Expect the Two Sessions, beginning 4 March, to firmly back Beijing’s present course and declare that ‘high-quality development’ and the Party’s roadmap to a modern industrial state will prevail over ‘short-term’ setbacks. The emergence of ‘new productive forces’, a reference to changing industrial models, undergirds a new doctrine to rationalise the PRC's development trajectory. This post-reform growth model appears short of consensus in the policy community.
Meanwhile, the stock market declined with no bottom as yet in sight. On 5 February 2024, the SCI (Shanghai Composite Index) fell below 2,700, a five-year low. Stabilise expectations, instructed Premier Li Qiang 李强 early in the month, signalling more support forthcoming. Buys by state-backed entities, domestic and offshore, together with a crackdown on short-selling, sparked a rally after the Lunar New Year holiday, boosting the SCI above 3,000; few deemed this sustainable. A proposed stock market stabilisation fund, worth trillions of RMB, has become a hot topic.
Awaiting a restoration of confidence, Beijing seeks to lower borrowing costs and pump up liquidity. PBoC cut 25 percentage points from the 5-year loan prime rate on 20 February 2024, the largest cut since its launch in 2019. The deep cut is intended, explains Li Yujia 李宇嘉 Guangdong Housing Policy Research Centre, to encourage buys in the market as rates will not fall further.
On the global stage, FM Wang Yi 王毅 told the 60th Munich Security Conference in mid-February that the PRC is a global stabilising force. He warned that decoupling would be a 'historic mistake.' He engaged in extensive diplomacy on the sidelines, liaising with high-level US, UK, French, German, EU, Canadian, Argentine and Ukrainian officials.
Geopolitics pundits at home meanwhile saw the MSC 2024 annual report as ‘pessimistic’, incapable of solving global problems: a provider of diagnoses but not treatments.
Given a sluggish 2023, retaining foreign investment and luring more is a rising issue. Deeming it ‘a major focus’ for 2024, the State Council pledges to improve market access, the business environment and the flow of ‘innovation factors’ e.g. capital and data. Building on progress claimed in Q4 of 2023, MofCOM aims to keep easing foreign firms’ worries. Veteran trade commentator Jiang Xiaojuan 江小涓 notes that international firms are leaving for a host of reasons. They are still vital to the economy, and the PRC must leverage its complete industrial chains and massive market to attract international players.
Anti-subsidy duties on EU potato starch imports will be extended, adding to this year's food-related anti-dumping measures, typified by those on EU brandy in January. Eying the less friendly external environment, not least the latest EU probe on PRC electronic vehicles, MofCOM will step up support, urging firms to work more closely with overseas manufacturers to offset threatened restrictions.
Piloting reforms, FTZs (free trade zones) remain in the PRC policy mix. February saw measures roll out in Shanghai, including
- further applying high-standard trade rules in services, trade facilitation and digital trade in Shanghai’s FTZ
- leveraging aviation connectivity to build an international business cooperation zone
- waiving offshore resale trade stamp duty in Lingang New Area
- piloting dedicated catalogues for different categories of data flow in Lingang, starting with key sectors like intelligent connected vehicles, finance, shipping and biomedicine
Maintaining post-subsidy support for renewables, a new initiative is on the drawing board, boosting consumption. GECs (green electricity certificates) are the focus. An NDRC (National Development and Reform Commission) Notice solidifies GEC’s value as the sole proof of domestic renewable power consumption—valid offsets in setting energy-saving targets. Provinces will be urged to set up mandatory renewable consumption and limit big emitters’ fossil fuel use.
Installation of solar, wind and new energy storage has landed well ahead of schedule, with Xi stressing the need for further growth. Stepped-up power sector reform is on the cards, ensuring storage is utilised and the grid does not curtail renewable power.
New carbon market trading rules promise harsher penalties for firms that commit data fraud or fail to comply. They also call for phasing in paid allocation to reflect the costs of reducing carbon. Power generators are currently allocated allowances gratis, the point being to lower firms' costs and industry friction. More scrutiny of data quality is expected, with MEE (Ministry of Ecology and Environment) flagging expanded coverage. Cement, aluminium and steel will be tapped in the next compliance cycle.
A new MIIT (Ministry of Industry and Information Technology) initiative focuses on data security in industry. By 2026, it targets data categorisation and protection in over 45,000 enterprises (the top 10 percent, at least in each province) and developing scores of standards.
Patents notoriously fail to be commercialised in the PRC. A new campaign projects a ‘significant increase’ in exploitation rates of campus and research institute patents. Precise target rates are awaited. The point now is to identify promising patents, connect with firms via a central platform, and support successful matches.
SOEs are to strive to develop AI, taking the lead in fostering ‘new productive forces’. SASAC urges them to multiply smart computing centres, apply AI to traditional industries, create an industrial ecology empowered by large models, etc.
The SPC (Supreme People's Court) IP Court claimed success in IP appeal cases over five years of pilots. Reversals rose from some 6 percent in 2019 to some 20 percent in 2023. The SPC’s IP Court agreed with fewer original judgments, and fewer were remanded for retrial. This marks higher quality and efficiency of case handling while drawing attention to the poor quality of IP case handling in lower courts. Yet administrative litigation reform appears less effective than civil.
Progress has been made in hearing cases involving non-Chinese entities. Such cases account for nearly one-tenth of all cases heard by the Court. Staff shortages hamper the Court, hindering IP trial reform. Judges, on average, took on 140 cases, concluding just over 82 cases each. Calls continue for a national IP court.
Plans are afoot to develop life sciences and biotech in Xiongan New Area. This nicely marries a high-profile sector with a pet project of Party leader Xi Jinping.
HK seniors’ access to PRC health services is to improve, and certain Great Bay Area hospitals will independently price medical devices via the ‘HK and Macao Medicine and Equipment Connect’. All this flags Beijing’s increasing efforts to integrate Hong Kong and Macao with neighbouring PRC hubs. The goal is a more fluid and convenient channel to better provide medical services and equipment.
The first guidelines on off-campus tutoring are out for public comment. When made official, they will set off-campus tutoring, a formerly thriving industry, within a legal framework. Criteria are set, defining off-campus tutoring organisations and their primary clientele of primary and middle school students. Informal, occasional tutoring by relatives and friends is intentionally excluded. The prevailing view is that the draft fails to yield useful data, instead extending the existing ‘double reduction’ measures. Its value is in legally codifying current settings.