november: mending trade and business fences

an image to be cherished

Meeting on the fringes of the San Francisco APEC summit on 13 November, Presidents Xi and Biden expressed some bonhomie and exchanged a few home truths. Biden did not avoid upsetting Beijing with an offhand remark about Xi. 

But solid progress was made. Notably, Xi and Biden agreed to restore high-level military communications. After it agreed to help the US curb fentanyl use, Beijing rapidly followed up with firms, laying out US laws against selling precursor drugs. A meeting in the APEC margins yielded fence-mending on trade, going to enterprise cooperation, standards and administrative licensing. 

Ag traders had seen relations with the US recover as well in October. State-owned buyer Sinograin made the largest single-day procurement of US soybeans in 2023, eye-catching among similar transactions. Some ten more deals, primarily for soybeans, wheat, corn, and sorghum, were signed worth billions of dollars. Downplayed by the PRC media, the deals signal a reboot of ag trade with the US.

More positive news on PRC-US relations came in the run-up to COP28. A working group on climate action was set up and issued a new joint statement. Hailed in the PRC as a win for climate diplomacy, the parties agreed to triple global renewable capacity by 2030, reducing methane emissions as per their action plans. Beijing’s methane plan claims to improve emissions data accounting and verification; hard targets for methane emissions reduction are still awaited.

Xi’s meeting with Australian PM Albanese in Beijing shortly before APEC (5 November) was quite a happy affair. Local media hailed the restoration of Sino-Australia relations. Closer PRC ties are, Australia was reminded, in its best interests–not least in trade, critical minerals, green energy and security. 

Lauding ‘Xi Jinping Diplomatic Thought’, the Politburo at its 27 November meeting made a noticeable reference to the International Liaison Department of the Communist Party, the defacto foreign affairs wing of the Party. The Department's head, Liu Jianchao 刘建超, was in Canberra for talks with Australian Foreign Minister Penny Wong the following day. He then gave a rare public address. 

Debt relief made some headway following a late October Central Financial Work Conference that urged systematic, long-term management. Localities are drawing up plans, including refinancing and negotiating with creditors. A return to declining consumer prices in October renewed fears of deflation, with commentators faulting weak demand—due primarily to the demise of the real estate sector—and urging more fiscal stimulus. 

Pessimism deepened with a fraud scandal in private equity and the reported insolvency of wealth manager Zhongzhi Enterprise Group. Yet Beijing, convinced of the PRC’s long-term prospects, insists economic malaise is transient. New measures to boost financial support for the private economy may help, but even more echo Beijing’s mantra that the current predicament is manageable. 

Trade decline eased further in October, with imports recovering, reversing the post-March 2023 downturn. Robust domestic demand and a ‘low base effect’ from last year, claims commentary, may explain the uptick.

Diversification attempts in ag trade have not, however, slowed. The PRC and Russia signed the ‘largest grain trade deal in their history’. Worth US$25.7 bn over 12 years, it will see Russia supply a total of 70 million tonnes of grain and oilseed. (The US and Brazil supply well over 100 million tonnes annually). The immediate impact on the current PRC ag trade structure will be minimal. Given the PRC welcome and steps to allow Russian wheat and barley imports, Sino-Russia ag trade has growth potential.

Offsetting foreign investment falls in Q3 remains a priority for Beijing—hence, yet more measures to boost business interest

  • MofCOM stepped up tax breaks, launching a campaign dedicated to addressing the prejudicial treatment of foreign firms 
  • A Xinjiang pilot free trade zone was approved by the State Council, with expansion of the  national demo zone for the services sector
  • customs procedures will be clarified and streamlined

The Politburo meeting of 27 November underscored the role of foreign trade, calling for an open and transparent foreign-related legal system—better treatment for international firms in China and more access to fair, legal recourse.  

Echoing a mantra of ‘creating the new before destroying the old’, NDRC launched new pricing support for coal, allowing plants to cover fixed costs when not generating power. Pressure on plants, many operating at a loss since 2021, should be eased, facilitating orderly energy transition, explains NDRC. The move is deemed a precursor to broader conventional power capacity support covering all power sources.

The PRC showcased a Global AI Governance Initiative at the first BRI Conference on Science and Technology in Chongqing, 6-7 November, and at the 10th annual World Internet Conference in Wuzhen Zhejiang, 7-10 November. Positioning itself as a leading voice for developing countries, and in response to perceived rising Western tech protectionism, Beijing, counterintuitively, urges ‘open science’.

Improved financing for PRC tech firms was the topic of joint talks between MoST and financial regulators. Banks play an outsized role in the domestic financial sector but remain ill-equipped to handle tech financing. More tailor-made services for innovative enterprise funding and state guarantees are in the pipeline. 

The big surprise in education in November was a fall of some 350,000 applicants for MA degrees compared to 2023. Caixin pointed to the bleak job market as one of the factors putting students off. The mental toll on students was acknowledged with the creation of a National Student Mental Health Work Advisory Committee.

Beijing will set up a pilot zone for rare disease medicines. Approved 23 November, the zone allows the import of cell and gene therapy products and urgently needed foreign clinical pharmaceuticals that have not yet been registered and marketed domestically. 
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