context: Since the 2024 Third Plenum, the CPC has worked to create a 'high-level' socialist market economy, refining resource allocation while addressing market failures. The party aims to boost strategic planning and regional teamwork, building a unified domestic market for internal circulation. Central to this push is tackling local protectionism and monopoly. There is a need to ensure equal market access and protection for all participants while stopping administrative power misuse.
Market regulatory departments ought to grasp the significance of advancing an environment for fair competition, taking steps to build a unified national market, notes Luo Wen 罗文 State Administration of Market Regulation Party secretary and director.
Upholding fairness in market competition helps to eliminate ineffective enterprises, protecting the room for SME development and public interest. In recent years, market regulators have refined relevant legal grounds, creating a system with
To enhance operationalisability and the expected effects of such laws, there is a need to
Another approach is to vet administrative decisions or policies that hamper fair competition. In 2024, market regulators reviewed over 19.6k major policy documents, with fair competition violations discovered in 2.1 percent of the paperwork, marking a 2.7 percent annual decline.
Overall, regional review work remains unbalanced, especially in areas of market entry and access, industrial development, government procurement, bidding and setting standards. To improve the situation, there is a need to
These measures help to curb local protectionism, removing hidden market barriers such as credit ratings, local standards and differentiated standards across the country.
To cultivate a healthy market environment, ‘involution’ ought to be tackled. As the external environment shifts, there is a need to guarantee the stability of the PRC’s domestic supply chain.
context: The 2023 Central Financial Work Conference identified five key areas—technology, green, inclusive, pension and digital finance—as essential for strengthening the PRC’s financial stability and sustainable growth. Following up, there have been growing calls for better integrating these sectors. In response, the China Securities Regulatory Commission released Implementation Opinions on advancing the five key financial areas in the capital market, emphasising support for new productive forces, deepening investment and financing reforms and directing resources toward these priority sectors.
Tian Lihui 田利辉 Nankai University Institute of Financial Development director emphasises that in terms of green finance improving green bond standards and unifying information disclosure rules will create a clear regulatory framework for market participants. Additionally, introducing more green-themed funds and developing low-carbon futures and options will expand financing channels for the green economy. Tian notes the PRC’s active role in shaping international sustainable finance standards, enhancing its global influence.
On inclusive finance, the Opinions directly address financing difficulties for SMEs
Tian notes efforts to broaden investment channels for individuals, such as accelerating the transformation of securities and fund institutions toward wealth management and expanding the range of public fund products.
Critical steps are being taken to address the ageing population
Tian notes the need for a stronger digital financial infrastructure to support capital market development, through initiatives like
On technology finance, Zhou Xiaozhou 周小舟 CSRC (China Securities Regulatory Commission) spokesperson notes that CSRC has introduced policies such as the 16 measures for science and technology to continuously improve the regulatory framework for technological innovation.
Chen Li 陈雳 Chuancai Securities chief economist, emphasises the importance of interregional coordination, risk monitoring and policy differentiation to ensure effective implementation.
context: The 2024 CEWC (Central Economic Work Conference) was held in Beijing on 11–12 December, shortly after the Politburo laid out priorities on economic work in 2025.
A more proactive macroeconomic policy will be implemented in 2025 with a specific plan to be unveiled at the upcoming National People's Congress, says Han Wenxiu 韩文秀 Central Financial and Economic Commission Office deputy director in an authorative interpretation of the Central Economic Work Conference. This is a significant change that is conducive to increasing counter-cyclical regulation, better responding to unstable and uncertain factors in economic operation and providing strong policy support for achieving the annual goals and tasks, meaning
Han notes that powerful policy combination punches are needed to
Action will focus on boosting domestic demand as the main growth driver by
Through coordinating and unifying quality improvement and reasonable growth throughout high-quality development and leveraging the vast PRC market, a key aim is to
In the context of increasing uncertainty, the external environment requires more reliance on domestic demand and expanding consumer demand, says Han, noting
It is necessary to coordinate the relationship between an effective market and an effective government to form an economic order that is 'both active and controllable', Han stresses. The more standardised government behavior, the more effective the market role, he says, noting
PRC economic policy in 2025 will also centre on
context: Opened in 2019, the STAR Market (Shanghai Stock Exchange’s Science and Technology Innovation Board) aims to be the PRC’s Nasdaq and support smaller 'hard tech' firms in achieving tech self-reliance. However, high IPO thresholds hinder financing for innovation, such as in semiconductors. On 19 June 2024, CSRC (China Securities Regulatory Commission) unveiled fresh measures to lower the IPO and M&A barriers for hard tech firms.
