roundup from our portfolios

‘Stabilising’ the economy, promised in the December 2021 CEWC, is driving fiscal policy. More tax and fee cuts have shored up private firms, and local government bonds have been issued faster. The roll-out of monetary policy, as reported by the PBoC, gave no hint of any dramatic moves on the horizon. Housing prices performed better in January, but developers still face wipe-out. Restrictions have been mildly eased for real estate financing: loan caps for affordable rental housing projects were removed and lending for M&As restricted. Yet state developers are the primary beneficiaries, given the weak finances of most private firms.

China’s abstention from the UN security council resolution condemning Russian aggression in Ukraine attempts to avoid reputation damage and protect the security of its international assets. Trade is also at stake as export credits, tax cuts and other sweeteners continue to be offered to boost exports.

CBEC (cross-border e-commerce) pilot zones were expanded for a 6th round to 27 new cities and regions, covering third- and fourth-tier cities in the hinterland. Giving consumers more choice, an updated list of CBEC retail imports added 29 items including tomato juice, ski and golf equipment. CBEC firms are urged to set up their own platforms and overseas warehouses, localising global operations and boosting data capture. More supporting infrastructure and novel regulations are however needed.

The anomaly of skier Eileen Gu 谷爱凌 competing for China in the Winter Olympics sparked feuding over what it means to be ‘Chinese’. As she competed in the halfpipe, the public was shocked by a horrendous case of local female trafficking. The commotion fuelled debate on women’s rights and the upcoming amendment to the ‘Women’s Rights and Interests Protection Law’. Social justice under a closed political elite is once again under the spotlight. All this sets the scene for get-togethers across the PRC on International Women’s Day, 8 March.

SpaceX and Blue Origin’s high-profile missions have spurred Beijing to reinvigorate its space industry: in a quinquennial white paper sketching the space exploration program, the State Council portrays a Beijing keen to commercialise high-precision mapping, space tourism, satellite internet services (like Starlink) for ocean-going ships and civil airliners, and space biopharmaceuticals.

MoE has started the second cycle of the World Class 2.0 initiative announcing an overhauled world-class universities list highlighting basic STEM and frontier research that will support cutting edge science and tech, not least the space program.

Provinces currently set rules for their power sectors; interprovincial trading is minimal. A unified power market by 2030 is pledged, its preliminary set-up in place by 2025. With Xi Jinping’s blessing in November 2021 and now a concrete timeline to boot, steps to unify will pick up speed. A national market promises efficiency, security and decarbonisation—dubbed a ‘win-win-win’ by pundits. Renewable power, which, per new guidelines, should meet all incremental energy demand and begin replacing fossil fuels ‘at scale’ by 2030, will be absorbed in higher volumes under a unified national system.

First announced in November 2021, a recently issued 5-year plan for ag and rural modernisation is another step towards modernising the sectors by 2035. Transition from small- to large-scale and mechanised agriculture is as ever deemed necessary. Changing the game, the priority now is ‘high-quality’, offering consumers more choice. The ag and rural sectors are to be equipped with techniques, models and governance. The State’s No. 1 Document, as usual rural-focused, dropped 22 February, reiterating rural revitalisation messaging of the post-COVID period.

A 5-year plan for enhancing rural voc ed and aged care promotes a rural aged care safety net and improves rural voc ed by providing better online education in partnership with agribusinesses, ag science universities and research institutions.

Province-level ‘Two Sessions’ conclaves ended early February, issuing official reports. Almost all underline safety (above all in industrial production), welfare, and natural disaster threats. The interests of commerce get a little new TLC, not least better markets allocation of production factors, anti-monopoly and law-based market regulation.

Lawyers’ fees are included in the scope of anti-monopoly and promoting fair competition. Standard fees must now be declared, and, for a minimum 12 months, held constant. The dominance of large legal firms will not be affected, but the market for legal service providers will increase.

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‘six stabilities, six guarantees’ 六稳六保 liù wěn liù bǎo

six of one, half a dozen of the other paint a smile on the soaring economy

Declaring spiritual victory over economic crisis, Beijing now groups macro trends and micro impacts into two lists of six. Once separate, the two lists now consolidate the long-term requirements for ‘baseline thinking’. The ‘six stabilities’ emerged as the economy slowed and the US trade war intensified under Trump. At stake in 2018 were

  • employment
  • financial sector
  • foreign trade
  • foreign investment
  • domestic investment
  • expectations

After Trump came COVID-19, prioritising the ‘six guarantees’. At stake in 2020 were guarantees for

  • employment
  • basic living needs
  • corporate operations
  • food and energy security
  • stable supply chains
  • normal grassroots governance

Taken together the phrases register the macro impacts of rising global tensions, but also the impacts on the real economy and on individuals brought by COVID-19: lockdowns, supply chain and business disruption, and local government financial havoc.

featured analysis

labour on the move

factoring in data and R&D

As the economy slows, a major reallocation of land, labour and capital aims to inject new growth momentum. Xi’s new plan, a historic first, sets a clear roadmap, but entrenched hierarchies that stifled progress in the past will remain. full post open access →

february policy movers

policy professionals in and out of the establishment

Gao Erji 高尔基 | Caixin Media vice president

Naturalising overseas-trained athletes on a mass basis is, claims Gao, a test of the PRC’s attractiveness to international talent, applicable to other struggling fields. In quest of medals, more global talent, not least of overseas Chinese, may ‘return’. But reaching national goals beyond individual trophies entails a more inclusive and open narrative for the naturalised ‘returnees’.

