Skip to main content

TRIVIUM CHINA: The Tip Sheet, know china better



1. China appeals to the world in the trade war

With the trade war deepening, the Chinese government is experimenting with its messaging strategy. 

One new-ish message that was really pushed in the State Council’s white paper on US-China trade (see yesterday’s Tip Sheet) is that the trade war hurts US economic interests.

At a press conference on Tuesday, government officials doubled down on that message – even suggesting that US businesses are losing their edge to counterparts from other economies (SCIO).

As evidence, authorities highlighted some data: 

In H1 2018, China’s agricultural imports from non-US countries, including Brazil and Australia, increased substantially; growth in US imports was negligible.The US used to be the largest supplier of automobiles to China, but Germany has recently surpassed it.The US could become an important LNG supplier to China, but thanks to trade restrictions, Australia will have the edge.

And it didn’t stop with the trash-talking press conference.

Former central bank governor Zhou Xiaochuan is leading a high-level delegation to talk with EU think tanks about the trade war. Zhou told them China-EU investment negotiations should be accelerated (China Daily).

Get smart: China is trying to get the rest of the world on its side in the trade war. 

But will it work?

SCIO: 《关于中美经贸摩擦的事实与中方立场》白皮书发布会图文实录
China Daily: Germany, EU urged to deepen cooperation with China


2. Central government wants every fen of its money counted

The Chinese government spends trillions of RMB every yearon services and investment. But to date, they’ve never really assessed the efficacy of that spending. 

That’s set to change soon, given that the Party Central Committee and the State Council issued a top-level policy document on Monday, called “Opinions on Comprehensive Implementation of Budget Performance Management.”

To put it simply, measuring budget performance requires continuous assessment of the impact of fiscal spending – and a roadmap for improvement over time.

The new system will focus on assessing and improving:

Fiscal revenue structureRevenue collection efficiencyEffects of preferential fiscal policiesEfficiency of fiscal expenditure

And get this: All government departments are required to do performance assessments before applying for budgetary money for major policies or investments.

Plus, agencies’ future budgets and officials’ personal careers will be affected by how smartly they spend money.

The timeline: The system should be established in three to five years.

Get smart: This is huge deal. The central government is starting to force local governments to be honest with their books (see next entry). The new budget performance system will help sustain that effort by guiding them – as well as central agencies – to spend money more efficiently going forward. 

READ MORE 中共中央 国务院关于全面实施预算绩效管理的意见
MoF: 加快建成全方位、全过程、全覆盖的预算绩效管理体系


3. Getting serious about resolving local government debt

Local government efforts to account for their off-balance-sheet debt are making some real headway. 

Some context: Both the Party’s Central Committee and the State Council have issued high-level documents in recent months ordering local governments to audit and address their implicit debt positions (see August 16, August 28, and September 14 Tip Sheets). 

As part of the effort, local governments have filled out detailed forms called, “The Form to Have a Clear View Into and Resolve Local Government Implicit Debt by the end of August 2018.”

It’s a mouthful – and the form itself is a doozy. Local governments have had to account for: 

The work unit (danwei) that incurred each debtUses of debt, including the name of the project it financed, the project code, and moreSources of the funds and financing agreementsThe time the debt was borrowed, along with repayment schedules and expected balance at the end of 2018The debt maturity structure in the 2019-2028 timeframe Debt repayment arrangements An annual debt dissolution planAnd assets corresponding to debt items, including the liquidity of such assets

Our take: This effort mirrors the campaign to audit banks’ off-balance-sheet debt last year. That program was successful thanks to detailed implementation. We wouldn’t count this one out either.  

21st Century Biz: 国家审计署8月下旬全面开展地方政府隐性债务审计 债务摸底需填报八大类信息


4. Authorities support the panda bond market

China’s financial authorities are trying to buoy the panda bond market – that’s why the central bank (PBoC) and the Ministry of Finance (MoF) issued new guidelines on Monday to govern issuance of the bonds. 

Some context: Panda bonds are onshore RMB-denominated bonds issued by foreign institutions. To date, the market hasn’t gotten a lot of uptake. The bonds that have been issued were mostly symbolic shows of support – by foreign entities looking to earn points with the Chinese government.

According to the 21st Century Business Herald, the idea is to pick things up by establishing clearer rules:

"The new regulations divide issuers of Panda Bonds into four categories: foreign government institutions, international development institutions, overseas financial institutions, and overseas non-financial enterprises." "[They then] establish rules, issuing conditions, issuing procedures, and information disclosure requirements for these four categories."

As one local banker put it:

"This document clarifies issues that were previously ambiguous, such as the issuer's qualification requirements, financial norms, and so on."