Wu Qing 吴清 CSRC (China Securities Regulatory Commission) chair gave a speech on eight measures to reinvigorate the STAR Market (Shanghai Stock Exchange’s Science and Technology Innovation Board) on 19 June 2024 at the annual Lujiazui Forum, reports Caixin. The reform will support 'hard tech' through improvements in issuance, underwriting, M&As, equity incentives and trading systems.
Wu states the reform aims to
To achieve these goals, the new measures will
Strict standards on tech attributes are likely imposed on loss-making companies during IPO or M&A applications, notes an investment professional. CSRC will also press investment institutions to improve their pricing capabilities.
On IPO rules, Wu mentions the reform will
On investor protection, Wu emphasises
On quantitative trading regulation to protect individual small investors, Wu stresses
Wu expresses support for Shanghai to become a world-class financial center by
context: Annual work conferences review the year and announce priorities for the next year. MIIT (Ministry of Industry and Information Technology) did not hold one in 2022, and its 2021 work conference was overshadowed by COVID-19-related manufacturing disruptions. Throughout 2023, ‘new industrialisation’ has gained in prominence. MIIT has received additional responsibilities for its implementation in the 2023 agency overhaul.
‘New industrialisation’ was the core theme of the MIIT (Ministry of Industry and Information Technology) annual work conference, held on 21 December. The meeting readout stresses that new industrialisation is a strategic deployment for the great rejuvenation of the Chinese nation, and calls for thoroughly implementing the requirements laid out at the National New Industrialisation Conference held by the CPC Central Committee in September 2023.
The meeting readout highlights 12 specific tasks for 2024, including
The meeting readout highlights progress in 2023, including
Jin Zhuanglong 金壮龙 MIIT minister presided over the conference, and cadres from provincial industry departments of Liaoning, Jiangsu, Hubei, Sichuan and the Shanghai Municipal Communications Bureau attended.
context: The private economy is the latest target of a ‘1+N’ approach, demonstrating Beijing's understanding that strengthening the sector will take time and effort. For years, commentators have called for establishing a similar agency to raise the private sector’s profile and coordinate policy implementation.
A new private economy development bureau was announced by the NDRC (National Development and Reform Commission) on 4 September. The bureau will be organised as an internal agency within NDRC and focus on planning, coordination and policy implementation. Its main tasks include
The 19 July State Council opinion on promoting the development of the private economy and the subsequent 1 August initiatives from NDRC signal Beijing sees revitalising the private sector as an important part of the Party's current policy direction. A number of provincial-level governments have responded with their own policies
NDRC says the bureau’s next steps are
Tu Xinquan 屠新泉 UIBE (University of International Business and Economics) WTO (World Trade Organisation) Research Institute director says setting up the bureau as a part of NDRC was appropriate because
While establishing the bureau sends a clear signal, it will not be enough to boost the private economy, says Tan Haojun 谭浩俊 China Institute of the Private Sector. That will require changes to the overall social, services and work environment, he asserts.
context: The system for allocating scitech funds was announced to undergo a reform at the Two Sessions. While complete details have not been revealed, the June 16 State Council executive meeting approval of an action plan to strengthen support for financing of technology-based enterprises is a notable development. The plan aims to incentivise financial institutions to offer a range of financial services to tech-based businesses, with a specific focus on supporting them during their early stages of development.
The action plan to strengthen support for financing of technology-based enterprises is an important boost for the innovation-driven development strategy, says Liu Jipeng 刘纪鹏 China University of Political Science and Law professor, who helped draft the Securities, State-owned Asset and Futures Trading Law. Financial policy support for scitech enterprises is urgently needed, he says, because they are at the forefront of
The action plan emphasises support throughout the entire lifespan of tech companies, from inception to maturity. Liu highlights that such backing necessitates a diverse range of financing options. While venture capital equity investments are required in the start-up phase, debt financing becomes crucial at later stages. Since the action plan prioritises the start-up stage, Liu anticipates increased policy support for private equity venture capital in the near future.
