roundup from our portfolios

Scrap all birth restrictions a.s.a.p., urge experts: but will it be enough to restore the plummeting birth rate? The grim reality of an ageing population is confirmed by results, long-awaited, of the PRC’s seventh national census.

Major setbacks in public health exposed by COVID-19 have prompted launch of a new National Administration of Disease Control and Prevention.

Preparations continue for the Party centenary. The Ministry of Public Security is bearing down on ‘stability maintenance’ ahead of the big show on 21 July. As well as physical safeguards, thought crimes like ‘historical nihilism’ (see below) are also on watch lists.

Kicking off in Hainan on 6 May, the China International Consumer Products Expo attracted some 3,000 brands from 70 countries, Offering consumers high-quality imports, it bypasses intermediates strengthening the pull of the China market.

BRI, above all the ‘digital Silk Road’, was promoted at trade fairs and fora with claims of potential contributions to global ‘digital governance’, and demonstrating goodwill via bettering its host countries’ quality of life.

China-Europe relations were meanwhile set back: the EU parliament voted to halt talks on the EU-China investment deal; Lithuania withdrew from the ‘17+1’ China Central and Eastern European country forum.

Consumers reverted to spending over the May Day holiday; domestic tourism, box office revenue, and duty-free shopping neared or surpassed pre-COVID-19 levels.

The State Council fretting at rising commodity prices, called for rolling out steel import taxes and rebate adjustments, while penalising fraud or speculation. Steel has faced policy pressure all year as environmental targets climbed the agenda. Yet crude steel output was up 16 percent y-o-y through April. Debate reignited as well on real estate taxes, flagged in a MoF/MoHURD meeting on pilots and by Liu Kun 刘昆 finance minister.

On the scitech front, the sluggish state research base, dominated by an old boys’ network of ‘academicians’, now faces an overhaul. Beijing city, putting self-reliance into practice, is quietly reengineering its R&D ecosystem.

The anti-trust crackdown is not letting up in commerce, with resources being officially diverted to ‘genuine innovation’ and away from ‘business model innovation’. Finance too is on notice: shun speculation and serve the real economy. Bitcoin mining has been brought to an abrupt stop nationally. New pledges on carbon emissions also appear to have proved fatal to this ultra energy-intensive activity.

Projects that pollute are under mounting scrutiny. Substandard ‘energy-intensive high-emission’ projects will be scrapped, Xi Jinping told a Politburo study session. NDRC (National Development and Reform Commission) also insists on enforcing the curbs. The energy spot market will be expanded to another six regions. Renewable power developers will be able to take part in the market for the first time.

Measures to channel capital to agribusinesses and rural revitalisation are stepping up. Ag and rural projects are first in line for public budget allocation; further leveraging private capital, the prime source for ag and rural investment, is critical for sustainability and efficient use of funds. Matching borrowers and banks, fast-track loans guaranteed by the National Ag Credit Guarantee Alliance, are flowing, to ease financing difficulties faced by new ag operators.

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historical nihilism 历史虚无主义 lìshǐ xūwúzhǔyì

historical nihilism: an ‘opium’ for the mind
historical nihilism: an ‘opium’ for the mind

The term is used to label malignant ideas and people who

  • distort the ‘four histories’ of the Party, New China (i.e. since 1949), ‘reform and opening’ and socialism
  • defame past Party leadership, guiding thought or main policy direction
  • slander heroes and martyrs
  • deprecate or devalue traditional Chinese, revolutionary or advanced socialist culture

It is blamed for the collapse of the Soviet Union, starting with Khrushchev’s denunciation of Stalin. ‘Document No. 9’, a 2013 Party directive, called for combatting seven ‘perils’ in the ideological struggle: constitutional democracy, universal values, civil society, neoliberalism, free press, historical nihilism and questioning Chinese-style socialism.

A Party history education campaign launched 20 Feb 2021 ahead of the July Party centenary targeted historical nihilism with renewed intensity.

new China Executive Briefing

China Executive Briefing is an exciting new venture for us teaming up with Asia Society Australia. It provides up-to-date, impartial and accessible analysis of China’s economic policies and trends and their implications for Australiasia and beyond. The homepage page is here →

hydrogen station in Liu’an, Anhui province
hydrogen station in Liu’an, Anhui province


