roundup from our portfolios

Freight backlogs and disruptions throughout southern China have been spreading from a COVID-19 outbreak in Yantian Port, Shenzhen; back at full operation on 24 June, the incident highlights ongoing supply chain risks. Clearing the backlog is expected to take some weeks.

The Anti-foreign Sanctions Law redoubles Beijing’s riposte to sanctions against the PRC. Parties wielding sanctions face asset freezes and other penalties. The threat fulfils mounting calls for ‘foreign-directed’ legislation, launch of ‘blocking mechanisms’ and a listing of ‘unreliable entities’. Many on-the-ground rollout details remain unspecified.

Industry policy is now in high gear to enact the 14th 5-year plan: June saw new notices re industrial internet, 6G, hydrogen vehicles, as well as blockchain (despite Bitcoin mining now being banned nationwide). Yet no policy remedies are in sight to deal with the acute shortage of semiconductors and key commodities like steel, affecting all industrial sectors but especially the all-important auto industry. Elsewhere, the Data Security Law was passed within a year of its first draft, flagging central moves to better use and control data.

Financial risk, ever a topic of concern, was the target of policy in June, symbolised in a speech by CBIRC’s Guo Shuqing 郭树清 to the Lujiazui Forum, outlining his agency’s perennial concerns: non-performing loans, shadow banking, fraud and speculation on real estate. Anger is also directed at emerging concerns: speculation on commodities and cryptocurrencies.

Among many efforts to intervene in commodity markets, ag are near the top of the list, with new measures to curb speculation. Food prices, except those for pork, rose in May, triggering official anxiety. In light of surging input costs, one-off subsidies totalling 20 bn will go directly to farmers. In addition, producers also enjoy better terms on insurance. such support is more compliant with WTO rules.

A new Leading Group for carbon peaking and neutrality met for the first time 26 May. Hosted by vice premier Han Zheng 韩正, it emphasised setting targets for localities and industries, supporting green, low-carbon tech, and adjusting industry and energy structures. Banks’ green loans and bond issuance will be subject to green finance assessment by the PBoC (People’s Bank of China). PBoC conducted climate-related ‘stress tests’ to evaluate the financial system’s resilience to shocks.

Party centenary preparations have entered the home straight. Some 14,000 people were mobilised to rehearse of the main event on 12 June. The Propaganda Bureau has announced the opening of 111 new patriotic education bases, while Xi led the top leadership to inaugurate the brand new CCP museum, where they retook their oaths of loyalty to the Party.

Institutions that protect minors are being revamped, pulling together ‘unprecedented’ high-level joint efforts. Among the highest priority initiatives is reducing study burdens. Costly extracurricular training institutions will be more regularly and stringently monitored, via a new dedicated agency. Curbing costs of education and other childrearing services, agree experts, may raise birthrates more effectively than the three-child policy.

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talent 人才 réncái

talents returning home to serve the motherland
talents returning home to serve the motherland

Indispensable to tech-driven growth imagined in Xi Jinping’s ‘new development stage’, talent is officially deemed a strategic resource. Often best translated as ‘skill’, ‘talent’ generally means employable persons or staff. Scitech, military, or education talents are but a few examples of seemingly unending spins on the term. In the New Era, however, skills must be matched with ‘correct’ political views. Proper talent policy, insists Xi Jinping, would allow talents, while realising personal dreams, to serve the motherland both abroad and at home.

featured analysis

Chinese fishing vessels perpetually at the centre of geopolitics
Chinese fishing vessels perpetually at the centre of geopolitics

food security and maritime tension

As issues with land-based food production mount, and consumer desire for protein and fresh food grows, providers and officials increasingly look to the sea. ‘Blue granary’ scenarios have proliferated, boosting both aquaculture and fishing; but Chinese vessels in disputed waters are causing diplomatic headaches. full post open access →

june policy movers

policy professionals in and out of the establishment

Huo Zhengxin 霍政欣| CUPL School of International Law professor

The Anti-foreign Sanctions Law matters, asserts Huo, in giving countermeasures a legal basis. Earlier responses were mainly administrative, carrying less clout than laws. Anti-sanctions and agencies enacting them will now have better legal footing. Domestic policymakers will be able to counter ‘long-arm’ tactics of other states more strongly. Huo anticipates further regulations emerging from ministries, clarifying their powers and duties under the law.

