China-Russia Ties - Xi's Corruption Warning - Galwan Anniversary - China Blocks Makki's Terror Listing - Online Comments Regulation - Yang-Sullivan Meet - Fujian Carrier - Struggling in S. Asia
I. Xi Watch: Russia, Human Rights, anti-Corruption & Leadership Reaffirmation
by Manoj Kewalramani
Let’s begin with Xi Jinping’s call with Vladimir Putin. The call came on Xi’s 69th birthday, and is the first conversation between the two since February 25, if I am correct. There’s also some history to Putin keeping Xi’s birthday in mind.
Anyway, Xinhua reports:
“During their conversation, Xi noted that since the beginning of this year, bilateral relations have maintained a sound development momentum in the face of global turbulence and transformations. The economic and trade cooperation between the two countries has made steady progress, Xi said, adding that the Heihe-Blagoveshchensk cross-border highway bridge has opened to traffic, creating a new channel connecting the two countries. The Chinese side stands ready to work with the Russian side to push for steady and long-term development of practical bilateral cooperation, Xi said. China is willing to work with Russia to continue supporting each other on their respective core interests concerning sovereignty and security, as well as on their major concerns, deepening their strategic coordination, and strengthening communication and coordination in such important international and regional organizations as the United Nations, the BRICS mechanism and the Shanghai Cooperation Organization, Xi said. China is also willing to work with Russia to promote solidarity and cooperation among emerging market countries and developing nations, and push for the development of the international order and global governance towards a more just and reasonable direction, he added.
Putin said that “Russia supports the Global Security Initiative proposed by the Chinese side, and opposes any force to interfere with China’s internal affairs using so-called issues regarding Xinjiang, Hong Kong and Taiwan, among others, as an excuse.”
Also, the two sides discussed the situation in Ukraine:
“Xi emphasized that China has always independently assessed the situation on the basis of the historical context and the merits of the issue, and actively promoted world peace and the stability of the global economic order. All parties should push for a proper settlement of the Ukraine crisis in a responsible manner, Xi said, adding that China for this purpose will continue to play its due role.”
To me, the language signals continuity in China’s position on Ukraine and cooperation with Russia on broader interests related to the international order.
The Russian readout of the call says that:
“The presidents stated that Russian-Chinese relations were at an all-time high and are constantly improving. They reaffirmed their commitment to consistently deepen the comprehensive partnership and strategic interaction in all areas…It was agreed to expand cooperation in energy, finance, the manufacturing industry, transport and other areas, taking into account the global economic situation that has become more complicated due to the illegitimate sanctions policy pursued by the West. The further development of military and defence ties was touched upon as well…it was emphasised that Russia and China, as before, have overlapping or very close positions, consistently uphold the fundamental principles of international law, seek to build a truly multipolar and fair system of international relations…Vladimir Putin laid out his principled assessment of the situation in Ukraine and the tasks being tackled during the special military operation. The President of China noted the legitimacy of Russia’s actions to protect fundamental national interests in the face of challenges to its security created by external forces.”
Later in the week, Xi spoke at the 25th St. Petersburg International Economic Forum. Among other things, he talked about the “strong resilience, enormous potential and long-term sustainability” of the Chinese economy. Also, there are some interesting differences between the Chinese reporting of the speech and the Russian reporting. For instance, the Chinese readout of the speech says that Xi said “China stands ready to work with Russia and all other countries to explore development prospects, share growth opportunities, and make new contributions to deepening global development cooperation and building a community with a shared future for mankind.”
Russia Today’s reportage has Xi saying that: “Today our cooperation between Russia and China [is] rising…Trade over the first half of this year has been [in the tens of billions of U.S. dollars] and we can expect new records in upcoming months, which is a testament to the great cooperation between our two nations.”
Anyway, one of the key points that Xi made in his speech was this:
“It is important that we strengthen ‘soft connectivity’ of development policies and international rules and standards, reject attempts at decoupling, supply disruption, unilateral sanctions and maximum pressure, remove trade barriers, keep global industrial and supply chains stable, tackle the worsening food and energy crises, and revive the world economy.”
Also, this week, Qiushi published an article by Xi on following China’s human rights development path and advancing the development of China’s human rights cause. This is drawn from the speech given by Xi on February 25, 2022, at the thirty-seventh collective study session of the Politburo. In it, Xi talks lashes out at Western countries for interference under the pretext of human rights and calls on China to “actively carry out the international human rights struggle.” You can find a detailed breakdown of the article in my People’s Daily tracker here.
