be formally approved.

Vaccine delivery will be central. Sinopharm, one of the vaccine developers, has already prepared 880 cold chain transportation vehicles, each of which can carry 200,000 vaccines, reports Yicai. Drills have been performed to ensure efficient and safe vaccine delivery. Sinopharm will also cooperate with Fosun to deliver the Pfizer/BioNTech vaccines.

Financial issues could hinder progress. Current vaccines are all priced at 200 per shot. All people require two shots. Together with service and transportation fees, vaccination will cost 458. A local CDC worker says costs will keep the vaccination rate low, but fiscal budgets will come under pressure if local governments decide to reimburse vaccines. Zhang Wenhong 张文宏 Huashan Hospital Department of Infection director predicts urgency for vaccination will arrive in H2 2021, when global transportation resumes following vaccination in other countries. He hopes that the national immunisation plan will categorise COVID-19 vaccine as a type I vaccine, making it free and compulsory for all.

energy and environment

Xi Jinping announces strengthened 2030 climate targets

Xinhua Net | 12 December

context: Following his carbon neutrality pledge, Xi provided updated climate commitments. In the right direction and adding credibility to earlier announcements, they represent a boost of previous NDC pledged targets which aimed to cut carbon intensity by 60-65 percent and increase the share of non-fossil fuels to 20 percent. The 1.2TW goal appears to be lower than renewables industry experts predicted, although it is more of a bottom line than an upper limit, and the 25 percent goal could lead to higher installation capacity.

Chairman Xi Jinping announced details of China’s updated NDCs (nationally determined contributions) in a keynote address to the Climate Ambition Summit on 12 December. By 2030, Xi declared

  • China’s carbon emissions per unit of GDP will fall by over 65 percent compared to the 2005 level
  • non-fossil energy will account for around 25 percent of primary energy consumption
  • forest stock volume will expand 6 bn cubic metres compared to the 2005 level
  • combined installed capacity of wind and solar power will reach over 1.2TW

Xi also recommended

  • building open and collaborative climate governance
  • observing the principle of common but differentiated responsibilities; scaling up financing, tech and capacity support for developing nations
  • adhering to a green recovery

science and innovation

scrutinising monopolies in the platform economy long overdue

Xinhua Net, State Administration for Market Regulation, People’s Daily, China Economic Daily | 24 December

context: Efforts to regulate internet companies are widely applauded, with references to similar trends in the US and EU. Although Alibaba is on the receiving end now, Big Tech is set to benefit from the state’s push for self-controllable technology, which was also highlighted by the CEWC (Central Economic Work Conference).

Anti-monopoly and anti-unfair competition is needed for the socialist market economy and high-quality development, said CEWC on 18 Dec 2020. Innovation at digital platforms is encouraged, but regulatory compliance and digital rules need to improve, said the official statement, calling for

  • legal standards for monopoly recognition, data management and consumer rights
  • regulation and oversight

Financial innovations require strict supervision, concluded CEWC. (CP note: referring to Ant Group’s delayed IPO.) Alibaba Group, to which Ant is affiliated, is subject to an anti-monopoly investigation, said SAMR (State Administration for Market Regulation) on 24 December. The investigation focuses on pressure on suppliers to break with Alibaba’s competitors. (CP note: a common practice targeted by draft ‘Platform economy anti-monopoly guidelines’ from 10 Nov 2020.)

The platform economy is not falling out of official favour, comments People’s Daily. The state is guaranteeing its healthy development. If the online economy, which owes everything to state encouragement, runs ahead of legal restraints, its growth will not be sustainable, says the article. (CP note: contradicting Jack Ma’s poorly received public speech for regulators to step back.)

Internet platforms tend to lose innovativeness as they become big and dominant, says Huang Qunhui 黄群慧 Chinese Academy of Social Sciences. But countering monopolies does not automatically mean stopping mergers or breaking up firms, adds Zhu Wei 朱巍 China University of Political Science and Law. Once finalised, says Zhu, the guidelines will cause platforms to self-regulate and enable SMEs to innovate. Big Tech should go back to its origins, adds Ma Chao 马超 fintech expert, and embrace innovation and competition.

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