Huang Zheng 黄峥 | Pinduoduo 拼多多 founder

Stepping down as chair after his firm’s e-commerce platform overtook Alibaba as the PRC’s largest (by user numbers), Huang is one of several of the business elite standing down amid a wave of crackdowns on tech firms. Said to now be ‘pursuing lifelong interests’, he will study life sciences and green food options, fields aligned with Pinduoduo’s response to calls to modernise ag, investing heavily in logistics linking farmers and distributors. Over 12 million farmers sold products to merchants on Pinduoduo in 2019.

Liang Jianzhang 梁建章 | Ctrip co-founder, Peking University Guanghua School of Management professor of economics

Fierce birth control abolitionist Liang concedes the recently announced ‘three-child’ policy is on the ‘progress’ side of the ledger. But still better, he argues, is outright abolition. Easing restrictions to make having children desirable, financial and other incentives need to be in place. Housing purchase discounts and tax cuts for families with many children would achieve much. The state should also step in to help extend maternity leave and offer child care.

policy ticker highlights

gems from our feed of policy releases and domestic debate

trade policy

Anti-foreign Sanctions Law passed

National People’s Congress, Globe Online, Global Times (1), Global Times (2) | 10 June

context: In the face of increasing sanctions imposed by the US, China also elevated its counter-sanctions from administrative enforcement measures to the legal level. Related companies may have to choose their political positions in the future. The lifting of US bans on WeChat and TIKTOK seems to have initially shown this law is effective.

13th NPC (National People’s Congress) Standing Committee passed Anti-foreign Sanctions Law at its 29th session on 10 Jun 2021. It specifies

  • circumstances of taking countermeasures
    • adopting discriminatory restrictive measures against Chinese citizens and organisations
    • interference in China’s internal affairs
  • targets to whom countermeasures apply
    • compiling countermeasure lists: individuals and organisations directly or indirectly involved in formulating, deciding and implementing discriminatory restrictive measures
    • other individuals and organisations implicated
  • countermeasures
    • four types of countermeasures
      • entry and exit restrictions
      • restrictions on property in China
      • restrictions on transactions and cooperation
      • others
    • relevant departments of State Council
      • making countermeasure decisions (final)
      • can suspend, change or cancel relevant countermeasures
  • countermeasures working mechanism
    • setting up a coordination mechanism for anti-foreign sanctions
  • obligations of relevant organisations and individuals
    • individuals and organisations within China should implement countermeasures
    • forbidding individuals and organisations to implement or assist in implementing discriminatory restrictions on China
    • other legal documents may provide for other necessary countermeasures

The new law is largely aimed at long-arm jurisdiction and illegal sanctions imposed by the US on China, Tian Feilong 田飞龙 Beijing University of Aeronautics and Astronautics School of Law associate professor told Global Times. Tian believes that Hong Kong should consider including this law as Annex III in the Hong Kong Basic Law.

The main purpose of this law is to authorise administrative law enforcement agencies and judicial institutions to initiate sanctions and counter-sanctions, which means that a specific legal system will be developed in the future, Huo Zhengxin 霍政欣 China University of Political Science and Law professor said.


major achievements obtained in politico-legal rectification

Central Political and Legal Committee | 10 June

context: A national politico-legal rectification campaign was launched on 27 Feb 2021, following a pilot trial in December 2020. The campaign aims at ‘purifying’ the Party and furthering the anti-corruption campaign ahead of the Party centenary.

Chen Yixin 陈一新 Central Political and Legal Affairs Commission secretary and National Rectification Leading Group vice-chair, held a meeting on 10 Jun 2021, to summarise the major achievements of the rectification campaign so far. Chen encouraged ‘self-revolution’ and stressed four achievements

  • creating more effective propaganda work
    • upholding the ‘four-four-two’
    • arranging educational sessions in prisons, detention centres and courts
    • praising exemplary figures
  • hunting ‘tigers’ and swatting ‘flies
    • verifying tip-offs and deepening investigations
    • breaking connections between criminals and cadres
  • tackling deeply entrenched cases
  • serving the people
    • countering fraudsters
    • cutting bureaucratic red tape
    • freezing some illegal or unreasonable surveillance equipment