Finally, let’s look at the two reports coming from the Politburo meeting. First, on Friday, the Xi chaired a Politburo meeting to review a report on the rectification of problems discovered during the eighth round of inspections of financial institutions. Xinhua English reports:
“Focusing on the central task of economic development and serving the overall interests of the country, discipline inspection work has undertaken the primary task of upholding General Secretary Xi Jinping's core position on the Party Central Committee and in the Party as a whole and upholding the Party Central Committee's authority and its centralized, unified leadership, concentrated on its functions and responsibilities, and strengthened political oversight. Discipline inspections have cut like a blade through corruption and misconduct by identifying problems and acting as a deterrent and have ensured further reform and development.”
The report adds that after the inspections, “some prominent problems have been resolved and certain hidden hazards and risks have been defused…” However, “discipline inspection and supervision agencies and organization departments must strengthen oversight over rectification, launch special campaigns to address prominent problems, and ensure that cases involving violation of laws and regulations are strictly investigated and prosecuted. Relevant functional departments must make good use of inspection results, refine systems and mechanisms, and step up industry regulation.”
The report then informs that it was stressed at the meeting that “we must adhere to the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, continuously boost the consciousness of the need to maintain political integrity, think in big-picture terms, follow the leadership core, and keep in alignment with the central Party leadership” along with strengthening the four confidences and consciousnesses along with the two safeguards. It adds:
“We must uphold and strengthen Party leadership over financial work, prevent and defuse financial risks, advance reforms and innovation and, with the determination to crack tough nuts and the perseverance to follow through a problem, work continuously to ensure the responsibilities for rectification and supervision are fulfilled. We should tighten up political, ideological, organizational, and disciplinary work and push Party committees and leading Party members' groups of financial institutions to fully rectify the problems identified during inspections.”
Then there was the 40th collective study session of the Politburo. Xi spoke improving the Party’s ability to ensure the “三不腐” three no-corruptions, i.e, that officials “do not dare to be, are not able to be engage in corruption, and do not want to be corrupt.” This is really critical heading into the 20th Party Congress. Xi called the anti-corruption campaign “a major political struggle that cannot be lost and must not be lost.”
Xi said that in the new era, the CPC achieved the wholehearted support of the Chinese people and high-level solidarity among its members with the unprecedented anti-corruption fight. He then talked about the “remarkable results” and “important experience” accumulated from the fight against corruption since the 18th Party Congress. These are that:
an anti-corruption work pattern under the overall leadership of the Party has been established. This includes greater central leadership control, greater control of anti-corruption work by Party committees at different levels, better coordination between discipline agencies and other departments and public participation and support.
the Party has addressed symptoms and root causes of corruption so that cadres are in awe and dare not be corrupt, cannot be corrupt because of the system and develop a consciousness that they do not want to be corrupt.
a zero tolerance approach to corruption has been maintained
the institutional cage for preventing and controlling corruption has been and put in place — this includes a complete set of intra-Party regulations and legal tools
build an ideological dam to resist corruption and prevent degeneration, strengthen the foundation with ideals and beliefs, arm the whole party with the party’s innovative theory…build the ideological and moral defensive line.
strengthened supervision and oversight over the exercise of power by Party members and all office bearers
Xi then said that:
“corruption is the embodiment of the long-term accumulation and continuous fermentation of various unhealthy factors in the party, and anti-corruption campaign is to fight against various pathogens that weaken the party’s advanced nature and damage the party’s purity. This kind of struggle is extremely complex and arduous, and there is no room for any concession or compromise. We must always have the courage to face up to the problem and be firm in turning the blade inward, resolutely cut off the cancer, remove the source of the poison and eliminate the pernicious influence, so as to ensure that the red mountains and rivers never change colour with the party never degenerating.” 习近平强调，腐败是党内各种不良因素长期积累、持续发酵的体现，反腐败就是同各种弱化党的先进性、损害党的纯洁性的病原体作斗争。这种斗争极其复杂、极其艰难，容不得丝毫退让妥协，必须始终保持正视问题的勇气和刀刃向内的坚定，坚决割除毒瘤、清除毒源、肃清流毒，以党永不变质确保红色江山永不变色.
