roundup from our portfolios

March is always a big month for legislative theatre around the annual Two Sessions. This year it was amplified by release of the next 5-year plan setting Beijing’s post-COVID course (see our signal on what stands out in the 14th 5-year plan). Gesturing towards a 2021 GDP growth target of ‘over 6 percent’, Premier Li Keqiang 李克强 ended speculation that targets might be dropped. Dropped indeed from the 5-year plan, they will now be set annually. Other goals for 2021 include 11 million new urban jobs, holding notional joblessness to some 5.5 percent and CPI up 3 percent. SOE reform is also on the cards: new regulations will redouble supervision and address budget management and disposal of bad assets.

The new plan touts trade advantages of the PRC’s ‘ultra large’ market and urges promoting BRI. Beijing is working to position itself as ‘trade nurturing’, in contrast to the ‘de-globalising’ US. New deals (RCEP, China-EU Comprehensive Agreement on Investment, China-New Zealand FTA) are deemed cases in point. Talks, reports Ministry of Commerce, on a China-Japan-Korea FTA, with the Gulf Cooperation Council, and with Israel and Norway, are to be moved forward.

Grain imports more than doubled y-o-y in Jan-Feb 2021. Mainly feed grain, they are vital to food security. Given pressure on the supply side, ways of reducing and replacing soybean and corn in feed formulas are urgently called for. Crop rotation and fallowing, expanded to cover some 2.7 million ha of farmland, are intended to boost corn acreage in northeastern provinces via rotation among tubers, minor cereals and beans, as well as corn.

A new energy mix dominated by renewables was underscored at the top Party economic committee meeting on 15 March. Wind and solar power are central to the system. Ways are being sought to lower their costs. Firms not yet receiving subsidies may apply for loans.

Urging ‘indigenous innovation’ is again in overdrive with unveiling of the new 5-year plan. To serve a vision of self-sufficiency, Beijing is building a ‘national team’ of campuses and businesses to tackle scitech bottlenecks. Tech giants are expected to fall in line with the new emphasis in the plan on enforcing competition policy; all eyes are now on the probe into Alibaba’s anti-competitive practices.

Actively coping with ageing is now a national strategy that includes pension reform and retirement deferral. The Ministry of Human Resources and Social Security is rolling out individual pensions, in tandem with detailed requirements for raising the legal retirement age.

A campaign to study Party history is in full swing. Ideology czar Wang Huning 王沪宁 chaired a mobilisation meeting on 15 March; several institutions and provinces have already held their own. Now made public, the curriculum holds few surprises: it is dominated by Chairman Xi’s treatise on Party history. Speaking of ongoing rectification in political-legal affairs, a Xinhua commentator spoke of ensuring ‘vermin have no escape’.

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featured analysis

imported wine on display
imported wine on display

buyers’ views on food imports

With geopolitical tensions mounting, diversifying ag imports has become a prime concern for Beijing. Established ag trading partners like Australia, Canada and the US have lost markets. What has it meant for consumers in the PRC? full post open access →

march policy movers

policy professionals in and out of the establishment

Lu Jiehua 陆杰华 | China Population Association vice president

Peking University sociologist Lu teaches demography. Echoing calls to remove nationwide birth restrictions, he comments widely on aged care. In China it will remain, he argues, overwhelmingly provided via communities rather than independent aged care institutions. Thus, he advocates ‘embedded aged care’ that delivers services to the door. The ‘silver hair’ industry, he predicts, is on the verge of a boom.

Feng Fei 冯飞 | Hainan governor

Seasoned civil servant Feng has served in State Council research offices, with a stint as head researcher in the industrial economy portfolio, before becoming a deputy minister in the Ministry of Industry and IT. Newly promoted, he champions intensified training of the highly-skilled; he will focus on improving Hainan’s online social management and the visa-free entry scheme, with plans set for 10 percent GDP growth on the island in 2021. Other goals include preparing for the free trade port, launching 2021.