Chen also outlines the following seven methods employed in the campaign

  • orderly planning
    • general policy orientation outlined by the Party Centre
    • specific details crafted by the Leading Group
    • actual policies implemented by provincial Leading Groups
  • clear division of responsibilities
    • main responsibility held by Party committee
    • direct responsibility held by the Political Legal Commission
    • shared responsibility held by the Commission for Discipline Inspection and various departments
  • effective propaganda work
  • balancing lenient and strict policies
    • lenient policies for active self-reporting
    • strict policies for passive non-cooperators
  • effective guidance from the provincial level
  • appropriate supervision and guidance from the Centre
  • integration with the Party history campaign


finance officials at the Lujiazui Forum

People’s Bank of China (1), People’s Bank of China (2), People’s Bank of China (3) | 10 June

context: Financial policy makers have been using China’s quick recovery from COVID-19 to double down on deleveraging and derisking with local government debt a major focus.

The Lujiazui Forum (10-11 Jun 2021) in Shanghai attracted major financial policy makers to discuss the economy. Among participants

  • Yi Gang 易纲 PBoC governor discussed
    • the current conomic situation
      • while producer prices are high the impact on consumer prices is expected to be weak, but uncertainties caused by the pandemic may increase the impact
    • normal monetary policy is still the goal and PBoC will
      • develop green finance
      • promote inclusive finance
      • develop Shanghai as an international financial centre
  • Pan Gongsheng 潘功胜 PBoC (People’s Bank of China) vice governor and SAFE (State Administration of Foreign Exchange) Foreign Exchange Bureau director focused on exchange rates
    • a managed floating exchange rate is suitable for China and will continue to be implemented in the long run
    • two-way fluctuations will become the norm
    • there is a risk international markets have become disconnected but will connect back to reality necessitating risk aversion and reversing cross-border capital flows
    • firms should properly hedge change rate risks and not speculate
  • Guo Shuqing 郭树清 CBIRC (China Banking and Insurance Regulatory Commission) chairman said
    • should increase direct financing particularly by improving the bond market
    • the major task remains preventing risks, like
      • non-performing loans
      • shadow banking
      • fraud
      • misuse of financial derivatives


controlling the domestic market amid surging global food prices

Sina Finance, Guang Ming Daily,, Xinhua Net | 10 June

context: The state is intervening in the commodity market to ease concerns about surging prices due to global market volatility. Among key commodities, ag products are stressed, with measures to reduce speculation. Food prices, except those of pork, increased in May. Regulators fear trouble among consumers if prices continue to rise.

Global food prices have surged at the fastest rate in history, due to COVID-19’s disruption of food supply chains, higher shipping costs and unfavourable weather. China’s stronger demand for grain and soybeans also adds upward pressure on prices. According to FAO (UN Food and Agriculture Organisation), food prices hit a new peak in May with a 4.8 percent increase since April – the biggest monthly rise in over a decade. Prices of wheat, corn, rice and soybeans have reached an eight-year high.

Despite stressing that grain imports only account for a small portion of total supplies, state has issued policies to rein in food prices. NFSRA (National Food and Strategic Reserves Administration) will launch a special law enforcement campaign in mid-June against interruptions to grain circulation, including speculation, hoarding and misinformation. NDRC (National Development and Reform Commission) and five other authorities jointly announced that they will improve monitoring, forecasting, early warning and controlling of prices of key ag commodities, including corn, wheat, edible oil, pork and vegetables.

Research shows that the global price spike will have a long-term impact, albeit limited, on the domestic corn and soybean markets, stronger than on those of rice and wheat, says Ding Cunzhen 丁存振 Shandong Agricultural University associate professor. Rice and wheat prices, however, may be under great pressure as they are increasingly used as corn and soybean alternatives in animal feed, driving up domestic demand and imports.


three-child policy misses the crux of low birth rates

Xinhua Net, Caixin, Weixin (1), Weixin (2) | 1 June

context: Birth policy adjustments are expected following changes to the 14th 5-year-plan, but experts are disappointed that some birth restrictions remain. Consistent with past commentaries, they continue to emphasise birth support.

A Politburo meeting on 31 May 2021 discussed demographic issues, reports Xinhua, including

  • implementing gradual retirement delay, national pooling of pensions, aged care improvements and adaptation to an ageing society
  • allowing every couple to bear three children (‘three-child policy’)
  • implementing support policies, including
    • enhancing guidance on people’s attitudes towards marriage and families
    • developing affordable preschool education, promoting education equality and lowering costs
    • improving social security for births and safeguarding women’s employment

The 7th national census revealed that the total fertility rate has fallen to 1.3. Internationally, it is recognised that recovery from a total fertility rate below 1.5 is difficult, notes Caijing. Adjusting birth policies is hence imperative. Lu Jiehua 陆杰华 Peking University professor expects the three-child policy to materialise before end 2021, reports Caixin. But its effectiveness is questionable. Liang Jianzhang 梁建章 frequent demographic commentator thinks the total fertility rate will not increase by more than 0.1.