Acknowledging that the campaign has built into a crushing tide and is being consolidated, Xi however warned of the complexity and difficulty of the anti-graft situation, urging more efforts to see the fight through.
Xinhua English has a decent summary of the points he makes next:
“Xi underlined the Party's centralized and unified leadership over the anti-corruption fight and called for coordinated progress in the fight in all sectors. He also emphasized maintaining zero-toleration and eliminating sectoral and systematic corruption which pose higher risks to effectively defuse relevant economic and social risks. Xi urged regular and long-term mechanisms against corruption, and coordination between precaution and punishment to improve the ability to detect and effectively handle corruption issues. The improvement of anti-corruption laws and regulations relating to foreign affairs should also be accelerated, Xi said. Sending precaution to senior officials, Xi said cadres in higher positions and with greater power must exercise stricter self-discipline. Xi said members of the Political Bureau of the CPC Central Committee in particular must hold themselves to the highest standards of self-discipline, and take the lead among all Party members in following the Party’s dos and don’ts.”
Let me end this section, with a line about the long article in Friday’s People’s Daily praising Xi’s leadership in managing pandemic containment and economic and social development amid the challenges brought by the pandemic and the Ukraine war. You can find a full breakdown of the article here.
II. India-China Ties
by Shrey Khanna
On June 16, S. Jaishankar delivered a keynote address at the 12th edition of the Delhi Dialogue where he elaborated upon the ASEAN’s place in New Delhi’s Indo-Pacific vision.
He stated:
“From the Indian perspective, ASEAN lies at the centre of the Indo-Pacific, geographically, culturally and strategically. ASEAN centrality is therefore self-evident especially as its architecture has such wide coverage. It was for this very reason that Prime Minister Modi announced the Indo-Pacific Oceans Initiative (IPOI) at the 2019 East Asia Summit.”
On the India-China relationship, Jaishankar reiterated that “the state of the border [LAC] will be reflected on the state of the relationship. Thus, the “development of our ties has to be based on three mutuals: mutual respect, mutual sensitivity and mutuality of interests.”
June 15th marked the second anniversary of the Galwan Valley clashes. In India, Defense Minister Rajnath Singh paid tribute to the soldiers killed in the clashes. Meanwhile, in China, state broadcaster CCTV’s military channel published a three-minute video of comrades-in-arms tearfully sharing memories of 18-year-old Chen Xiangrong, one of the four soldiers that China confirmed were killed in the clash.
On June 16, China put a “technical hold” on the joint Indo-US proposal to designate Lashkar-e-Taiba (LeT) leader Abdul Rehman Makki as a “global terrorist” on the 1267 Committee of the UNSC. On June 17, The Hindu reported India’s response describing Beijing’s decision as “regrettable” and “extremely unfortunate”. The article quoted the government sources as saying:
“China should reflect on its response that signals double standards on combating terrorism. Protecting well-known terrorists from sanctioning in this manner will only undermine its credibility and risk exposing even itself more to the growing threat of terrorism.”
It’s interesting that earlier in the week, the Chinese side had hosted a BRICS NSA-level meeting where cyber-security and terrorism were the focus areas. The official Chinese readout of that meeting had said that BRICS countries would “uphold the central coordinating role of the United Nations in the global counter-terrorism cause.” Let’s see if this issue becomes a sticking point in the upcoming BRICS summit next week.
In a press conference after the report, Foreign Ministry Spokesperson Wang Wenbin’ answered a question by Prasar Bharti on China’s considerations for the technical hold. Wang responded by saying that: “China’s actions at the UN Security Council 1267 committee are always consistent with relevant rules and procedures. China will continue to conduct its work in a constructive and responsible manner.”
Among other developments, on June 17, The Hindu reported that India has supported a Chinese initiative called “Solidarity-2023” to conduct a “joint border operation” in 2023 of all member countries of SCO. Also, earlier in the week, the Chinese Embassy in India updated its COVID-19 visa policy to allow Indian professionals and their families to return to China for resumption of work in all fields.
Separately, China is also processing requests of thousands of Indian students studying in Chinese universities who have expressed interest in re-joining their colleges and universities, reported The Hindu.
