october: 4th Plenum, South Pacific, RCEP

roundup from our portfolios

---

october policy movers

policy professionals in and out of the establishment

---

policy ticker highlights

gems from our feed of policy releases and domestic debate

geopolitics

China, India working together to reach RCEP deal

Yicai | 13 October

context: Xi Jinping visited India 11-12 October and held an informal summit with Indian Prime Minister Narendra Modi. High on the agenda was the Regional Comprehensive Economic Partnership (RCEP) negotiations. China wants the RCEP to be signed by the end of this year, but India’s attitude has been a major roadblock to the deal’s conclusion.

China and India have agreed to speed up RCEP negotiations, according to Yicai, enabling the deal to be signed by end 2019.

At the Chennai informal summit, Xi and Modi agreed to support the rule-based multilateral trade system and make a joint effort to complete RCEP negotiations.

Xi’s visit may help solve the most difficult part of RCEP negotiations, especially India’s concerns over the deal, says Zhang Mei 张梅 China Institute of International Studies.

RCEP is the most important issue between China and India, says Lin Minwang 林民旺 Fudan University Institute of International Studies, because India’s stance is of utmost importance to the future of the talks.

According to Shen Minghui 沈铭辉 Chinese Academy of Social Sciences Centre for APEC and East Asian Cooperation, RCEP will facilitate trade between China and India, which have not joined the CPTPP and do not yet have bilateral trade agreements.

Zhang Mei predicts that most substantive talks will be completed by the end of 2019.

Xi and Modi agreed to set up a high-level dialogue to promote balanced trade. They also agreed on a ‘manufacturing partnership’. Xi invited Indian pharmaceutical and IT firms to invest in China.

India has been concerned about China’s trade surpluses, but after Xi’s visit, says Zhang Mei, China will take some measures to balance bilateral trade.

governance

Politburo meeting announces dates for 4th Plenum

People's Daily Online | 24 October

context: Many in Party and government circles will welcome this long-awaited announcement of the actual dates for a meeting first mentioned in August. Perhaps most striking about the statement is that the delay in confirmation may have been because of continuing disagreement about the precise agenda.

Xi Jinping presided over a 24 Oct 2019 Politburo meeting that decided that the Fourth Plenary Session of the 19th Central Committee would be held in Beijing from 28-31 Oct 2019. Politburo members listened to a report that had solicited opinions on

• upholding and improving the socialist system with Chinese characteristics
• promoting modernisation of the national governance system and governance capability within and outside the Party

Members decided to modify the draft according to the opinions discussed at the meeting and submit it to the 4th Plenary Session for deliberation. The meeting held that the Party’s democracy should be fully promoted and opinions should be widely listened to. Various suggestions from representatives outside the Politburo, while fully affirming the draft, should be sorted, researched, and pooled so as to formulate an updated document.

The meeting stressed the importance of adhering to the organic unity of the Party’s leadership, and basically realising the modernisation of the national governance system and governance capacity by 2035, consolidating and fully demonstrating the socialist system with Chinese characteristics.

According to Xinhua, the meeting also pointed out that it is a major strategic task for the whole Party to adhere to and improve the socialist system with Chinese characteristics, and promote modernisation. The effort must be carried out under the unified leadership of the Central Committee, with

• scientific planning
• careful organisation
• short- and long-term considerations
• overall commitment

Where the socialist system is concerned, Party committees and governments at all levels, as well as leading cadres, should

• earnestly strengthen awareness
• take the lead in maintaining its authority
• set an example in implementation
• push the whole Party and society to consciously respect it
• strictly enact and resolutely maintain it

finance

continues slowing in Q3 2019

Caixin (1), Caixin (2), Caixin (3), Caixin (4), Jiemian (1), Jiemian (2) | 18 October

context: The economy continues to slow in line with market expectations. With a high CPI and slowing GDP growth, fears of stagflation are increasing, but because the high CPI is primarily due to pork price increases based on swine flu, stagflation is not yet a major concern. With the global economy also slowing, policymakers will hold off on stimulus to avoid using it too early, so a massive stimulus is unlikely in 2019.

National Bureau of Statistics (NBS) released Q3 2019 economic data showing that downward pressure on the economy continues. Data shows

• Q3 2019 GDP grew by 6.0 percent, down 0.2 percentage points from Q2
  • Q1-Q3 GDP increased by 6.2 percent y-o-y
• January-September 2019 fixed asset investment increased by 5.4 percent y-o-y, down 0.1 percentage point from August
  • infrastructure investment increased by 4.5 percent y-o-y, up 0.3 percentage points from August
  • manufacturing investment increased by 2.5 percent y-o-y, down 0.1 percentage points from August
  • real estate investment increased by 10.5 percent y-o-y, no change from August
  • private investment increased by 4.7 percent y-o-y, down 0.2 percentage points from August
• September total consumer goods retail sales increased by 7.8 percent y-o-y, up 0.3 percentage from August
• September national urban surveyed unemployment was 5.2 percent, up 0.3 percentage point y-o-y, but level with August
• September industrial added value increased by 5.8 percent y-o-y, up 1.4 percentage points from August

Weak consumption caused much of the GDP growth rate decline, according to Zhang Yiping 张一平 China Merchants Securities macro analyst. Zhang points out that consumption dropped 0.8 percentage points y-o-y, while investment growth only slowed by 0.5 percentage points y-o-y. Meanwhile value added to industry benefited from seasonal effects and optimism about a trade deal with the US, according to Zhang Deli 张德礼 Lianxun Securities senior macro researcher.