Chen Hongmin 陈宏民 | Shanghai Jiao Tong University Antai School of Economics and Management professor

Advisor to Shanghai’s city government, Chen favours nationalising the tech giants’ key assets, not least their vast troves of data—a quasi-public good with scale advantages, otherwise monopolised by platforms in the name of user privacy. Only when able to detect and curtail monopoly practices, argues Chen, should the state allow big tech to flourish.

policy ticker highlights

gems from our feed of policy releases and domestic debate

trade policy

trade highlights from Two Sessions

China Trade News, Comnews, 21st Century Business Herald | 11 March

context: ‘Dual circulations’ outlined the state’s attitude to decoupling and the 14th 5-year plan has predictably focused on that, by prioritising domestic innovation and spending, the latter by boosting low-income groups. For trade, this means exports and imports are welcome and FDI in high tech fields will be encouraged.

While the domestic economy was the major focus of Two Sessions, trade was discussed in interviews with MofCOM (MInistry of Commerce) officials, and the draft 14th 5-year plan noted

  • expanding opening-up
  • relying on the advantages of the large-scale market
  • promoting international cooperation
  • achieving win-win results
  • promoting BRI

Discussing specifics of the agenda for 2021 Wang Wentao 王文涛 MofCOM minister noted

  • advancing negotiations on the China–Japan–Korea Free Trade Agreement
  • consider joining CPTPP
    • some preliminary work done including making informal contacts
    • building a network of free trade zones
    • expanding courses to help firms and local governments understand RCEP

Wei Jianguo 魏建国 former MofCOM vice-minister added

  • free trade zone pilots previously focused on traditional areas such as trade and investment
    • moving forward, the priority is
      • increasing zero-tariff ratio
      • relaxing services market access
      • cross-border e-commerce
      • environmental protection
      • intellectual property rights
      • government procurement
  • China is looking at trade negotiations with
    • Gulf Coast Council
    • Israel
    • Norway
  • rearranging industrial chains is not a negative, as long as China remains the ‘main gear’; for example some textile and apparel manufacturing industries may shift to ASEAN, but China can focus more on apparel design and high-end fabric production

However, not everyone is so encouraging of more opening. Gao Rongkun 高融昆 Shanghai Customs commissioner highlighted more opening means there are increased concerns around foreign financial, data, and health risks. He advocates multifaceted monitoring to include port security and cyberspace.


Xi bringing ‘great changes in the New Era’

People’s Daily | 19 March

context: Xi Jinping announced the country was entering a ‘new development stage’, an historic leap towards ‘becoming strong’ over the next three decades on 11 Jan 2021. While Deng Xiaoping was the ‘chief architect’ of the previous stage, the present commentary strongly signals that Xi is to be given credit for what it is coming next.

People’s Daily issued an authoritative front-page commentary entitled ‘Great changes in the New Era’ on 19 Mar 2021. With Xi Jinping at its core, the Party achieved historic successes with unseen determination and force, deepening reforms and restructuring across sectors, it stresses. The reform and opening up of the past 40 years had been a moment of awakening for the Party. As it now stood at a new historical juncture, the Party of the New Era has to lead efforts to deepen reform in order to take this great awakening to new levels, the commentator continues.

Deng Xiaoping, the ‘chief architect of reform and opening up’, had awakened the country’s dormant forces and allowed the Party and the people to catch up with the times, the piece notes. In the New Era, Xi Jinping is personally leading this ‘great revolution’ towards new frontiers, a revolution which will define the future of the Party and the country.

In the process, Chairman Xi maintained a far reaching historical perspective and a strong sense of mission, it continues, developing original reformist thinking, which has

  • emphasised promoting social justice and the well-being of the people
  • defined reforms’ roadmap, answering major questions of global and strategic importance across various fields
  • identified scientific and effective methods, forming the most comprehensive and systematic reform methodology since the start of reform and opening up

Implementing new development patterns will be essential to deepen reforms as the country moves forward. A new journey has begun, and the pace of reform must never stop, the commentary concludes.


advocating SOEs becoming ‘the strategic pillar’

State-owned Assets Supervision and Administration Commission | 10 March

context: The role of SOEs (state-owned enterprises) becomes more important under Xi, despite his earlier mantra of ‘giving the market a decisive role in resource allocation’. The goal of market-oriented SOE reforms is never to raise the role of market actors, but to use the market framing to reshuffle and strengthen SOEs.

