Skip to main content

TRIVIUM CHINA: Daily Newsletter , know china better

TRIVIUM CHINA

HEARD IN BEIJING

"Break a promise in one place, be subject to restrictions everywhere."
 

- Xi Jinping, General Secretary of the Chinese Communist Party

Some context: That’s how Xi described China's nascent social credit system in 2016. The Party is intent on using the system to make China a more honest place. More in the Tip Sheet below.

Trivium's daily newsletter system aims to provide honest information to China watchers everywhere. Help us expand the scope of our readership by clicking here to subscribe.

We love feedback, so don't be shy about getting in touch to tell us what you think!

THE TIP SHEET

FINANCE & ECONOMICS

1. The PBoC’s currency toolkit

Yesterday we described the central bank's most recent move to slow depreciation of the CNY – hiking the amount of reserves that banks have to hold against certain FX transactions.

We wrote that it was likely to be the first in a series of moves. An important article in the 21st Century Business Herald outlines the central bank's wider toolkit.

The piece highlights the PBoC’s “counter-cyclical factor,” which helped set the CNY on an appreciating course in 2017.

Some context: The counter-cyclical factor is one element of the calculation that the PBoC uses to set the CNY’s opening price each day – it is used to counterbalance the previous day's market moves.

More context: The PBoC introduced the factor in May 2017. But in January, stopped using it, since it was no longer needed to counteract currency weakness.

Get smart: The PBoC is likely to reintroduce the counter-cyclical factor soon to help fight depreciation.

Get smarter: That should slow the pace of depreciation. But it won’t reverse things like it did last year. Only a détente in the trade war will do that.

 

READ MORE
21st Century Biz: 稳汇市还有哪些大招可用
 

FINANCE & ECONOMICS

2. Data dump: current account edition

The PBoC released current account data for Q2 on Monday.

The key number:

Q2 saw a surplus of USD 5.8 billion – up from a USD 34 billion deficit in Q1.

Some context: The current account is a measure of cross-border transactions that includes not just the trade in goods (i.e. the trade surplus) but also trade in services, repatriation of corporate earnings, and a few other metrics.

More context: In Q1 2018, China saw its first current account deficit in decades, as Chinese spending on travel abroad overwhelmed its earnings from exports.

Bloomberg has more detail:

"The growing services trade deficit, which includes outbound tourism, education, entertainment as well as purchases of foreign technologies and patents, highlights the changing nature of China’s economy.""[The resulting cumulative H1] deficit was larger than expected as foreign companies transferred profits out of China in the second quarter."

Get smart: China’s large travel services deficit is an underappreciated element of the trade war. It makes China vulnerable given that it represents a big channel for capital outflows. But it also represents another avenue for China to reduce spending into the US economy as the trade war deepens.

 

READ MORE
Bloomberg: China's Current Account Returns to Surplus on Trade Rebound
 

FINANCE & ECONOMICS

3. National guarantee fund coming

Here’s some good news for small business.

A national financing guarantee fund has been set up with registered capital of RMB 66 billion.

Some context: The State Council decided to set up the fund to help small businesses access bank funding at the end of March.

The fund has 21 shareholders, the biggest of which are:

The Ministry of Finance (Mof), which owns more than 45%The big five state-owned banks, which together own another 22.7%Nine joint-stock banks, which together own around 21%What the fund does: It provides guarantees for loans given by local financial institutions to small businesses.

Wang Yi, director general of MoF’s Finance Department, explains why the government set the fund up:“Establishing a risk sharing mechanism with commercial banks is critical.”Wang has a benchmark in his head:“In Taizhou and Wenzhou, Zhejiang Province, government guarantee funds are responsible for 65%-80% of losses…, and the remaining 20%-35% are borne by the bank.”

Get smart: This should actually facilitate more lending to small businesses.

 

READ MORE
21st Century Biz: 国家融资担保基金成立,注册资本661亿元,财政部持股45.39%
Securities Times: 国家融资担保基金成立 18家银行出资350亿
 

POLITICS & POLICY

4. Party wants to monitor how honest you are

Wang Huning has been absent from public view for over a month (see yesterday’s Tip Sheet).

But the Central Commission for Guiding Cultural and Ethical Progress – which Wang heads – is hard at work.

Some context: The commission is the top Party organ in charge of propaganda and ideology.

On Monday, Xinhua announced that the commission has launched a new campaign to “improve the level of integrity in society.”

The campaign has identified 19 behaviors that it wants to curb, including:

Telecommunication and internet fraudFake news on the internetGenerating and disseminating rumorsTax fraud and evasionSetting up illegal NGOsThe commission’s secret weapon: The social credit system.

The campaign aims to:“establish a comprehensive credit record in all fields and establish a credit information network covering the whole society”

Some context: The social credit system is a government initiative to track the behaviors of all citizens and score them according to how socially beneficial they are. Citizens with low scores will face difficulty in accessing credit – or even getting plane tickets. For citizens with high scores, these things will be made more convenient.

Get smart: The social credit system is still years from being functional.

Get smarter: It might actually find public support if it makes life easier for most citizens.

 

READ MORE
Xinhua: 中央文明委组织有关部门开展诚信缺失突出问题集中治理 着力提升全社会诚信水平
 

POLITICS & POLICY

5. Beidaihe beach Party, part 2

We are pretty sure that Xi Jinping is at the beach (see yesterday’s Tip Sheet).

But on Monday, he still took time out of his vacation to issue instructions calling for more patriotism (Xinhua):

“Xi…said the spirit of Wang Jicai, former head of the militia post on Kaishan Island in east China's Jiangsu Province, should be pursued by hardworking people in the new era.”“Wang resolutely stuck to his post without any complaint or regret, composing an extraordinary chapter in a life on an ordinary post, Xi said.”“On July 27, Wang died of sudden illness on duty at the age of 58.”Some context (Telegraph):“In 1938, the Japanese navy had stopped at Kaishan island on their way to occupy the port of Lianyungang, which they rebuilt and used as a major base to transport coal, iron ore, salt and grain.”“Ever since, the occupation of the tiny outcrop has been a point of national pride for China, and a strategic imperative.”

Get smart: Xi’s never too busy to beat the patriotism drum.
 

READ MORE
CPC: 习近平对王继才同志先进事迹作出重要指示强调 要大力倡导爱国奉献精神
Xinhua: Xi calls for promotion of patriotism, dedication
Telegraph: The lonely couple who guard a storm-tossed outpost of China
 

POLITICS & POLICY

6. China's new hypersonic jet

China’s got a new aircraft. And it’s really fast:

“China has successfully tested a new hypersonic aircraft that could one day be used to carry missiles at such speeds as to make them unstoppable, according to scientists involved in the project.”“The Starry Sky-2, which is an experimental design known as waverider – for its ability to ride on the shock waves it generates – completed its first test flight on Friday at an undisclosed location in northwest China, the China Academy of Aerospace Aerodynamics said in a statement issued on Monday.”Why it matters:“Although still at the experimental stage, once fully developed, waveriders could be used to carry warheads capable of penetrating any anti-missile defence system currently available.”It’s not just China:“China is not alone in developing hypersonic weapons, the United States and Russia are too.”

Get smart: China will continue to invest heavily into military technology. That means the rest of Asia will as well...
 

READ MORE
SCMP: China’s hypersonic aircraft, Starry Sky-2, could be used to carry nuclear missiles at six times the speed of sound

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…