Analysts are divided about what Q4 holds. CITIC Securities predicts a slight increase in GDP in Q4 and monetary policy remaining patient with stimulus measures. The group sees Q1 2020 as a critical period for the economy’s future. Lu Ting 陆挺 Nomura Securities China chief economist expects the economy will be stable in October, but that the GDP growth rate for Q4 and 2019 overall will slow to 5.8 percent and 6.1 percent respectively.

trade

China’s role amid new global trade trends

Yicai | 8 October

context: Participation in FTA negotiations benefits China in several ways. First, by shaping global trading rules in strategic and emerging industries. As the WTO enters deadlock, grouping with large economies. e.g. the EU and Japan, may allow China to avoid isolation from the rule-making process. Also, mega-regional trade pacts such as RCEP may reduce the damage of the US-China trade war. And as China moves up the global value chain, it eyes other developing markets to export goods and standards.

China’s evolution over the past 30 years in manufacturing, division of labour and services trade is shaping new global trade rules, says Huang Qifan 黄奇帆 China International Economic Exchange Centre executive vice president. This has also led to the rise of goods’ proportion of total international trade, over 70 percent, with services around 30 percent, Huang adds, noting changes in manufacturers’ management methods have facilitated world-class production and led to control of global industrial supply and value chains.

Realising the Three Zeros (CP note: referring to zero tariffs, zero market barriers, zero subsidies) strategy is difficult under the WTO, as developing or less-developed countries believe it would lead to unfair treatment in global trade, Huang notes.

FTA negotiations could become a way for countries to achieve a Three Zeros policy with limitations, Huang says. If Europe, the US, Japan, Canada and Mexico form an FTA with a combined economic volume that is 50 percent of the world’s total by 2020, this would be tantamount to setting up a new integrated international trade system. China joining this trade system would link it to an international trade body accounting for 70 percent of global GDP, facilitating a Three Zeros-based free trade system.

China should also consider joining the Comprehensive Progressive Trans-Pacific Partnership (CPTPP), as the opportunities presented by the CPTPP echo those made available by the WTO, says Huang. Huang concludes that trade negotiations will impact China’s role in world economic development and lay the foundation for China to become a ‘modern nation’ by 2035 and a ‘strong nation’ by 2050.

agriculture

MARA revises plant phytosanitary regulations, proposes stricter rules

Ministry of Agriculture | 22 October

context: Facing the growing risk of cross-province transmission and overseas plant epidemic introductions, the state is eager to strengthen a top-down phytosanitary supervision and control system. The state will impose stricter rules regarding risk evaluation, licence reviews and cultivation monitoring on foreign-introduced seeds to prevent alien species invasions.

Ministry of Agriculture and Rural Affairs (MARA) is calling for comment on its revised ‘Implementation rules for plant phytosanitary regulations (agriculture-related)’ until 22 Nov 2019 to improve the phytosanitary supervision system.

The system currently faces three major challenges

• growing risk of overseas epidemic introductions
• increased threats to industrial security posed by domestic epidemics
• weak epidemic control capacity

Major amendments include

• highlighting monitoring, interception and prevention of major plant epidemics and clarifying implementation responsibilities of local management authorities
• strengthening risk evaluation and licence review on foreign-introduced seeds
• setting up a classification and management system for agricultural plant quarantine with corresponding management measures
• strengthening quarantine supervision of seeds, seedlings and other reproductive materials with sales records and a whole-process tracing mechanism

society

state to stabilise supply and prices of drugs in shortage

State Council, National Business Daily | 11 October

context: These new measures largely follow suggestions outlined in State Council’s August 2019 executive meeting, addressing the shortage of commonly used drugs by pushing production and prescription while suppressing prices. Producers and hospitals could be left with little room to profit. The API production approval systems also remain unchanged, limiting the effects of these measures.

State Council issued ‘Opinions on stabilising supply and prices of drugs in shortage’ on 11 Oct 2019.

Among 3,200 commonly used drugs, more than 200 drugs have experienced a significant price hike this year, reports National Business Daily. Active Pharmaceutical Ingredients (API) monopoly is a major cause, and Shi Lichen 史立臣 frequent healthcare commentator said previous punishments for this were insufficient, considering the large profit API providers gain from monopolies. State Council now pledges to enhance law enforcement. Measures to regulate drug use and support manufacturing are also expected to ease the current crisis.