The action plan reflects the significant challenges tech start-ups encounter in securing financing, says Qu Jingdong 曲敬东 a private entrepreneur. Most tech financing is sourced directly from the government or from SOEs (state-owned enterprises), he explains, which are institutionally constrained and risk-averse; consequently, these organisations typically invest only in established, medium-stage companies rather than early-stage start-ups.
Highlighting the high costs and risks of investing in tech enterprises, Liu Jianjun 刘健钧 Hunan University professor and Tsinghua University Global Private Equity Research Institute chief asserts the need for explicit policy support. Given the impracticality of bank loans for early-stage startups, he insists on a more substantial supply of risk-tolerant angel investment.
Strengthening infrastructure construction is another crucial part of the action plan, stresses Liu Chenming 刘晨明 Tianfeng Securities assistant to the director. He explains that tech start-ups often face unfair term sheets for equity investment, such as having to relinquish their intellectual property rights.
Liu Chenming adds that the action plan comes at a crucial pivot for China’s economic development, as China's economy is undergoing a significant shift from a model driven by land and labour to one driven by data, technology and high-end human capital. He argues that the capital market is instrumental in this transformation, enhancing the effective protection, valuation and exchange of these new production factors.
context: The rapid depreciation of the RMB over the past two months has been a wake-up call for traders to strengthen protection against forex risk with financial tools. Given that most currently available products are designed for big firms, banks are urged to provide more personalised and creative services for SMEs.
PBoC (People’s Bank of China) issued 'Notice on supporting cross-border RMB settlement for new trade formats' on 20 Jun 2022, specifying
Industry insiders highlight four key takeaways from the notice, including
According to interviews conducted by 21st Century Economic Herald, the notice is expected to accelerate services collaboration between banks and relevant payment institutions. However, persuading overseas partner banks to set up offshore RMB accounts for PRC traders remains one of the key challenges, which requires overseas banks to connect to China’s CIPS (Cross-border Interbank Payment System) and launch RMB financial services.
context: For small, private companies in China, the pervasive state intervention in the economy is the root of the problem. But given the path of dependence on existing institutions, these companies cannot survive without state support. State backing comes at the expense of the loss of property rights, operational autonomy, and incentives for small enterprises to innovate.
Experts elaborated on policy recommendations for helping SMEs get through economic hardships at the 8 June China Macroeconomy Forum. As many small companies were affected by the pandemic, central and local governments released a series of supportive policies including tax and fee cuts, deferred social security submissions, rent discounts, special financing, etc.
While the Covid situation is yet to turn around in many localities, SMEs still have difficulties getting orders and restarting production. Without revenue, it is better to outright cancel social security submission and rent rather than defer them, advises Wen Bin 温彬 China Minsheng Bank. In a similar vein, Xu Zhaoyuan 许召元 State Council Development Research Centre said rent discount is currently limited to state-owned properties; systematic measures should be promoted to guide private property owners to cut rents for small companies.
Xu also advocates a systematic reduction of financing costs for small firms. Although China's savings rate is the highest globally, financing costs are still high for small companies. This situation can be improved with more creative supply-chain financial instruments and a reduction of inefficient investment. Banks need to change their conventional credit-granting models, raising the portion of credit loans, says Wen.
Mao Zhenhua 毛振华 China Chengxin Credit Rating thinks small companies should not rely on the banking sector. In normal times, they should rely on venture capital, private financing, and equity financing. But under extraordinary circumstances, the government should provide credit guarantees or even subsidies for specific sectors and wage payments to enable small company financing. Compared to many developed economies, China can still do more for small companies, adds Mao.
context: Following Opinions released by the State Council in January 2022, trade officials have now begun the selection process of pilot cities and zones, designated to advance synergy between domestic and global supply chains under the dual circulation strategy. Coastal regions such as FTZs (foreign trade zones) and SEZs (special economic zones) are likely to serve as the testing ground.