Also Read:
2 weeks on, search continues for missing soldiers in Arunachal: Army
Beijing’s 25 fighter jets, upcoming airfields — India-China border row is far from over
India must insist on return to status quo on border in talks with China, says Shyam Saran
‘I will solve India-China dispute in my lifetime' approach won't work, says Ram Madhav
China boosting nuclear arsenal, Pakistan leads India in warheads: Sipri
III. CAC Regulation on Internet Comments
by Megha Pardhi
Cyberspace Administration of China (CAC) on Friday revised the regulation for public solicitation of comments on "Administration of Internet Thread Commenting Services" (互联网跟帖评论服务管理规定（修订草案征求意见稿）.) The full notification (Chinese) is available on the CAC website. The unofficial translation by China Law Translate is available here.
These directions are based on the "Cybersecurity Law of the People's Republic of China" (中华人民共和国网络安全法), "Measures for the Administration of Internet Information Services" (互联网信息服务管理办法), and "Provisions on the Ecological Governance of Network Information Content" (网络信息内容生态治理规定).
Who are these revised regulations for?
These regulations apply to Internet websites, applications, and other website platforms where the public can post opinions and comments. The regulations are also applicable to platforms that provide social mobilization capabilities where users can express themselves through posting, replying, leaving messages, and a "barrage" of expressions, pictures, audio and video, and other means.
This means all the applications like video platforms like Blibli, iQiyi, and Youku, all in one social media app WeChat, Twitter equivalent Weibo, communication platform and discussion forum Baidu Tieba, Tik Tok's Chinese version Douyin, social networking site Douban, shopping, and social media platform Xiaohongshu (Little Red Book), video platform Kuaishou, the Chinese version of Quora Zhihu, Linkedin equivalent Maimai, etc. This should also include any platform which provides the facility of commenting and reviews. For example on news aggregation websites like Toutiao.
What are the platforms expected to do?
These are highlights from the notification to give an idea of the kind of provisions in the notification.
The real identity of registered users shall be authenticated. Unauthenticated users shall not be allowed to post comments.
Platforms and services have to establish and improve the user's personal information protection system.
Those who provide a "barrage" (Dàn mù 弹幕) post comment service should provide the corresponding static version of the information contained on the same platform and page at the same time.
Establish and improve information security management systems. This includes review and management of comments being posted. The content of post comments should be reviewed first and then published, and illegal and bad information should be discovered and handled promptly and reported to the Internet Information Department (网Wǎng xìn bùmén 信部门).
Use the information security management technology of comments and comments, and improve the ability to deal with illegal and bad information, timely discover the risks such as security defects and loopholes in the comment service, take remedial measures, and report to relevant authorities.
Equip a review and editing team suitable for the scale of the service provider to improve the professional quality of review and editors.
Cooperate with the Internet Information Department to carry out supervision and inspection work.
Any new service provider who launches a service or social media which provides a platform to express a public opinion or social mobilization ability will have to conduct a security assessment per the state regulations.
Service providers are expected to take measures such as warnings, refusing to publish, deleting information, restricting accounts, suspending account updates, closing accounts, prohibiting re-registration, and other measures if needed. Service providers and platforms are also expected to keep records to be provided to the relevant departments.
Service providers shall establish
User classification management system
Conduct credit assessments on users' thread comments behavior
Determine service scope and functions according to the credit level, and
Blacklist users who are seriously untrustworthy (Prohibit blacklisted users from re-registering)
This article by Zeyi Yang further explains the impact of new provisions on Chinese internet platforms.
Monitoring of comments and their active removal is already being done on Chinese social media platforms. This revision bans all unverified accounts from commenting. That means a user won't be able to comment unless they are verified. This significantly reduces the possibility of misinformation flooding or trolling since many times temporary accounts are used for trolling.
This notification is in a series of several others where the Chinese government is trying to regulate the internet, especially the social media platforms in China by modeling the behavior of people online. Disabling the unverified users is one way. There are other ways too. For example, shaping public opinion by planting trolls who would attack people who question the government. Encouraging and rewarding internet users to speak well about government and government initiatives. The infamous Social credit system also helps in shaping the behavior of people online.
I wonder if these regulations also apply to 50 cent army (Wǔmáo 五毛) or nationalist trolls (Zìgānwǔ 自干五). Perhaps "nationalist trolls" don't have anything to hide.
