roundup from our portfolios

A second 5-year plan for ‘building law-based governance’ was issued, setting tech giants’ nerves on edge about anti-monopoly measures: beyond the content, enactment of laws is now done at pace.

Transformation and upgrading of the military is underway, reiterating supreme CCP leadership over the armed forces.

Acting on high-level rumblings that warn against ‘disorderly expansion of capital’, Beijing ended the tolerance that had grown up around the tech sector. Probes into Tencent, one of the recent massive casualties, stunned investors, for whom the social media giant had cred as a deft handler of Beijing. The size of the penalties suggest that official consensus has yet to be reached on Tencent’s role as sheep or wolf. Tech developers deemed strategic by Beijing will continue to enjoy tens of billions of state yuan, suggests a mooted tax plan.

Intent on an image of a stable financial sector, Xi Jinping repeated calls for ‘baseline’ handling of risk, and preventing problems from spreading. Moving in lockstep, regulators boosted measures regulating the bond market, the credit rating industry and accounting firms. Financial intermediaries face being drawn over the coals for failing to predict defaults, or as perpetrators and/or henchmen in fraud and other market-distorting breaches. With mounting risk of financial decoupling, Beijing is prepping its home market to be able to step up, if needed.

Hainan’s new negative list for cross-border services levels the playing field for global providers across 11 sectors, claiming to supersede previous promises Beijing made to the WTO and in other free trade agreements. A nationwide version has hopes of being built on the Hainan list. MofCOM issued a plan on developing modern commercial logistics. Supply chain disruptions continued as the Ningbo-Zhoushan port, the world’s third busiest, was partially shut down on 11 Aug 2021 under the zero-tolerance COVID-19 strategy, adding to global container congestion and soaring shipping costs. Nationwide, authorities continue to mobilise to wipe out infection ‘at any cost’.

Making income and wealth distribution equitable is imagined as a policy target to replace economic growth; the state is taking a gradualist approach to strengthening the middle-income population. A sports industry worth 5 tn is forthcoming and will provide an engine of consumption and popular wellbeing.

Beijing is struggling to balance prevention/control of the Delta variant in rural areas while supporting ag production in the face of a series of natural disasters. Drawing lessons from last year’s pandemic-led chaos, ‘green channels’ were reopened for critical ag inputs to get to farmers and for fresh produce to reach urban markets. Cold chain logistics may be an exception; its alleged virus contamination supporting the PRC’s COVID-19 origin theory. Frozen seafood, earlier disrupted by the pandemic, will bear the brunt of the next wave, with importing and domestic distribution both affected.

The Politburo and NDRC are plumping for ‘scientific’ approaches to emissions reduction. They are warning localities that are overzealous in reductions at the cost of economic and energy security, whilst others have failed to change their behaviour. Coming to light in recent MEE and NDRC inspections, these flaws led to cancellation of over 350 energy- and emissions-intensive projects. A 5-year plan to protect forest and grasslands has emerged; lifting forest coverage to 24.1 percent by 2025 and developing carbon credit schemes appear among main objectives.

At its 30th session, the 13th National People’s Congress Standing Committee passed a partial Personal Information Protection Law, a PRC version of Europe’s new privacy framework (GDPR, General Data Protection Regulation) and a Supervisory Law that will further beef up anti-corruption.

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1+N policy system 1+N政策体系 yī jiā N zhèngcè tǐxì

come all ye bureaus to the green future
come all ye bureaus to the green future

The ‘1’ in this rising buzz-term refers to a collective goal; the ‘N’ a multitude of discrete policy measures. The ideal is for a whole-of-government approach to achieve the goal by carrying out the disparate policies. The phrase is invoked when there are substantial obstacles in the way of a coherent whole-of-government approach. Carbon neutrality, the term’s prime exemplar today, reveals Beijing struggling to bring together a unified effort in the face of obstinate policy silos at all levels. SOE reform is another area in which a 1+N approach is often discussed.

featured analysis

Zhejiang is to be the gold standard for common prosperity in the digital 21st century

common prosperity: the next normal

Rising inequity is a problem for the CCP. Xi Jinping’s administration, which reined in most of its predecessors’ concessions to civil society in favour of re-centralising and expanding Party control, is now reviving talk of social equity. full post open access →

august policy movers

policy professionals in and out of the establishment

Gao Qiang 高强 | former minister of health

Vehemently opposed to highly-publicised online calls for ‘coexisting’ with coronavirus, Gao insisted on complete eradication (the ‘zero-case’ policy) in an article in People’s Daily 7 Aug 2021. ‘Coexisting’ in his view implies avoiding responsibility. This aligns with state priorities: cadres in localities affected by the Delta variant outbreak are now being penalised. State financial system veteran Gao was promoted to Ministry of Health Party secretary in 2003 after the SARS crisis, and became minister in 2005. He became NPC (National People’s Congress) Standing Committee Budget Commission director in 2005, a position he held until he retired in 2011. He still undertakes health consultancy work.

