Skip to main content

THE TIP SHEET: China Updates from TRIVIUM

Source: TRIVIUM CHINA

HEARD IN BEIJING

"The renminbi won’t break through 7, because it’s a psychological barrier.

- Sheng Songcheng, advisor to the PBoC

Some context: On Friday, the central bank intervened to prevent the currency from falling below 7 RMB to the dollar. That sent a signal to markets that rapid depreciation is off the table. More in the Tip Sheet below. 

THE TIP SHEET

FINANCE & ECONOMICS

1. China's financial regulatory overhaul is just getting started

China’s financial regulatory overhaul is kicking into high gear, Caixin reports:

"After a series of top appointments last week, more personnel moves are on the way as China’s top financial regulatory bodies staff up to carry out clearly defined new organizational responsibilities.""The shakeup will affect thousands of regulatory employees by the end of this year, settling the dust of a sweeping government overhaul unveiled in March."Some context: Tip Sheet readers are well aware that the government announced its most wide-ranging shakeup in decades back in March. Changes to the financial regulatory architecture are a key part of the re-tooling effort.

Why the shake up?"China’s previously fragmented regulatory system was blamed for allowing financial institutions to exploit gaps and loopholes to carry out risky and sometimes shady business practices.""Lax oversight brewed corruption scandals that brought down top financial regulators including insurance industry head Xiang Junbo and senior banking regulator Yang Jiacai."

Get smart: Financial regulators are shaking things up so that their oversight of the industry continues to improve. Key to that effort will be the newly created Financial Stability and Development Committee.

Get smarter: The moves show that regulators’ primary goal is still to crackdown on illegal and illicit behavior. They aren’t backing off the de-risking campaign.

 

READ MORE
Caixin: Redrawing China’s Financial Regulatory Landscape
 

FINANCE & ECONOMICS

2. PBoC steps into currency markets

On Friday, the central bank made its most aggressive move of the past two years to intervene in currency markets. And it might just be getting started.

CNBC has the details:

"China's central bank said it would require banks to keep reserves equivalent to 20 percent of their clients' foreign exchange forwards positions from Monday, in a move to stabilise the yuan currency.""The reserve requirement ratio had been set at zero since last year.""In a statement on its website on Friday, the People's Bank of China (PBOC) said it would take counter-cyclical measures to keep foreign exchange markets stable."

Why it matters: The CNY has dropped almost 10% since its April high. That is a huge move for the currency.

Get smart: The move isn’t designed to stop the depreciation altogether. The central bank just doesn’t want the pace of depreciation to get out of hand. So, it is actively working to counterbalance market forces.

What to watch: This is likely to be the first in a series of moves. If the US-China trade war keeps pushing the currency lower, the PBoC will become more active in managing the fallout.

 

READ MORE
CNBC: China c.bank to raise reserve requirements for forex settlements to 20 pct
PBoC: 中国人民银行决定将远期售汇业务的外汇风险准备金率调整为20%
PBoC: 国人民银行新闻发言人就远期售汇业务的外汇风险准备金率调整为20%有关问题答记者问
 

FINANCE & ECONOMICS

3. Trade war rolls on

Chinese authorities are fed up with the US’s handling of the trade war.One minute the Americans say they want to deal, the next they say they want to escalate (see August 3 Tip Sheet).

China wants the US to know that they are ready for either approach.

After meeting with US Secretary of State Pompeo on Friday, State Councilor Wang Yi said China is ready to talk (Reuters):

“We are willing to resolve the concerns of both sides via talks.”

But a few hours later, China announced tariffs on USD 60 billionof US goods, primarily in the chemicals, energy, and agriculture sectors. That was in response to a tweet by US President Trump threatening increased tariffs on USD 200 billion of Chinese goods.

Get smart: This is the first time that Chinese authorities didn’t respond by promising tariffs on an equivalent value of US goods.

Get smarter: China can't match the US tit-for-tat because it doesn't import as many US goods, so it may be trying to ration its retaliatory measures.

 

READ MORE
Reuters: China says it wants to resolve differences with U.S. 'on equal footing'
NYT: China Threatens New Tariffs on $60 Billion of U.S. Goods
MoF: 国务院关税税则委员会关于对原产于美国的部分进口商品(第二批)加征关税的公告
MoF: 国务院关税税则委员会发布公告决定对原产于美国的部分进口商品(第二批)加征关税
 

POLITICS & POLICY

4. Beach Party

It’s official. Top leaders are at the beach.

Well, we assume they are. That’s because Organization Department head Chen Xi and Vice Premier Hu Chunhua met with assembled experts in Beidaihe on Saturday.

Some context: Beidaihe is a beach town two hours northeast of Beijing. Senior leaders hold informal meetings there for around two weeks every August.

Some more context: The Beidaihe meetings are shrouded in secrecy. Agendas and attendees are never confirmed, and there is likely to be little to no indication in official media that the gathering is even taking place. The annual meeting with experts is one of the only signs that leaders are there.

This was weird: We would have expected head of the Central Secretariat Wang Huning to meet with the assembled experts, like his predecessors did.

Get smart: Wang has not made a public appearance in over six weeks, fueling speculation that he may be in some sort of political trouble. Expect those rumors to heat up after his absence Saturday.