Also Read:
China's Communist party raises an army of nationalist trolls
China's "Social Credit System" Has Caused More Than Just Public Shaming (HBO)
IV. Region Watch
by Shibani Mehta
Sri Lankan authorities on Friday announced a two-week shutdown of government offices and schools, as public transport almost entirely comes to a halt. In Pakistan, Federal Minister for Planning Ahsan Iqbal appealed to the people to cut down the consumption of tea. These efforts attempt to reduce the import bill consuming the respective country's fast-depleting foreign exchange reserves. Speaking to The Diplomat magazine about the numerous crises in the region Michael Kugelman said,
‘Pakistan and Sri Lanka have experienced the most political tumult in South Asia, and in both cases, it’s been driven by economic stress.’
Sri Lanka’s acute foreign currency crisis, which is rapidly spinning into a humanitarian crisis, has led to a lack of dollars to pay for imported fuel. Earlier in the week, authorities had declared Friday a holiday in a bid to conserve fuel. This is one in a series of government measures to mitigate the crisis. The Cabinet has,
approved a bill to impose a 2.5 per cent tax on companies with an annual turnover of Rs 120 million
declared Fridays as holidays for public sector employees (except employees in the health, power and energy, education and defence sectors), reducing the work week to four days
approved a move to grant government officials one leave per week for the next three months to engage in agriculture to mitigate the approaching food crisis
The rationing of fuel will likely begin next month.
Colombo is in discussion with Beijing to amend the terms and conditions of the USD 1.5 billion currency swap deal so it can be used for imports. According to the requirements specified in the agreement signed last year, the amount cannot be used unless Sri Lanka has foreign reserves sufficient for three months. Given the exceptional circumstances, the government has requested the clause be amended. It believes that the move will be beneficial for China as it would be used to import Chinese products to the island nation.
Speaking of trade, almost 80 percent of the Nepali traders are transporting their Chinese cargo by sea even though the route is longer. In late March, visiting Chinese Foreign Minister and State Councillor Wang Yi had assured Nepali officials that trade between Nepal and China would be eased. The consensus was that 40 containers would be permitted to pass through the Tatopani border point and 28 containers through the Rasuwa border point daily. However, over two months after, Nepal-bound cargo trucks remain stuck at the border.
Ever since the situation in Sri Lanka escalated in April, the Chinese ‘debt trap’ debate has been fueling again. There has also been plenty of reportage suggesting Pakistan’s economy too is headed towards dire straits. Last week, Finance Minister Miftah Ismail warned of loan default if the government does not abolish the subsidies on petroleum products. This as electricity outages are disrupting life and business in Pakistan as the cash-strapped government struggles to compensate Chinese power suppliers, complicating efforts to revive the frail economy.
Among the major reasons for the blackouts is that Chinese power producers under the China-Pakistan Economic Corridor (CPEC) initiative have shut down multiple plants as a consequence of the Pakistani government’s failure to pay dues of $1.5 billion. The CPEC has often been stated as Pakistan’s knight that would bring economic prosperity to the entire nation. However, it appears that Pakistan is in a dark tunnel. Member of the National Assembly representing Gwadar, Aslam Bhootani, told the media that construction of a 300 MW plant that was supposed to power the town was stopped after the government failed to pay the dues to Chinese power producers.
While China is a common factor in both scenarios, it is the economic mishandling by successive governments that have led to the current impasse in Sri Lanka and Pakistan. A combination of events over recent years has provided a perfect storm which is expected to trigger an unprecedented crisis with unpredictable outcomes.
Separately, China once again lent support to Pakistan at the United Nations. China blocked a proposal to list Pakistan-based terrorist Abdul Rehman Makki as a 'Global Terrorist' under the ISIS and Al Qaeda Sanctions Committee of the UN Security Council.
Also Read:
V. Economic Data & Fiscal Support for Local Govts
by Manoj Kewalramani
The NBS this week put out fresh economic data from May. NBS spokesperson Fu Linghui said that data from May show that government policies have had an impact and “there have been positive changes in economic performance, with most of the major indicators improving, and the economies of some regions hit hard by the pandemic have rebounded.” “随着国内疫情防控形势总体改善，稳增长的政策措施效果逐步显现，经济运行的积极变化有所增多，主要指标多数出现改善，部分受疫情冲击较大的地区经济出现了反弹.
He added: ‘On the whole, China's economy is gradually overcoming the adverse effects of the epidemic, and is showing a recovery momentum,’ said Fu. He assessed that the current international environment is still complex and severe; external uncertainty is increasing; and the domestic economic recovery is still in a preliminary stage. The growth rate of main indicators is still at a low level, and the foundation for recovery needs to be consolidated.” “总的看，我国经济逐步克服疫情不利影响，呈现恢复势头。”付凌晖分析，当前国际环境依然复杂严峻，外部不确定性增大，国内经济恢复仍然是初步的。主要指标增速还处于低位，恢复基础还需要巩固.