Hao Peng 郝鹏 SASAC (State-owned Assets Supervision and Administration Commission) chairman published an op-ed in Study Times, the CCP mouthpiece. SOEs, according to Hao, are the critical material and political foundation of CCP-governed socialist society with Chinese characteristics. In accordance with secretary-general Xi Jinping’s strategic view, Hao fleshed out priorities of SOE work in the 14th five-year plan, including

  • strengthening state-owned capital and SOEs in terms of quality and size
  • building world-class SOEs to foster leading companies in industries, innovation, and specialised supporting sectors

SOE high-quality development should follow Xi’s new development philosophy, says Hao, specifically

  • enhancing quality and efficiency through the new performance metric consisting of total profit rate, R&D investment intensity, aggregate productivity, and debt-to-asset ratio; modern management systems and product and service quality must be emphasised
  • improving weak links by guiding SOEs to invest in critical economic, technological, defence, and security sectors
  • deepening reform in labour, human relations, and distribution systems
  • preventing risks from investment and financial debt, as well as foreign-related risks

SOEs must be at the forefront of the dual circulation development model, adds Hao, becoming the

  • ‘national team’ in technological innovation
  • commander of modern industrial chains
  • main driving force of internal circulation
  • platoon leader in going global



replacing corn and soybeans in animal feed

Weixin (1), Yicai, Weixin (2) | 15 March

context: In the context of increasing consumption of animal products and dependence on grain imports, central policy has demanded corn and soybeans be replaced in animal feed to ease food supply pressure and lower the costs of feedstuff.

Feeling the pressure from surging feed grain imports, MARA (Ministry of Agriculture and Rural Affairs) released a notice urging the reduction and replacement of soybeans and corn in feed formulas. Aiming to come up with technical and work plans within 40 days, it specifies

  • tasks
    • building and improving a feed grain nutrition database and platform
    • developing low-protein formulas for pigs, broilers and layers
      • replacing corn and soybeans with paddy rice, wheat and tuber crops, etc
    • promoting formula and processing systems
  • timeline: finalising technical systems and an implementation plan by end April

Imports of soybeans and corn were alarmingly high in 2020, with alternative grains such as wheat, sorghum and barley also seeing rising overseas procurement. The momentum of increasing feed grain imports continued in the first two months of 2021, registering more than 200 percent y-o-y growth, while corn and soybean prices skyrocketed, per the General Administration of Customs. Since 80 percent of imported grains will be used for animal feed, optimising formulas to reduce soybean and corn use and developing new forage resources (such as alfalfa and oat grass) are much needed, says Chen Mengshan 陈萌山 State Food and Nutrition Consultant Committee director. Taking up 30 percent of animal feed but having low nutrition use efficiency, soybeans have the potential to be cut. Reducing the share of soybean meal by 3 percentage points means saving 11 million tonnes of soybean meal and 14 million tonnes of soybeans, estimates Xiang Zhonghuai 向仲怀 Chinese Academy of Engineering academician.


individual pension funds to be rolled out soon

21st Century Business Herald, Yicai | 3 March

context: Though pilots for innovative pension products have stalled in previous years, they have been revived as the demographic problem of ageing looms larger.

At the 26 Feb 2021 MoHRSS (Ministry of Human Resources and Social Security) press conference, You Jun 游钧 MoHRSS vice minister said individual pension funds, ‘the third pillar of pension’, will be rolled out soon, reports Yicai. Personal accounts will be created and people can voluntarily participate. Tax incentives will be offered and the funds will be invested in the market.

According to Luo Xi 罗熹 People’s Insurance Company of China chairman, individual pension funds are underdeveloped, reports 21st Century Business Herald, but can play unique roles in the mix of the nation’s pension schemes, by

  • providing pensions for high income groups
  • expanding coverage to workers in new forms of economies
  • long-term pension funds can promote a healthy financial market

The industry has already heeded the call. The areas of focus include

  • commercial pension products
  • long-term care
  • developing aged care products
  • participating in managing pension funds

Commercial pensions collected 71.2 bn of premiums in 2020 and accumulated a statutory reserve of 580 bn, a growth of 22 percent from early 2020. Many firms also take part in Basic Pension Insurance and enterprise annuity investment, as well as IIT-deferred pension. A new specialised commercial pension pilot is being prepared to launch in Beijing and Zhejiang.