China’s Tech Ambition and the Hydrogen Bet

Always inclined to technocracy, Beijing is now gripped by the prospect of tech serving national security and power aspirations. ‘Indigenous’ breakthroughs on the level of paradigm shifts are seen as essential to growth and security. To protect the manufacturing base against external shocks, innovation will now go beyond burnishing the global competitiveness of PRC firms. Nothing illustrates this better than the human and financial resources amassed to develop hydrogen, an emerging green tech star. full briefing here →

featured analysis

official centenary logo
official centenary logo

‘self-revolution’: gearing up for the Party’s party

The Party will celebrate its 100th anniversary on 1 July 2021. With preparations afoot for the big date, Party education and slogans are emerging with an intensity unseen in the reform era. In February, a campaign to renew the study of Party history was launched to prepare the ground for the centenary celebration. full post open access →

may policy movers

policy professionals in and out of the establishment

Zhang Wei 张伟 | CATIS (China Association of Trade in Services) chief specialist

Digital trade champion Zhang sees it coalescing in three regions: Asia (centring on China); Europe (led by France and Germany); and North America. Trade in digital services is shaping trade deficits. Setting more standards would, he urges, promote digital trade, as would connecting digital services to manufacturing and intermediary goods industries, using RCEP to promote internationalising RMB and reducing reliance on SWIFT.

Yang Gang 严刚 | Chinese Academy of Environmental Planning vice president

Many localities, says Yang, expect drastic rises in fossil fuel energy usage before 2030. Cutting emissions, they argue, can be postponed until later. The timing and level of carbon peaking will, he warns, affect the country’s ability to reach neutrality. High-carbon projects built over the 14th 5-year plan will keep polluting until around 2050, placing the 2060 goal almost out of reach. Coal consumption, he argues, must be curbed a.s.a.p.. Localities must cap coal use and map phase-out pathways.

Zhang Xinbao 张新宝 | Renmin University Information Law Centre chair

Supervising all 3.5 million apps on the Chinese market is a bridge too far, warns Zhang. Big internet platforms, app stores and operating systems should be tasked with ensuring apps and operators on their platforms respect consumer privacy. Zhang’s proposal is now part of the amended draft of the Personal Information Protection Law, which Zheng helped draft.

policy ticker highlights

gems from our feed of policy releases and domestic debate

trade policy

Digital Silk Road discussed at Bo’ao Forum

Comnews | 12 May

context: Xi Jinping championed multilateralism at the Bo’ao Forum and green development was a major theme. In recent years the BRI (Belt and Road Initiative) has been pivoting from large-scale infrastructure projects to include other types of economic ties with the digital economy being a main focus.

At the 2021 Bo’ao Forum in Hainan (7-9 May), the Digital Silk Road was both a vaunted ideal and topic of a panel addressed by

  • Zhou Mi 周密 MofCOM (Ministry of Commerce) America and Oceania Research Centre deputy director
    • the digital economy is growing part of COVID-19 recovery
    • BRI countries tend to lack the level of digital infrastructure and the technological needs to ensure digital economy continues to grow giving opportunites for Chinese firms to form partnerships
    • there are no unified global digital economy rules yet
      • developing rules and practices along BRI can help shape future global rules
    • as more firms shift online the Digital Silk Road will create further opportunities for logistics industry development
  • Qi Xin 祁欣 MofCOM Economic and Trade Cooperation Institute director
    • Chinese firms are participating in the development of ‘new infrastructure’ along BRI countries that will help host nations digitise
    • these projects improve local capacity and improve the livelihoods of the citizens of host countries
    • China’s large market helps develop firms exports and allows BRI countries to export to China


nine ‘invariable’ principles underlying a century of Party building

Xinhua Net | 19 May

context: Launching the Party history education campaign, Xi Jinping insisted that looking at the Party’s past successes is essential to build its future. The following commentary identifies just what some of these past successes might have been and gives us a glimpse of perceived problems in the Party and the shape of things to come.

Nine ‘invariable’ principles have characterised Party building over the past century, insists Zhang Zhiming 张志明 Central Party School Party Building Research Department head in a Study Times commentary published on 19 May 2021. These encompass

  • strong Party leadership guiding past great achievements
    • freeing the Chinese people from oppression and slavery
    • uniting the country and opening up the socialist road to wealth and power
  • upholding the correct political line
    • unifying thought and action across the Party
    • guaranteeing Party building always served socio-economic development
    • defining political construction as the essence of Party building following the 18th National Party Congress (CP note: i.e. when Xi Jinping took over as General Party Secretary)
  • stressing ideology and further Sinicising Marxism
    • developed theory and practice with Chinese characteristics
    • buttressing national ideological confidence
  • buttressing the Party organisation
    • consolidating the Party’s capacity for mobilisation
    • enhancing its grassroots network
  • maintaining close relations with the masses
    • pursuing ‘mass line’ efforts
  • managing the Party through iron discipline
    • ensuring the more complex the task, the stricter the discipline
    • standardising disciplinary measures and stressed cadre awareness
  • holding high the banner of anti-corruption
    • maintaining the Party’s ‘advanced and upright qualities’
    • promoting institutional mechanisms to lead cadres ‘to not want to be corrupt’
  • preserving the fundamental role of the Party Constitution
    • standardising intra-Party relations and life
    • enhancing ‘democratic centralism’
  • keeping the revolutionary spirit alive
    • undertaking recurrent ‘self-revolution’
      • e.g. Zunyi Conference (1935), Yan’an Rectification Campaign (1942-4), Third Plenum of the 11th CCP Central Committee (1978) (CP note: the former two buttressed Mao Zedong’s grip on power, the latter launched Deng Xiaoping’s Reform and Opening Up) and 18th National Party Congress
    • daring to ‘turn the blade inward’ when necessary to pare away ‘nefarious elements’ in the Party