Some data points shared in the report:
Industrial production rose 0.7 percent in May from a year earlier, after falling 2.9 percent last month
Manufacturing grew 0.1% in May after falling 4.6% last month.
The service industry production index decreased by 5.1% year-on-year, and the decrease was 1 percentage point narrower than last month.
The decline in the wholesale, transportation and warehousing industries has narrowed significantly.
In May, the total import and export volume of goods increased by 9.6% year-on-year, and the growth rate was 9.5 percentage points faster than that of last month. Among them, exports increased by 15.3%, accelerating by 13.4 percentage points.
In May, consumer prices rose by 2.1% year-on-year, which was the same as last month.
Urban unemployment rate was 5.9%, down 0.2 percentage points from last month. In this, the unemployment rate for migrant agricultural registered population is 6.2%, down 0.4 percentage points from last month; the unemployment rate of 25-59-year-olds is 5.1%, down 0.2 percentage points from last month.
What the report does not tell us is that Fu also shared that the surveyed urban unemployment rate among workers aged 16 to 24 – this includes new graduates - climbed to 18.4% in May from 18.2% in April. That’s the highest since the bureau started publishing the survey data in January 2018.
In May, the total retail sales of consumer goods exceeded 3.3 trillion yuan, down 6.7% year-on-year. The decline was 4.4 percentage points narrower than last month. Among them, the retail sales of automobiles, which accounted for nearly 10% of the total retail sales of consumer goods, decreased by 16%, which was 15.6 percentage points narrower than that in April.
In May, fixed assets investment grew by 6.2% year-on-year. Among this, infrastructure investment increased by 6.7%, with a growth rate of 0.2 percentage points higher than that of April and 0.5 percentage points higher than that of the total investment; investment in high-tech industries increased by 20.5% year-on-year, maintaining the rapid growth this year.
Luo Yifei, chief statistician of the NBS’ Investment Department, said that in the first five months, the completed investment of projects with a planned total investment of 100 million yuan or more increased by 10.2% year-on-year; the contribution rate to the total investment growth was 83.3%, an increase of 2 percentage points over April.
In terms of the property sector, investment in property development went down 4 percent year on year in the first five months. The total property investment in the period stood at 5.21 trillion yuan (about 772 billion U.S. dollars). Investment in residential buildings was 3.95 trillion yuan, down 3 percent year on year. Commercial housing sales in terms of floor area totaled 507.38 million square meters in the first five months, down 23.6 percent year on year. In terms of value, commercial housing sales fell 31.5 percent to 4.83 trillion yuan during the five-month period.
Also this week, there was reporting (related English report) about the new opinions on promoting fiscal system reform at the sub-provincial levels. This document “is aimed at straightening out fiscal powers and expenditure responsibilities at local levels and inter-governmental revenue division in order to form a standardized fiscal system below the provincial level.”
The article quotes a finance ministry official explaining that the document clarifies reform measures in five areas:
First, clarify the division of fiscal powers at the sub-provincial levels.
Second, moderately strengthen the fiscal power at the provincial level, and moderately strengthen the responsibility at the provincial level for matters that need cross-regional overall coordination or have strong externalities.
Third, expenditure responsibility is now being determined according to the division of fiscal powers.
Fourth, it is necessary to determine the expenditure responsibilities when it comes to common expenditures…It is necessary not only to reduce the pressure of grass-roots expenditure through the mechanism of burden sharing between higher-level and lower-level authorities, but also to give better play the role of common fiscal powers in promoting the equalisation of basic public services through differentiated sharing methods.
Fifth is to implement the expenditure responsibilities of governments at all levels. If greater financial authority really needs to be entrusted to a subordinate/lower-level authority to perform, then the higher-level treasury should arrange the transfer payment funds in full. Subordinate authorities should not be burdened with additional financial pressure owing to the delegation of responsibilities. Higher-level authorities are also not allowed to increase the expenditure responsibility of subordinate authorities in disguised form or shift the expenditure responsibility to them.