Why it matters: The discussion around RMB internationalization usually focuses on developing RMB assets abroad. But equally important is the willingness of companies to borrow in a given currency. We’ll see if these new rules are enough incentivize foreign companies to incur RMB liabilities. 

21st Century Biz: “熊猫债”迎统一管理办法 外资评级机构获益


5. Getting serious about tax compliance

We’ve written a lot lately about big changes to China’s tax rules and compliance procedures. 

Now, it seems the tax authorities are getting even more serious – using inspections to make sure local authorities are carrying out the changes (

“In order to further implement the measures of simplifying administration and reducing the tax burden, 36 inspection teams were sent to tax departments of various provinces on September 25.” The goal of these inspections is:“To carry out a six-day special supervision and inspection on the implementation of preferential tax policies.” 

And they are keeping a narrow focus to start:

"The inspections focus on the implementation of a series of preferential tax policies, such as the reduction of VAT rate and the refund of VAT."

Why it matters: China's tax system, and overall fiscal system, needs an overhaul. Lower tax rates help to ease the burden on businesses, which is the point of these inspections. But that needs to go along with better tax enforcement to keep up government revenues.

What to watch: Inspection tours tend to be a powerful tool to ensure compliance, but the jury is still out, as local governments are not keen to lower taxes.

READ MORE 税务总局派出36个督查组赴各省(区、市)开展督导督查 确保减税政策和“放管服”改革措施落实落地


If the Tip Sheet isn't the best thing in your inbox every day,
we'd like to know why.


Popular posts from this blog

SSG Commando Muddassir Iqbal of Pakistan Army

“ Commando Muddassir Iqbal was part of the team who conducted Army Public School operation on 16 December 2014. In this video he reveals that he along with other commandos was ordered to kill the innocent children inside school, when asked why should they kill children after killing all the terrorist he was told that it would be a chance to defame Taliban and get nation on the side. He and all other commandos killed children and later Taliban was blamed.
Muddassir Iqbal has deserted the military and now he is  with mujahedeen somewhere in AF PAK border area”
For authenticity of  this tape journalists can easy reach to his home town to interview his family members or   ISPR as he reveals his army service number”
Asalam o Alaikum: My name is Muddassir Iqbal. My father’s name is Naimat Ali. I belong to Sialkot divison (Punjab province), my village is Shamsher Poor and district, tehsil and post office  Narowal. Unfortunately I was working in Pakistan army. I feel embarrassed to tell you …

CPEC Jobs in Pakistan, salary details

JOBS...نوکریاں چائنہ کمپنی میںPlease help the deserving persons...Salary:Salary package in China–Pakistan Economic Corridor (CPEC) in these 300,000 jobs shall be on daily wages. The details of the daily wages are as follows;Welder: Rs. 1,700 dailyHeavy Duty Driver: Rs. 1,700 dailyMason: Rs. 1,500 dailyHelper: Rs. 850 dailyElectrician: Rs. 1,700 dailySurveyor: Rs. 2,500 dailySecurity Guard: Rs. 1,600 dailyBulldozer operator: Rs. 2,200 dailyConcrete mixer machine operator: Rs. 2,000 dailyRoller operator: Rs. 2,000 dailySteel fixer: Rs. 2,200 dailyIron Shuttering fixer: Rs. 1,800 dailyAccount clerk: Rs. 2,200 dailyCarpenter: Rs. 1,700 dailyLight duty driver: Rs. 1,700 dailyLabour: Rs. 900 dailyPara Engine mechanic: Rs. 1,700 dailyPipe fitter: Rs. 1,700 dailyStorekeeper: Rs. 1,700 dailyOffice boy: Rs. 1,200 dailyExcavator operator: Rs. 2,200 dailyShovel operator: Rs. 2,200 dailyComputer operator: Rs. 2,200 dailySecurity Supervisor: Rs. 2,200 dailyCook for Chinese food: Rs. 2,000 dailyCook…

The Rise of China-Europe Railways

The Rise of China-Europe RailwaysMarch 6, 2018The Dawn of a New Commercial Era?For over two millennia, technology and politics have shaped trade across the Eurasian supercontinent. The compass and domesticated camels helped the “silk routes” emerge between 200 and 400 CE, and peaceful interactions between the Han and Hellenic empires allowed overland trade to flourish. A major shift occurred in the late fifteenth century, when the invention of large ocean-going vessels and new navigation methods made maritime trade more competitive. Mercantilism and competition among Europe’s colonial powers helped pull commerce to the coastlines. Since then, commerce between Asia and Europe has traveled primarily by sea.1Against this historical backdrop, new railway services between China and Europe have emerged rapidly. Just 10 years ago, regular direct freight services from China to Europe did not exist.2 Today, they connect roughly 35 Chinese…