steel policy screws tightening

National Development and Reform Commission, Sina Finance, Economic Information Daily | 13 May

context: MIIT (Ministry of Industry and IT) plans for crude steel production to fall in 2021. However, crude steel output grew by some 15 percent in Q1 despite policies such as the environmental crackdown on the steel sector in Tangshan, adjusting export and import rebates, and changing steel capacity replacement measures. With some way to go before reaching their goal, further tightening is likely on the way.

Pressure on the steel industry to conform to national goals is increasing, as signalled by

  • the announcement that NDRC (National Development and Reform Commission) and SAMR (State Administration for Market Regulation) jointly visited Hebei to analyse the market situation
  • NDRC issued a policy on implementing follow-up inspections of the cutting of steel overcapacity in 2021, specifying
    • inspections should include all provinces except those without steel smelting capacity (Beijing, Hainan, Tibet)
    • inspection focus
      • the progress of production capacity withdrawal
      • ascertaining whether new construction meets requirments
      • revisiting problems discovered in previous investigations
      • monitoring progress in reducing crude steel output in 2021

In addition, more policy is on the way as Economic Information Daily reports that calling for comments for a set of ‘Opinions’ on steel industry high-quality development are completed and will soon be implemented. Their source says the policy will

  • gradually set up production restrictions based on
    • carbon emissions
    • pollutant emissions
    • total energy consumption
    • capacity utilisation
  • use comprehensive standards to remove outdated production capacity
  • improve layout of the steel industry
    • no new coastal steel base projects will be allowed
    • new steel smelting projects will be encouraged to develop at existing production bases
    • by 2025, the proportion of the country’s electric furnace steel output in the total crude steel output will increase to between 15-20 percent
  • develop domestic and alternative iron ore and scrap sources
    • set up an iron ore reserve system
    • strengthen the construction of a domestic scrap steel resource supply chain
    • encourage firms to build a stable scrap steel supply network and make full use of overseas recycled steel
    • by 2025 the domestic iron metal self-sufficiency rate will reach at least 45 percent or more and the domestic annual production of scrap steel resources will reach 300 million tonnes
    • set up one or two overseas iron ore mines
    • overseas iron ore from Chinese-owned mines should account for more than 20 percent of imported ore
  • concentrate industry players
    • by 2025 develop several super-large steel enterprise groups
      • the top five domestic firms should account for 40 per cent of the industry
      • the top 10 should account for 60 percent


channeling private capital to ag and rural

Ministry of Agriculture, Economic Daily | 8 May

context: Further leveraging private capital, the prime source for ag and rural investment, is critical for sustainability and funding use efficiency in rural revitalisation. To make the policy work at the real grassroots level is challenging and most ag operators still struggle to get loans.

Preliminary calculations on rural revitalisation investment in the 14th 5-year plan by MARA (Ministry of Agriculture and Rural Affairs) show that funding demand will increase significantly from the last 5-year plan period, reports Economic Daily.

To facilitate capital inflows for rural revitalisation, MARA and National Rural Revitalisation Bureau released ‘Guidelines on private capital investing in ag and rural areas 2021’, specifying

  • key investment fields, namely
    • modern farming
    • seed industry
    • rural industries
    • ag processing and products circulation
    • rural services
    • ecological ag
    • ag sciences and innovation
    • rural human resources development
    • ag and rural infrastructure
    • smart ag
    • ag and rural entrepreneurship
    • rural living environment improvement
    • ag international cooperation
  • supporting measures
    • encouraging business models and solutions targeting whole supply chains
    • launching PPP projects
    • setting up a rural revitalisation fund, guided by government budget, supported by financial agencies, and participated in by private investors
    • building platforms based on ag and rural industrial parks, zones and clusters
    • consolidating major projects, including
      • high-standard farmland
      • ag products cold storage

Government budget is sufficient for making up the huge funding gap, Liu Huanxin 刘焕鑫 MARA vice minister told a working conference, calling for participation of financial agencies and private investors.

Rural and ag financing is difficult, costly and has high risk, say Liu, which is a big challenge for ag operators, limiting farming upscaling. A platform that connects financial agencies and new ag operators is being built to support them getting loans. A financial service platform specifically designed to finance ag products cold storage is now in operation, says Liu.


ageing population makes 2020 population census results alarming

National Bureau of Statistics, Caixin (1), Caixin (2) | 11 May

context: While scrapping all birth restrictions has been advocated and considered in northeastern regions, the plummeting birth rate makes it clear the nation must adopt it sooner with more policies encouraging childbearing and rearing.