一是根据事权属性划分省以下财政事权，避免事权错配造成职能和管理的越位或缺位。二是适度强化省级财政事权，对需要跨区域统筹协调或外部性较强的事务，适度强化省级责任。三是根据财政事权划分明确支出责任，省级财政事权由省级政府承担支出责任，市县级财政支出责任根据其履行的财政事权确定。四是差异化确定共同财政事权支出责任，既要通过上下级共同负担的机制减轻基层支出压力，也要通过差异化的分担办法更好发挥共同财政事权促进基本公共服务均等化的作用。五是落实各级政府的支出责任。上级财政事权确需委托下级履行的，上级财政要足额安排转移支付资金，不能让下级因履行委托事权而额外增加负担，不得变相增加下级支出责任或向下级转嫁支出责任，避免加重基层负担。
On tax revenue sharing, the report says:
“Tax revenue among governments at sub-provincial levels should be straightened out and revenues should be divided based on tax features such as strong mobility in tax base, uneven distribution among regions and large fluctuations in annual revenue. These will be included into the revenue of provincial-level governments or be shared by provincial-level governments in higher proportion, while the tax revenue with stable tax base and obvious geographical features will be defined as revenue at the city and county level or be shared at a higher proportion. To standardise revenue sharing, tax sharing should be clarified among governments at sub-provincial levels and the sharing proportion of various types of tax should be defined appropriately.”
The PD report informs that tax revenue from sectors like finance, electricity, petroleum, railways, and highways can be used as provincial-level revenue, and can also be reasonably distributed among relevant cities and counties.
Reuters’ report on the document says that:
“Local governments would increase spending on education, scientific and technology research, social security, food security, as well as construction of major infrastructure projects, it said. Local governments needed to step up the management of their debts through increasing revenues, cutting costs and selling assets, the cabinet said. China would also improve the debt quota mechanism for local governments, under which their special debt quota should match revenues and project income, it added.”
Also Read:
China Budget Deficit Hits Record Due to Tax Rebates, Covid Pain
China’s property troubles have pushed one debt indicator above levels seen in the financial crisis
China Budget Dilemma Is Whether to Boost Debt or Slow Growth
China steps up fixed-asset investment to steady COVID-hit economy
Chinese Bond Market Records Fourth Month of Foreign Outflows: “Foreign investors cut their holdings of Chinese bonds by another $16 billion in May, a month that saw the yuan hit its lowest level in 20 months, as institutions continued to shift money into other assets that offer better returns. May marked a fourth straight month of outflows from Chinese yuan-denominated bonds, and took the total drawdown since February to about $61 billion.”
VI. The Long & Short of It…
by Manoj Kewalramani
a. Fujian Carrier
China’s third and most advanced aircraft carrier, named Fujian, was launched on Friday. Global Times reported: “In a short but festive ceremony, China on Friday launched the country's third aircraft carrier in the Jiangnan Shipyard, a Shanghai-based subsidiary of China State Shipbuilding Corporation Limited. Having a displacement of more than 80,000 tons, the carrier, named Fujian, is equipped with electromagnetic catapults and arresting devices.”
Reuters informs that the launch of the ship was delayed by two months due to the COVID lockdown of Shanghai. It was due to be launched on April 23 around the 73rd anniversary of the People’s Liberation Army Navy (PLAN). China plans to have around five aircraft carriers, according to the official media. The next aircraft carrier China plans to build is expected to be nuclear-powered.
b. Common Prosperity & Bankers’ Pay
The Financial Times reported this week that “Chinese securities regulators and industry associations have instructed local and foreign banks to rein in executive pay levels, in the latest sign that president Xi Jinping’s drive to promote ‘common prosperity’ is gathering pace ahead of a crucial Communist party congress this year.”
The report added:
On Friday, the Asset Management Association of China instructed fund houses to “enhance [their] social responsibility and capability to serve the economy and the country’s strategies”. According to the AMAC’s new rules, at least 40 per cent of bonus payments to senior staff should be deferred for three or more years. The association also decreed that senior staff should invest at least 20 per cent of their bonuses in financial products issued by their own companies. It added that the guidelines were intended to corral “risk-taking behaviour and potential risks” stemming from executives’ pursuit of short-term bonus payouts. The Securities Association of China issued similar guidelines last month. The new guidelines were finalised months after the Beijing office of China’s securities regulator convened a meeting in January about pay restraint with financial institutions including CICC, Citic, Credit Suisse, Goldman Sachs and UBS, according to people briefed on the matter. Domestic and foreign banks were also briefed more recently on the new pay rules issued by the AMAC and the SAC.