Many experts argue that low birth rates are no longer caused by birth restrictions, but the lack of birth support. The three-child policy shows that authorities are still mired in the logic of family planning, Liang Zhongtang 梁中堂 former National Expert Committee on Family Planning member told China News Weekly. Low birth rates are the result of people’s unwillingness to marry and have children. Thus, not only should all restrictions be abolished, but government funding should also go to policies providing support. These policies will be the same as those described in the 14th 5-year-plan, Wang Guangzhou 王广州 Chinese Academy of Social Sciences researcher points out, in that they focus on reducing the costs of child bearing, rearing and education by implementing parental leave and improving preschool education.

energy and environment

green bonds included in central bank’s green finance plan

Caixin Finance | 9 June

context: This plan is the central bank’s latest efforts to incentivise financial institutions to scale up green projects. Yi Gang 易纲 PBoC governor also said that the bank will support carbon reduction and green finance through adjusting commercial bank ratings and deposit insurance rates, as well as through macroprudential assessment.

On 9 Jun 2021, PBoC (People’s Bank of China) announced its green finance assessment plan for banks, effective 1 June. It stipulates

  • green finance businesses used in the plan include, but are not limited to, loans, securities, equity investment, financial leasing and trusts
  • businesses that will be under assessment are domestic green loans and green bonds
  • assessment will be carried out based on quantitative (80 percent), like the portion of green businesses, and qualitative indicators

Financial institutions’ self-managed and wealth management funds will very likely shore up investment in green bonds in the future and boost the green bond market, note bank insiders. This will help bring down financing costs.

The plan also adds that assessment results will be incorporated into the central bank’s policy and prudential management tools. The results will directly impact the fees that fund the deposit insurance program and other financial businesses banks would like to open, Caixin explains.

science and innovation

Beijing plans to have world-leading blockchain firms by 2025

Ministry of Industry and Information Technology (1), Ministry of Industry and Information Technology (2) | 7 June

context: Blockchain was highlighted in the 14th 5-year plan as one of the emerging digital industries alongside industrial internet and big data. It attracted nationwide attention following Xi Jinping’s personal endorsement in late October, and since then it received the usual industry policy treatment: local governments scrambled to devise action plans and fight the pandemic with the technology, a national platform was set up, and industry groups are setting industry standards. The new Guiding Opinions highlight sectors that Beijing considers as high potential, with finance notably missing from the list. Blockchain-based cryptocurrencies like Bitcoin are getting the opposite treatment.

Blockchain application and industry development receive a shot of confidence from MIIT (Ministry of Industry and IT) and CAC (Cyberspace Administration), who issued a set of guiding opinions on the matter on 7 June. By 2025, Beijing hopes to see

  • notable applications in product traceability (e.g. medicine), data flow and supply chain management
  • from three to five internationally competitive firms
  • from three to five blockchain industry clusters
  • supporting standards, talent and ecosystem

Blockchain should support China’s aspirations in manufacturing, cyberspace, digitisation and governance modernisation, note the agencies, and policy actions aim to

  • foster internationally competitive products and enterprises that serve
    • the real economy, with industry digitisation and supply chain solutions
    • public services, such as digital ID, healthcare services, digital certification and smart city
  • address the dearth of core technologies, mature applications, supporting ecosystem, talent and cybersecurity measures
  • target clear, demand-driven areas of blockchain applications, which should be integrated with other ICT technologies like industrial internet, big data, cloud computing and AI
  • foster a high value-added, resilient, open-source industry chain that consists of world-class products, enterprises and industrial parks

MIIT and CAC are now working on a detailed implementation timeline. Major policy measures include

  • application pilots in localities with a solid industry foundation
  • conventional industry policy tools including fiscal and tax incentives
  • local-level policy incentives
  • public services, including training, certification, investment and entrepreneurial support
  • talent cultivation in universities and vocational schools
  • international cooperation, not least through the Belt and Road

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