The results of the 7th national census were released by NBS (National Bureau of Statistics) on 11 May 2021. Key statistics include

  • total population is 1.41 billion, a 5.4 percent increase from the 2010 census
  • 12 million new births in 2020, 18 percent lower than 2019
  • total fertility rate is 1.3 average children per woman
  • population median age is 38.8
  • proportion of people by age bracket
    • between 0-14: increased by 1.3 percent to 18 percent
    • between 15-59: decreased by 6.8 percent to 63.4 percent
    • above 60: increased by 5.4 percent to 18.7 percent
  • 51 percent are men and 49 percent are women, sex ratio at birth is 111.3, 6.8 lower than 2010
  • 64 percent of people live in urban areas, 14 percent more than 2010
  • average number of university-educated people per 100,000 grew from 8,930 to 15,467
  • people not living in original residence cities/counties increased by 70 percent to 376 million

The official explanation for the one-month delay in releasing the results is the added preparation time for a substantial amount of new data, reports Caixin. The 2016 two-child policy has shown initial success as the proportion of children between 0-14 increased, however, the population will continue to age more rapidly, says Ning Jizhe 宁吉喆 NBS director. Moreover, because more new births are attributed to second births and the effects of the two-child policy will gradually wear off, the total fertility rate will continue to plummet below 1.3, a figure that is already extremely alarming, writes Liang Jianzhang 梁建章 Peking University professor. The reason is the declining number of women of childbearing age and the extremely high costs of housing, education and child-rearing, Liang says. Lifting all birth restrictions is not enough; strong policies to encourage and support childbearing and rearing are needed, Liang adds. Improving childbirth policies and enhancing inclusiveness are the next steps, says Ning.

energy and environment

renewables can now participate in power spot markets

Caixin | 10 May

context: Almost four years after the first set of pilots was launched, energy authorities are expanding reform to broader regions. The spot markets continue to be hampered by incomplete liberalisation that upset prices and the supply-demand balance.

National Development and Reform Commission and National Energy Administration released a document targeting current obstacles in power spot markets.

The document stipulates

  • allowing new energy to enter the power markets
    • new energy projects will participate by signing long-term CFDs (contracts for differences) with power grids, power sales firms and users
    • they are encouraged to trade 10 percent of expected generated power in the current settlement cycle through bidding
      • this is the first time renewables’ participation in the power market has been endorsed by national policies; they were previously protected by state priority rules, but their percentage will increase as reform deepens
  • boosting cross-region power transfer, at least 20 percent of transmitted power should be traded through market-based measures
  • including users in the spot markets so price fluctuations can be received at the user end
  • supporting regional power market pilots in the south, and researching plans for Jing-Jin-Ji and the Yangtze River Delta
  • six regions (Shanghai, Jiangsu, Anhui, Liaoning, Hubei, Hebei) as the second batch of power spot-market pilots, requiring the first eight pilot regions to make further progress by end 2021

science and innovation

more provinces appointing ‘industry chain chiefs’

Shanghai Securities News, State-owned Assets Supervision and Administration Commission | 19 May

context: The notion of ‘industry chain chiefs’ is gaining traction, following its inclusion in Guangdong province’s 5-year plan in January 2021. As with the systems of ‘river chiefs’, ‘forest chiefs’ and ‘farmland chiefs’, ‘industry chain chiefs’ are responsible for liaising between several agencies to ensure the coordinated development of a local industry chain, responding to Beijing’s emphasis on supply chain security and the dual circulation system. This military-style, task-oriented assignment continues the government overhaul that began in 2018.

Hubei, Jilin, Tianjin and Shenzhen issued policies last month to make top local officials responsible for entire industry chains, reports Shanghai Securities News. Encouraging upgrading and innovation is often among the tasks of an ‘industry chain chief’, says the report. Yichun city in Jiangxi requires its chiefs to get firms to invest in R&D, help SMEs get funds to buy equipment and mend R&D weaknesses. Many localities also focus on strategic emerging industries, notes Wang Bin 汪斌 Beijing High Precision Science and Technology Development Academy director.

Visiting an exhibition of innovative, high-end equipment produced by central SOEs at the China Academy of Machinery Science and Technology, Hao Peng 郝鹏 SASAC (State-Owned Assets Supervision and Administration Commission) secretary general called for

  • studying Xi Jinping’s remarks on the PRC becoming ‘a manufacturing powerhouse’
  • persisting in innovation-driven development
  • intensifying research efforts
  • striving to create a ‘ground zero’ for original equipment manufacturing and ‘industry chain chiefs’ for modern industrial chains
  • realising high-end technological self-reliance

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