MofCOM (Ministry of Commerce) and 13 other agencies jointly issued 'Notice on launching pilots for integrating domestic and foreign trade' on 10 May 2022, specifying
context: Stringent COVID-19 lockdowns have laid bare the weaknesses in China’s logistics system, putting local protectionism, market fragmentation and disconnection of inter-regional rules in the spotlight. Building a unified national market, not least for the logistics industry, will require overcoming deep-rooted regional competition resulting from the 'political tournament system'.
In response to dire logistical blockage in areas surrounding Shanghai, which has been under lockdown since 28 Mar 2022, and to follow up with a recent State Council notice on streamlining logistical flow, vice-premier Liu He 刘鹤 held a teleconference on 18 April, specifying
With the roll-out of policies to support logistics over the past week, road transport disruptions have been easing. MoT (Ministry of Transport) data show that by 16 April the number of closed highway toll stations has dropped by 67.7 percent to 219 (around two percent of the total), and the number of closed highway service stations has declined by almost 80 percent to 76 (1.15 percent of the total). According to the G7 IoT platform, the national truckload freight flow index has recovered from its lowest point at 70.54 percent on 6 April to 87.53 percent on 15 April.
Nevertheless, uncertainties remain as the evolving local COVID-19 situation could cause an unexpected shutdown of roads once new cases are reported. Logistics firms and truck drivers are also concerned about the effectiveness of local implementation as cross-city and provincial barriers persist. For instance, some localities still require drivers to have negative nucleic acid test results within the past 24 hours instead of 48 hours.
context: Rising concerns over the economy are barely concealed in the latest report from the central bank, which has refrained from substantial easing so far into the pandenmic. Massive easing is still unlikely as it could jeopardise the structural transition to a green, quality-growth model. Rhetorical shifts may nonetheless signal further stablising efforts and possibilities for loosening in particular sectors.
Some ‘phased, structural, and cyclical constraints’ are faced by the domestic economic recovery, and it is becoming more difficult to maintain a stable economy, states the Q3 2021 Monetary Policy Implementation Report released on 19 Nov 2021. Comparing with the Q2 report, the latest one
Based on these rhetorical shifts, monetary policy may further tilt in the direction of stablising growth, argues Wang Jingwen 王静文 Minsheng Bank senior macro researcher.
The possibility of substantial credit easing is low in the contexts of ‘housing anti-speculation’ and ‘common prosperity’, argues Wang Han 王涵 Industrial Securities chief economist. Easing will be more precise and targeted, concentrating on specific sectors like green finance, 'new infrastructure' and SMEs, Wang notes.
Regarding property market risks, the report states they are generally controllable. Stabilising the market and preventing a hard landing remain key, states Ren Zeping 任泽平 Soochow Securities chief economist. Policies are loosening, and support for reasonable real estate financing is being ramped up, Ren observes, adding that they still serve to fine-tune the ‘anti-speculation’ framework.
context: The annual CEWC (Central Economic Work Conference) is the main agenda-setting event for the upcoming year. Answering debates on whether or not to extend COVID-time support policies, CEWC gave reassurances that necessary support for the economy would be continued, but more efficiently and precisely. Among concerns, expanding innovation and domestic consumption figure prominently.
Eight key tasks must be carried out in 2021 as per the CEWC readout, including
Overall directives and expressions of interest include
The gist is to strike a fine balance between economic recovery and managing risks, notes Dong Ximiao 董希淼 Merchants Union Consumer Finance chief researcher. With the emphasis on maintaining the continuity of policies, CEWC has managed to stabilise market confidence and expectations, Dong believes.
context: A few eye-catching expressions were coined at the December Politburo meeting just concluded. Signs of strengthening anti-monopoly, especially in the tech industry, have become a trend at the policy level in recent months. With the state’s Marxist genes in mind, regulatory overhauling and market shake-up could be some of the political and economic ramifications.
In the runup to the agenda-setting Central Economic Work meeting, a Politburo meeting is held every mid-December to discuss overall directives for the coming year. Heading into 2021, Politburo is demanding four major tasks be carried out, namely
Among the tasks, the call for ‘strengthening anti-monopoly and preventing the disorderly expansion of capital’ has caught wide attention.
