‘Allow healthy development of tech firms’, urges the Politburo. At its 29 Apr 2022 meeting, it had promised them a greater say in how they are to shoulder tech sector responsibilities. As crackdowns are discarded in favour of clarification and protocol, the tech sector may expect to resume its investment bets. But return to the freewheeling past may be best avoided.
The alarm was first raised of COVID arriving in Beijing via refrigerated goods in mid-2020. Dependent on freshness, higher-priced cold chain imports lost market. Still worse, buyers lost confidence in their safety. Getting into the market at all was against the odds; many shipments were stopped at customs. Overseas exporters hit with COVID contamination claims risked ruinous suspension of their business.
Long exempt from Beijing’s climate agenda, agriculture is privileged due to food security concerns. Even a minor drop in grain output brought by greener practices threatens the state narrative built on food self-reliance. Now, ag emissions and carbon sequestration have hit the policy agenda. Xi Jinping’s ‘dual carbon’ strategy and the ‘N+1’ scheme are at the heart of the overall climate plan.
For all the Politburo’s firm support for zero-COVID, policymakers are evidently considering easing COVID-19 quarantine and allowing more international movement of people and goods. COVID-19 restrictions on international and domestic shipping and passenger and vehicle terminals have been streamlined by the Transport Ministry.
Supporting the economy and forestalling financial risk were, as to be expected, listed as top priorities by the PBoC H2 work meeting on 1 August. This comes hot on the heels of the China Banking and Insurance Regulatory Commission’s (CBIRC) 15 July decision to defer rules for online bank loans for another year.
The economy barely achieved growth in Q2, according to official data, with weak domestic demand the primary culprit. To fill the gap, the tap of fiscal spending has been eased. Localities too are suffering under the weakening trend. Hit with tax revenue cuts and plummeting land transactions, cumulative general public budget revenue was down over 10 percent y-o-y nationally in H1.
An off-ramp is appearing for Xi’s crackdown on offshore IPOs found to violate data security. On 21 July 2022 Didi Chuxing, the ride-hailing giant, was accused of accessing customer data ‘excessively and abusively’, violations of state rules that threaten national security. It was fined C¥ 8 bn (over USD 1 bn).
Fallout from the Evergrande crisis and the struggling property sector is spilling over from financial press headlines to the real economy. A seismic movement began when homebuyers in Jingdezhen, Jiangsu, threatened to stop paying mortgages on an unfinished Evergrande project. Contagious as COVID the boycott has hit some 300 projects across over 80 cities.
Fully autonomous vehicles (AVs) can run on certain roads in Shenzhen from 1 Aug 2022. Thanks to new local regulations commercial scale rollout of AVs will likely speed up in the Greater Bay Area’s buzzing high-tech and innovation hub. Shenzhen is home to BYD—that recently overtook Tesla as the world’s top EV producer by sales.
The trade picture in June showed major producers bouncing back while small firms and consumer spending continue to languish. Lauding the imminent benefits of its ultra-large domestic market in recent years, 2022’s serial crises have, again, underlined the role of exports in the PRC economy. More support for domestic demand can be expected in response to fears of a looming global recession.
Market-based strategies are gaining momentum to address the sorry state of much of the PRC environment. High hopes are held for the national carbon market. Other initiatives, such as pollution rights trading and eco-compensation schemes, have long been in train and are gaining traction.
Early data hints that the economy has bottomed, after stressful COVID times through March, April and May. Both manufacturing and services expanded, notes Liang Si 梁斯 Bank of China Research Institute, while credit data indicates more optimism among firms. Excavator sales, a proxy for construction activity, improved by some 10 percentage points in June.