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TRIVIUM CHINA: Tip Sheet on China events


"China only has two options: give in to America’s bullying…or let the other side know that Chinese people are not easily pushed around."

- Zhao Changmao, Former Deputy Head of the Central Party School

Some context: Zhao says the choice is obvious. China can’t give in to American bullying. That doesn’t bode well for a détente in the trade war. But at this stage anything is possible. More in the Tip Sheet below.

Anything is possible in China…as long as you regularly read the Tip Sheet.



1. Top leaders are probably at the beach

It’s been 72 hours since any Politburo Standing Committee member has made a public appearance.

That leads us to believe that top leaders have begun their annual summer holidays.

And that means that the political news out of China is likely to be pretty thin over the next two weeks.

Get smart: With the trade war simmering and the economy looking fragile, it’s not likely to be a restful holiday for Xi and co.


2. Trump's tough stance leaves China no room to budge

We are seeing confusing signals on the trade war.

US President Trump is threatening to impose 25% tariffs on USD 200 billion of Chinese goods, after previously only threatening 10% tariffs.But there are also reports of back-channel discussions to come to a deal.The Ministry of Commerce (MofCom) is fed up. Last night, a ministry spokesperson said (MofCom):“[The American] carrot and stick strategy…won’t work on China.”“The Chinese side has already completely prepared and will have no choice but to take countermeasures.”Zhao Changmao, former deputy head of Central Party School, goes further (Study Times):“This trade war is different.”“It’s a strategic game concerning the country’s fate.”“[We] have no reason to compromise.” How China can win, according to Zhao:Take the moral high ground and further open the economyMake more friends internationallyTake targeted measures to hurt the USZhao warns this will not be pretty:“[We] need…to be prepared to accept a heavy cost for fighting with the world’s number one country.”

Get smart: Zhang is using the trade war to advocate for domestic reforms.

Get smarter: History teaches that there is no greater catalyst for reform than a crisis.


Study Times: 中美贸易战:挑战和机遇


3. Know your cadre: PBoC edition

There are some important coming promotions at the central bank (Caixin):

"The People’s Bank of China (PBOC) has internally approved the appointment of Liu Guoqiang, previously one of its assistant governors, and Zhu Hexin, a former vice president of the Bank of China, as new deputy governors, sources told Caixin.""Liu and Zhu, who have years of experience in macroeconomic policy and the banking industry respectively, will be expected to help steer the central bank in its newly expanded role."But that’s not all – one of the men will take a key role at the new financial coordinating body:"Caixin also learned that either Liu or Zhu will be appointed deputy director of the cabinet-level Financial Stability and Development Committee (FSDC), set up in November to coordinate financial policy between regulatory bodies."

Get smart: A lot of people think China doesn’t have a “deep bench” of capable financial regulators. Those people are wrong – there are lots of folks like Liu and Zhu that have been accumulating experience for decades.


Caixin:Central Bank Appoints New Deputy Governors: Sources 


4. FSDC wants more money flowing to real economy


The Financial Development and Stability Committee recently held its second meeting, according to a government report on Friday.

Some context: The body was established late last year to coordinate financial, fiscal, and industrial policies. It’s headed by Vice Premier Liu He.

The theme: Improving the monetary policy transmission mechanism to make sure that funding flows to the real economy.

How they plan to do that (

The central bank will improve assessment and incentive systems to encourage financial institutions to lend to the real economy.Fiscal authorities will make better use of government bonds and tax cuts.Financial reform will be deepened to foster financial institutions of all sizes.Authorities will create more positive incentives for financial institutions that do a good job in carrying out policy.Regulators will keep the pressure up on illegal financial activities.

Get smart: Nothing new here. Regulators’ focus has been on getting more money to small businesses for a while now.

Get smarter: If China’s financial services were more market-oriented, they wouldn’t have to keep passing administrative measures to try and get money to the real economy.


READ MORE 国务院金融稳定发展委员会召开第二次会议


5. SOE lenders get on board with the Politburo plan

Yesterday, we wrote that the financial regulators were wasting no time getting on board with the Politburo’s new policy initiatives.

Well, today it’s the SOE banks – or at least one of them.

Caixin reports that ICBC is prepping to ramp up lending to “government-driven infrastructure”– one of the key priorities that the Politburo underlined on Tuesday:

“The move comes at a time when the [de-risking] campaign has led to a credit squeeze accompanied by a slowdown in infrastructure investment, which has dragged on economic growth.”“The lender has asked its branches to be prepared to offer loans to corporate customers in 'key areas,' particularly those involved in infrastructure, shantytown renovation or major projects under construction, the sources said.”

Get smart: We’ve said it a hundred times – these measures are meant to ease the slowdown, not ramp up growth.

What to watch: We’ve said this dozens of times – the key number to watch in the next six weeks is the pace of overall credit growth in July and August. We don’t expect it to markedly accelerate, despite the stepped-up support measures.

Disagree? Feel free to ping us and tell us why we are wrong.


Caixin: ICBC to Lend More to Businesses, Sources Say


6. ICYMI: National Energy Committee gets reshuffled

China’s National Energy Commission (NEC) has been reshuffled.

Some context: The NEC was created in 2010 to coordinate the country’s energy policies.

The composition of the commission has not changed much. Li Keqiang remains head of the commission. Executive vice premier Han Zheng takes over as deputy head, replacing former executive vice premier Zhang Gaoli.

There were a couple of interesting changes:

The body’s membership grew from 26 to 28.One new addition is the Minister of Agriculture and Rural Affairs.Our thought: Does this signal a greater focus on biofuels?The other new addition was the Minister of Housing and Urban-Rural Development.

Our thought: Does this signal a more concerted effort to upgrade energy efficiency standards in buildings?

Get smart: It’s unclear how important the NEC is. It rarely met or issued policies in Xi's first term.

We'll be watching to see if the NEC takes on a larger role. That's what we do. We track on-the-radar and under-the-radar policy developments – so that we aren’t blindsided and neither are our clients.

If you want to become a client, just reply to this email. We’ll make sure you don’t get blindsided by personnel or policy changes.


READ MORE 国务院办公厅关于调整国家能源委员会组成人员的通知 



7. Thinking through China’s drive to dominate tech

China's made no secret that it wants to lead in cutting-edge technologies. That is making many Western governments increasingly uneasy.

This is a complicated issue, and the sudden recognition of the looming challenge could lead to overkill as Western governments shut down all Chinese investment.

The challenge must be addressed, but in a smart way.

That’s the essence of an excellent op-ed in the FT by Robert Hannigan, executive chairman of BlueVoyant Europe and a former director of GCHQ, the UK’s signals intelligence agency.

The key paragraph:

“The west needs a policy response rooted in the understanding of technology as well as foreign policy.""Some of that will be down to industry, a point acknowledged by Brad Smith, Microsoft president, this year.”“We must not cut ourselves off from the brilliance of Chinese technology, but we need a more mature assessment of the risks.”

Get smart: Chinese leaders need to put more effort into making other countries more comfortable with their rise. More transparency would help, but Chinese politics is getting more opaque under Xi.

Click the link below: The piece is worth the read, and worth pondering over the weekend.


The Financial Times: Wake up to the security risks in Chinese tech dominance


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