This, warns Gao, is to worsen already intense rivalry amongst Chinese youth. Equitable, transparent recruitment of immigrants is required. Procedural fairness must be ensured, along with nurturing of domestic talent.

A graduate of Tsinghua School of Economics and Management, Gao became a vice president of Caixin Media in 2014. He built the data and intelligence arm, Caixin Insight, from scratch from 2015. He began as a banker at CITIC Securities and HSBC focusing on cross border M&As. He is a featured speaker on finance and economics at such conferences as the 19th World Knowledge Forum.

Peng Xiaobo 彭小波 | iSpace 星际荣耀 chairperson

Rather than compete with the state, says Peng, iSpace hopes to complement it. Commercial aerospace firms focus on cost-effectiveness, efficiency and innovation, he says. This includes investment in reusable flights, consolidating comparative advantage, and leveraging based on PRC manufacturing capabilities. Unlike semiconductors and other IT industries, commercial aerospace has an unbroken domestic supply chain and a full suite of engineering skills. This means it remains competitive with US rivals, he argues, even if they emerged years before iSpace and other Chinese space startups. State support propelled growth over the last few years, adds Peng, pointing to the civil-military fusion strategy and related state agency support.

Joining iSpace in 2018, Peng was for two decades an aerospace engineer and executive at CASC, origin of most of iSpace’s founding team.

Liu Kun 刘昆 | Minister of Finance

Discussing fiscal policy direction for 2022, Liu noted MoF will be proactive, strengthening cross-cycle adjustments, and focusing on the ‘six stabilities and six guarantees’. Proactive fiscal policy is twofold: precision and sustainability:

  • precision entails supporting such sectors as high-tech manufacturing, SMEs and innovative tech firms via tax and fee cuts, plus financial support for grassroots
  • sustainability entails balancing necessary fiscal spending without going overboard and creating risk

The weakening economy and further uncertainties will lower fiscal revenue growth, he notes, making cutting back on unnecessary spending critical.

Working his way up in the Guangdong government, Liu rose to a deputy governorship, before promotion to deputy finance minister in 2016. He became minister in 2018.

policy ticker highlights

gems from our feed of policy releases and domestic debate


expansionary fiscal policy should prioritise deficit rise

Jiemian | 10 February

context: The state’s propaganda of robust COVID-19 control and economic recovery is at odds with deep insecurity in economic policy. As Beijing tries to project a confident and promising image to the world, undercurrents of the shaky economic foundation and deep-rooted structural problems still persist, which prevent sustainable growth over the long run.

trade policy

the 6th round of cross-border e-commerce pilot zones announced

State Council, Comnews | 10 February

context: As an innovative trade form, cross-border e-commerce has grown rapidly during the pandemic and become a key booster to gradually slowing export growth. Nevertheless, constructing support logistics facilities outside regional commercial hubs will need to be scaled up to reduce transport costs for SMEs.


avid public participation in Women’s Rights Law revision

Sina Finance | 6 February

context: The amendment to ‘Women’s Rights and Interests Protection Law’ was released for public consultation on 24 Dec 2021. It received unprecedented levels of public attention, indicating progress in social justice and political participation in an authoritarian environment.

science and innovation

5-year plan for pharma involves medical insurance regulator

Ministry of Industry and Information Technology, Sina Finance | 11 February

context: China’s pharma industry saw impressive growth over the last decade, in part due to regulatory reforms and centralised procurement policies. Innovation remains a bottleneck due to a lack of sustained funding channels through basic health insurance. Basic research is still weak and firms are reluctant to go beyond conventional research areas.

energy and environment

experts say a unified power market will enhance energy security, renewables

Caixin, Jiemian, People’s Daily | 28 January

context: The two major priorities influencing PRC energy policy are energy security and decarbonisation. They are often in tension, but setting up a unified national power market system will create synergies between the two, both enhancing consumption of renewable power and ensuring that supply and demand are optimised on a larger scale.


ag and rural sector to be fully modernised by 2035

State Council | 11 February

context: Ag production will still be dominated by smallholder farmers in the long term. Their underdeveloped production modes and weak anti-risk capacity are at odds with the need to feed the huge population. Starting from a low base, a comprehensive modernisation campaign will be rolled out to equip both ag and rural sectors with advanced techniques, operational models and governance practices.


security the focus of local governance in 2022

Caixin | 15 February

context: Beijing has called for maintaining stability and governance improvement. Production safety is the focus of both, echoing Xi Jinping’s holistic view on national security. However, local governments’ accident prevention and national disaster response are still lagging.

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