c. Sullivan-Yang Meeting
China’s top diplomat Yang Jiechi met with US NSA Jake Sullivan on Monday in Luxembourg. Xinhua reported:
“The two sides conducted candid, in-depth, and constructive communication on China-U.S. relations, as well as other issues of common concern. The two sides agreed to follow the important consensus reached by the two heads of state, step up contact and dialogue, reduce misunderstanding and miscalculation, and properly manage differences. Both sides agreed that maintaining unimpeded channels for communication is necessary and beneficial….The Chinese side is ready to work together with the U.S. side to explore ways and methods to realize this vision, yet China firmly opposes using competition to define bilateral ties, Yang said. He said the U.S. side should correct its strategic perceptions of China, make the right choices, and translate President Biden's commitments into concrete actions, working together with the Chinese side in the same direction and concretely implementing the important consensus reached by the two heads of state.”
“The Taiwan question concerns the political foundation of China-U.S. relations which, unless handled properly, will have a subversive impact, said the senior Chinese diplomat. The risk does not only exist but will escalate as the United States attempts to contain China with the Taiwan question, and as the Taiwan authorities rely on the United States to seek its ‘independence,’ he added. The U.S. side should not have any misjudgments or illusions, Yang said, adding that it must abide by the one-China principle and the stipulations in the three China-U.S. joint communiques and handle the Taiwan question in a prudent and proper way. Yang also stated China's solemn position on issues concerning Xinjiang, Hong Kong, Tibet, the South China Sea, as well as human rights and religion. He stressed that the U.S. side ought to have benign interactions with the Chinese side and make concerted efforts in promoting prosperity, stability, and development in the Asia-Pacific region.”
On Saturday, meanwhile, US President Joe Biden said that talks with Chinese President Xi Jinping will happen “soon”, and that he is “in the process” of deciding whether to ease US tariffs on China.
Finally, some data points from the latest AmCham survey:
25% of consumer and services companies have decreased their investment plans, as have 20% of manufacturing companies. Just one respondent plans to increase their investment in China.
26% of manufacturers are accelerating the localization of their China supply chains while moving production of global products out of the country. 23% of manufacturers said that the Shanghai lockdowns had not impacted their supply chain strategy.
Only 9% of respondents have received economic support measures from the Shanghai government to help them recover from the effects of the lockdowns, while an additional 19% have applied for support and are still waiting.
d. Ideology in Xi’s China
I am sharing below two really fantastic pieces on the role of ideology in China today. The first is an interview with Timothy Cheek. He says that Xi seems to believe that ideology is important; he is “acting as if correct thought, correct belief is something that he wants not only because it makes him feel good, but because he thinks that’s the only way to get things done.” In terms of Xi’s success in this effort, Cheek argues that:
“I think that the ideological goals, or the goals of ideological governance, that Xi Jinping has been pursuing, particularly in the last five years, have been successful on the minimal level but not on the maximal level. It’s been more effective negatively than positively. Because of the strong inquisitional enforcement, most notably through the Discipline Inspection Commission, the renewed ideology, the new puritanism, the reimposed demand for loyalty and orthodoxy have scared the living daylights out of the bureaucracy and served the minimal role, which is to curb corruption and keep people from doing what they shouldn’t, what Xi Jinping does not want them to do. It has been less successful in what Xi Jinping would call the zheng nengliang, positive energy. It is less successful in inspiring people to do the creative and wonderful things needed to have the rejuvenation of the Chinese nation.”
The other report is this paper by Professor Joseph Torigian on Xi Jinping and Ideology. The key takeaways from the report are:
With regards to ideology, President Xi Jinping has consistently displayed two “shticks” that might seem contradictory to outside observers: a distaste for radicalism and dogmatism and a preoccupation with conviction, values, and dedication.
Despite the return of some Mao-era rhetoric, Xi views struggle not in a “class” sense but rather as “forging” experiences that increase party members’ devotion to the cause through hardship and challenge.
Two factors may indicate a shift in Xi’s approach to ideology: 1). Xi believes that the United States opposes Beijing for both ideological and power political reasons; that American efforts to undermine the CCP will only increase; and that Washington uses ideological infiltration to achieve that goal; and 2). As Xi’s time as top leader continues and the propaganda apparatus increasingly emphasizes his stature, the prospect of “leftist” adventures may become increasingly tempting.
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