Two Sessions delegates have made further suggestions, including

  • clarifying the definitions of third pillar pension products
  • support for the insurance industry to innovate new pension products, such as house-for-pension schemes
  • providing the elderly and patients easier access to commercial insurance
  • supporting insurance companies to invest in aged care institutions and communities

Pensions are also being pooled nationally. ‘Reform plan to nationally pool enterprise employee pension’ was passed by the Central Deepening Reform Commission as early as 14 Feb 2020.

energy and environment

tackling financial hardships for solar and wind companies

National Development and Reform Commission, Jiemian | 12 March

context: Financial institutions are encouraged to cooperate more with renewables companies to ease their cash flow hardships. Bank loans, however, might not be an effective solution as they will increase renewable firms’ debt burdens and financial institutions may be reluctant to grant loans.

NDRC (National Development and Reform Commission) and four other central departments jointly issued ‘Notice on increasing financial support to promote the healthy and orderly development of wind and solar power industries’ on 12 Mar 2021, aiming to to tackle financial stresses faced by renewable energy companies. The document clarifies that

  • local governments and financial institutions should support companies in wind, solar, biomass power generation and other renewable industries
  • financial institutions can
    • negotiate with renewables companies that are subject to short-term repayment pressure but have good long-term prospects to extend, renew or adjust payment schedules
    • grant loans to firms based on the upper limit of unpaid subsidies which have been already confirmed by relevant authorities
  • loan size, term and interest rate should be negotiated by both parties
  • interest costs shared by companies may be compensated through the issuance of green certificates
  • ensuring that subsidies are fully collected through renewable surcharges
  • companies can choose whether to convert their projects to grid-parity ones, which will receive subsidy funds first
  • pilots will be introduced to explore ways to address subsidy shortfalls

Heralding the new policy, industry siders says that how it will be implemented remains to be seen. Multiple measures are required to fundamentally solve the subsidy issues, points out Tao Ye 陶冶 NDRC Energy Research Institute deputy director. He adds that loans may have limited appeal to SOEs with high debt ratios.

science and innovation

anti-monopoly boosted as 14th 5-year plan kicks off

Xinhua Net (1), Xinhua Net (2) | 15 March

context: Competition enforcement has been ramped up since late 2020 as Beijing halts the high-profile Ant Financial IPO and vows to tackle anti-competitive practices. Observers are now closely watching for new case precedents, most notably action involving Alibaba.

The 14th 5-year plan adds emphasis on competition laws and enforcement compared to previous 5-year plans, calling for

  • a competition policy framework
  • ex ante and ex post facto enforcement
  • fair competition vetting
  • market competition assessment
  • anti-monopoly and anti-unfair competition enforcement
  • marketisation reform for utilities like energy, railway and telecommunications

NPC (National People’s Congress) also indicates in its annual legislative plans that Anti-monopoly Law revision is high on its agenda. Other prioritised laws include Data Security Law and Personal Information Protection Law. NPC also vows to study laws relevant to the digital economy, internet finance and emerging tech like AI.

Competition priorities are further clarified by Central Financial and Economic Affairs Commission on 15 March, which reveals that the National Development and Reform Commission, People’s Bank of China and State Administration for Market Regulation are the major agencies involved. The meeting

  • reaffirms the positive role of platform economy, including resources allocation efficiency and tech upgrading
  • highlights development risks and the lack of regulatory oversight
  • highlights political relevance
    • adheres to the correct political direction, to
      • build new national competitive advantages
      • balance development and security, and domestic and international development
      • strengthen regulation and supervision and safeguard public interests and social stability
      • affirm the role of private enterprises in the platform economy
  • outlines upcoming regulatory steps
    • filling regulatory gaps
    • strengthening data property rights institutions and data security responsibility of platforms
    • improving regulatory capacity and promoting ex ante and ex post facto enforcement
      • all financial activities should be regulated
    • promoting the platform economy’s role in high-quality development, not least advanced manufacturing (industrial internet)
    • ensuring stakeholder interests are protected
    • emphasising platforms’ role in
      • product quality
      • food safety
      • user data and privacy rights
      • labour protection
    • promoting R&D investment, especially in basic research, among platforms

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