Get smarter: Wang already has a reduced role when compared to his predecessor Liu Yunshan. Unlike Liu, Wang is not head of the Central Party School – Chen Xi is. So Wang's absence may simply reflect that he plays a different role from previous secretariat heads. 

 

CPC People: 陈希:弘扬爱国奋斗精神 建功立业新时代
 

POLITICS & POLICY

5. China's take on the South China Sea

On Saturday, State Councilor Wang Yi admitted that China is militarizing the South China Sea(SCS). But he said it’s not China’s fault:

"Certain non-regional countries, mainly the United States, have been sending massive strategic weaponry into this region, especially to the South China Sea, as a show of military might and putting pressure on regional countries, China included.""I'm afraid that is the biggest force behind China's push for militarisation in this region."

Wang made the comments in Singapore, where he attended the Association of Southeast Asian Nations (ASEAN) foreign ministers' meetings

Some context: On his visit to the United States in September 2015, Xi Jinping promised then US President Barack Obama that “China does not intend to pursue militarization” in the SCS. Xi did not promise that China would not militarize the islands.

Get smart: Nobody buys Wang’s argument that China was forced to militarize the SCS.

Get smarter: China’s island-building campaign in the SCS makes many neighbors uneasy. But neighbors are also wary of confronting China as its power and influence grows.

 

READ MORE
The Straits Times: China's militarisation of South China Sea done in self-defence: Foreign Minister Wang Yi
 

POLITICS & POLICY

6. New Environmental Impact Assessment regs give public more input

On Friday, the Ministry of Ecology and Environment announced updated measures regulating Environmental Impact Assesments (EIA).

Some context: EIAs assess the environmental impact of new investment projects.

The goal: Make the whole process more transparent by involving the public more. The measures specify rules for public hearings and commenting periods.

But regulators don’t want the new procedures to inhibit investment.So they have also streamlined the commenting process, and provided a simplified EIA procedure for investments in industrial parks.

Get smart: Public resentment over polluting factories is arguably the biggest cause of civil unrest in China.

Get smarter: The measures are a step in the right direction, but the gap in trust between citizens and industry will take a long time bridge.

 

READ MORE
MEE: 环境影响评价公众参与办法
Gov.cn: 生态环境部环境影响评价司有关负责人就《环境影响评价公众参与办法》修订发布答记者问
 

POLITICS & POLICY

7. Trimming the administrative state

On Friday, the State Council announced the abolition of 11 administrative approvals, including (Gov.cn):

“employment permits for residents from Hong Kong, Macao special administrative regions and Taiwan”“project approvals for foreign investment in the transport sector”“visas for ships’ commutes to fishing ports”“record filings for establishing company branches”“announcement of withdrawing business licenses”

Get smart: This is what China talks about when it talks about administrative reform. It’s not big and it’s not flashy. Instead it is incremental, but steady, progress.

 

READ MORE
Gov.cn: State Council cuts 11 more administrative approvals
Gov.cn: 国务院关于取消一批行政许可等事项的决定

Comments

Popular posts from this blog

Balochistan to establish first medical university

https://www.dawn.com/news/1366135

The Newspaper's Staff CorrespondentOctober 25, 2017QUETTA: The provincial cabinet on Tuesday approved the draft for establishing a medical university in Balochistan.Health minister Mir Rehmat Saleh Baloch made the announcement while speaking at a press conference after a cabinet meeting.“The cabinet has approved the draft of the medical university which would be presented in the current session of the Balochistan Assembly,” he said, adding with the assembly’s approval the Bolan Medical College would be converted into a medical university.Published in Dawn, October 25th, 2017

5 Shia Hazara community members gunned down in Pakistan

http://m.hindustantimes.com/world-news/5-shia-hazara-community-members-gunned-down-in-pakistan/story-CHWR4lYByRHzf2KjHjMloI.html



Five members of the minority Shia Hazara community, including two women, were killed on Sunday in an attack by unidentified gunmen in Pakistan’s restive Balochistan province.This is not the first time that members of the Hazara community have been targeted in Quetta and other parts of Balochistan.(Reuters File Photo)Updated: Sep 11, 2017 00:20 ISTBy Press Trust of India, Press Trust of India, KarachiFive members of the minority Shia Hazara community, including two women, were killed on Sunday in an attack by unidentified gunmen in Pakistan’s restive Balochistan province.The gunmen targeted a car in Kuchluck area of Quetta while it was coming from the Chaman border crossing area, police said.The firing took place when the travellers had stopped at a filling station to refuel their vehicle. Five people of the Shia Hazara community, including two women, died in …

China’s 'Digital Silk Road': Pitfalls Among High Hopes

https://thediplomat.com/2017/11/chinas-digital-silk-road-pitfalls-among-high-hopes/


Will information and communication technologies help China realize its Digital Silk Road?By Wenyuan WuNovember 03, 2017In his speech at the opening ceremony of China’s 19th Party Congress, President Xi Jinping depicted China as a model of scientific and harmonious development for developing nations. Xi’s China wants to engage the world through commerce but also through environmental protection and technological advancement. This includes Beijing’s efforts to fight climate change with information and communication technologies (ICTs) that it plans to export along its “One Belt One Road” initiative (OBOR). Xi may have ambitious plans, but could China be throwing up obstacles in its own way?In his speech, the Chinese president emphasized the need to modernize the country’s environmental protections. The Chinese state is taking an “ecological civilization” approach to development and diplomacy, with a natio…