Irregularities of competition especially among internet platforms have been an outstanding issue in recent years. Smaller players have been driven out of business by price wars. Unconstrained expansion of capital harms the interests of consumers and hinders the sustainable growth paradigm, argues Liu Xue 刘学 Peking University Guanghua School of Management professor. The focus is on the real estate industry and internet finance platforms, Liu believes.
A high-standard market system is necessary for cultivating a strong domestic market (as per the dual circulation paradigm), points out Liu Xiangdong 刘向东 China International Economic Exchange Center economic research deputy director-general. Capital must therefore submit to the control of risks and the overriding agenda of high-quality growth, Liu believes.
context: The highest-level meeting so far in 2020 for SOE (state-owned enterprise) reform was held in Beijing deploying major policy directives. Although the 3-year action plan has not been publicly released, in recent months high-level officials have hinted at a reform direction of SOEs worth watching for.
The flagship ‘3-year Action Plan of SOE Reform’ is being fully launched, and is expected to be released to the public shortly, according to Xinhua Finance. Overall directives are out on 27 September, with Liu He 刘鹤 Vice Premier heading the meeting of the State Council SOE Reform Leading Group.
Five requirements are put forward for the implementation of the 3-year action plan, including
SOEs must first be true market entities, with innovation a top concern. The highlight is the emphasis on achieving innovation through incentive schemes, notes Li Jin 李锦 China Enterprise Development Research Centre.
In particular, SOEs will play a leading role and influence the development of private enterprises. Depending on different concentration requirements among industries, SOEs must
In the past, M&As were mainly between large SOEs, notes Zhu Shanbo 祝波善 SOE restructuring expert. M&As with private firms are new and could mean
context: As the economy slows, pressure on officials to stimulate the economy grows. However, key officials are pushing back believing a return to massive stimulus would be counterproductive. Compounding the problem is that six percent growth in 2020 is needed to realise government's goal of doubling the economy between 2010-20.
Debate intensifies on whether the government should use stimulus to ensure GDP growth remains at or above six percent, or let it fall.
Liu Shijin 刘世锦 Chinese People’s Political Consultative Conference economic committee deputy director believes potential output between 2020-25 will fall 5-6 percent (considered median speed), attempts to increase output over potential output will have short term benefits but long term risks
Wang Yiming 王一鸣 State Council Development Research Centre deputy director posits the slowing economy is natural and reform will be key to maintaining medium speed growth
Xu Gao 徐高 Bank of China International Securities chief economist argues maintaining 6 percent growth is crucial for market confidence
context: The taxation super-agency will not only be in charge of central and local tax collection, but also the collection of social insurance funds. In practice, this consolidation raises compliance costs for SMEs and makes short-term pain more acute in face of a slowdown.
Starting on 1 September 2018, responsibility for social insurance fund collection will start to be transferred from social insurance bureaus to tax administrations, with the transfer fully implemented by 1 January 2019. While this reform will help replenish social insurance fund shortages and benefit long-term public welfare, tightening collection will significantly raise small and medium enterprises (SME) operation costs, suppress profits, and cut household income in the short term, according to Guotai Junan Securities report.
The reform is premised on two considerations: the large social insurance fund gap and poor enterprise compliance. As society ages, the funding gap will only grow, reaching C¥1.8 tn in 2020 and C¥3.2 tn in 2030, estimates the report. China’s total social insurance fee to wage ratio is 29.29 percent, much higher than the world average 16.26 percent, shows the report. This creates strong incentive for firms, especially SMEs, to evade submission. Social insurance bureaus, on the other hand, are constrained in resources and information to investigate firms’ submissions. For example, an enterprise may register fewer employees and wages in the social insurance system than in the taxation system. Integrating the two systems will mitigate the issue and make it harder for enterprises to arbitrage information asymmetry.
Only 27.05 percent of firms are fully compliant, and firms submitting only baseline insurance account for 31.7 percent of the total, according to ‘2018 Enterprise Social Insurance White Paper’. State-owned enterprises and listed companies align with requirements; most non-compliant ones are SMEs, reports The Paper. Considering the already huge management difficulties facing SMEs, this measure is too drastic and may threaten their survival, argues Qi Chuanjun 齐传钧 China Academy of Social Sciences researcher.