Zhang Jianping 张建平 | MofCOM (Ministry of Commerce) Regional Economic Cooperation Research Centre director

Newly-developed types of processing trade advantage Hainan, notes Zhang, in terms of production costs, location and policy support. Near RCEP’s (Regional Comprehensive Economic Partnership) geographical heartland as well as the Greater Bay Area, and flourishing maritime trade routes, Hainan expects to rank as a high-quality industrial complex. Lessons from the GBA and Yangtze River Delta in development are there to be drawn. Frequent media commentator, Zhang also directs the NDRC (National Development and Reform Commission) international economics research institute and has addressed a number of international think tanks.

Zhao Jian 赵建 | Atlantis Research Institute dean

Markets and private capital in education, medicine and real estate have found capital typically short-sighted and profit-driven. This prompted the most recent crackdown, argues Zhao, risking some decoupling from international capital. Issues of employment, volatility in PRC stocks and bonds, and state-owned options not necessarily being better must now be dealt with. A new balance between state and market must be found. Holding a chair at Jinan University, Zhao’s prior career was in private sector finance.

policy ticker highlights

gems from our feed of policy releases and domestic debate

trade policy

first cross-border services trade negative list takes effect in Hainan

Ministry of Commerce, 21st Century Business Herald, Economic Information Daily | 27 July

context: Amid the accelerating digitisation and diversification of China’s services trade, the long-awaited Hainan cross-border services trade negative list marks the next-level liberalisation of trade and investment. Foreign service providers will have equal access to sectors that are not included on the list, especially in professional services, transportation, talent recruitment and finance.


5-year plan for constructing law-based government

State Council, 21st Century Business Herald, Legal Daily | 11 August

context: China is trying to achieve a comprehensive breakthrough by constructing law-based government within five years. Foreign media have framed this as part of the IT giant crackdown, while most domestic voices pointing out that this is just about Party governance. As an implementation outline for government construction, the plan sets out legislative requirements, which shows strong resistance to any division of rights.


credit ratings under the spotlight with new regulations

People’s Bank of China, Securities Daily, Economic Observer, Yicai | 9 August

context: It is an open secret that the state’s credit rating agencies are prone to influence: ratings are generally bloated, while hignly-rated SOEs can still default. Given that, their ratings undermine market pricing, resource allocation, and even financial stability. Eyeing the long term, the new regulations aim at making ratings more independent, transparent and reliable.


new COVID-19 guidelines ramping up cold chain regulation

Sina Finance, State Council, Economic Information Daily, People’s Daily Online | 13 August

context: Beijing has long regarded frozen food imports as a major vector of virus transmission. With the Delta variant now spreading in China, public attention has again been drawn to the safety of cold chain logistics. Authorities responded by updating cold chain regulations and ramping up local pandemic prevention and control measures.


public opinion on COVID-19 prevention turns radical

Weixin (1), Weixin (2) | 15 August

context: Beijing took the opportunity presented by COVID-19 to reinforce state power over individuals and at the grassroots. Mild public health measures were not an option but it continues to mobilise people to wipe out infection ‘at any cost’.

energy and environment

ministry discusses financial support for carbon peaking

East Money, Securities Daily | 8 August

context: Schemes like the ecological protection compensation mechanism and carbon taxes will be used to address environmentally negative externalities of economic activity, but these could be politically and technically difficult to implement.

science and innovation

big tech to pay billions more in tax

Caixin | 11 August

context: As Beijing strives to achieve common prosperity and domesticate big tech, many tech firms are losing access to one of its biggest policy supports. Alibaba warned investors that it may lose billions in revenue due to a rise in the effective tax rate, international media reported over the last week, and this is now confirmed by tax officials. Moving forward, only companies developing technologies handpicked by the state will enjoy lavish financial aid.

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