The opinions call for

• increasing sensitivity and timeliness of monitoring on drug supply and prices
  • enhancing coordinated monitoring
  • setting up multiple grades of response
  • setting up different categories of response according to specific situations
  • managing a list of drugs in shortage
  • implementing termination of manufacturing reports to deal with possible consequences
• improving clinical use of essential drugs
  • promoting prioritised supply and rational use of essential drugs
  • improving hospital management and use of drugs in shortage
• improving procurement of drugs in shortage
  • allowing hospitals to procure drugs in shortage on provincial centralised procurement platforms
  • allowing hospitals to directly procure drugs in shortage from manufacturers if the drugs are not centrally procured or no manufacturers are producing them
  • ensuring procurement contracts are carried out
• enhancing price supervision and law enforcement
  • enhancing monitoring and warning of irregular changes in drug prices
  • enhancing long-term drug prices supervision
  • enhancing law enforcement against illegal practices such as monopolising API
  • resolving drug price hikes according to specific situations
• improving multi-level supply system of drugs in shortage
  • setting up a long-term storage mechanism
  • improving production capacity and quality
  • enhancing API supply

industry and environment

Jingjinji 2019-20 heating season pollution control plan

Ministry of Ecology and Environment | 16 October

context: Compared to the draft, the final heating season pollution plan lowered PM2.5 and heavy pollution day targets, although they are still higher than in 2018. This year’s plan adds targets for coking de-capacity and steel ultra-low emission upgrading, and emphasises the urgency of controlling coal consumption.

Ministry of Ecology and Environment, along with nine other agencies and six local governments, issued ‘Air pollution control plan for Jingjinji and surrounding areas autumn and winter 2019-20’. It specifies

• air quality targets for 1 Oct 2019 through 31 March 2020
  • PM2.5 concentrations to drop by 4 percent y-o-y
  • heavy pollution days to drop by 6 percent y-o-y
• key tasks
  • upgrading steel, construction materials, coking and chemical industries’ structure, before end December 2019
    • Tianjin Rochcheck Steel Group to close down one blast furnace plant
    • Hebei to cut steel capacity by 14 million tonnes, coking capacity by 3 million tonnes, cement capacity by 1 million tonnes, flat glass capacity 6.6 million weigh cases
    • Shanxi to cut steel capacity by 1.75 million tonnes, coking capacity by 10 million tonnes
    • Shandong to cut coking capacity by 10.31 million tonnes
  • upgrading industry clusters
  • controlling pollution from ‘scattered, chaotic and polluting’ firms
  • enhancing pollutant discharge permit regulations
    • closing down unlicenced firms or suspending operations for rectification
  • enhancing ultra-low steel emissions upgrades
    • before end December 2019, Hebei to complete steel ultra-low emission upgrade of 100 million tonnes and Shanxi 15 million tonnes
    • firms will have preferential measures revoked and pollution emergency response performance evaluation rating downgraded if found to be falsifying documents
  • promoting industrial boiler pollution treatment
    • starting 1 Oct 2019, coking industry to implement air pollutant special discharge limits
  • controlling VOCs pollution
    • launching VOCs pollution inspections before end October 2019
  • promoting clean heating
    • before end October 2019, converting 5.24 million households from low-quality to cleaner energy sources
  • prohibiting switching back to low-quality coal
  • capping total coal consumption
  • accelerating construction of railway lines run specifically for large-scale industrial and mining firms and newly built logistics parks
  • punishing excess vehicle emissions
  • strengthening non-road mobile pollution sources
  • optimising land use structure
  • effectively responding to heavy pollution days, based on ‘Guiding opinions on strengthening heavy pollution response and emission reduction measures’
  • strengthening infrastructure

science and innovation

Politburo studies blockchain

Xinhua Net | 25 October

context: The Politburo often holds study sessions on emerging technology to signal support. Beijing has accelerated blockchain development with management regulations, industrial research, and financial applications. Market interest in blockchain skyrocketed following the announcement, with Bitcoin jumping from US$7,400 to over US$10,500 on 25 October.

The Party Central Committee Politburo study session on 24 October focused on blockchain technology. Integrated blockchain applications are vital to technology innovation and industry upgrading, stressed Xi Jinping 习近平 Party chairman, adding that it should be a key focus of indigenous innovation. Xi further stated that the state shall

• accelerate blockchain technology and industrial innovation development, and promote integrated growth of blockchain and socioeconomic development
• strengthen R&D, including
  • basic research
  • key technology breakthroughs
  • standardisation research and global standard-setting power
  • industry growth
  • integrated development with other frontier technologies like AI and big data
  • talent cultivation
• improve data sharing, business operations and overall trust with blockchain
  • integration of blockchain and the physical economy
    • financing
    • risk management
    • regulations
  • blockchain-based digital economy innovation
  • ‘blockchain+’ public services
    • education
    • employment
    • elderly care
    • poverty alleviation
    • healthcare
    • anti-counterfeiting
    • food safety
    • public welfare
    • social security
  • integration of blockchain and smart city
    • IT infrastructure
    • smart transport
    • energy and electricity
    • strengthened interrelationship in information, capital, talent and credit rating
  • flows of production factors
  • data sharing across government agencies and regions
• improve policy guidance
  • blockchain security research and analysis
  • development tracking
  • security protection system suitable for blockchain technology
  • establishing responsibilities of industry actors
  • orderly industry growth

Relevant government agencies should take note of the latest blockchain development trends, improve their capacity to use and administer the technology, and foster its role in overall social, economic and technological development.