NPCSC meeting; Politburo meeting on discipline; Politburo studies "building strong cultural nation; Huawei sanctions evasion; Pro-natal measures; Phone hacking

Summary of today’s Essential Eight:

1. NPC Standing Committee meeting November 4-8 - The highly anticipated NPC Standing Committee meeting will convene November 4-8. In the announcement of the meeting there was no explanation for why it was delayed, not that we should have expected one, nor was there any mention of anything about bond issuance or other fiscal measures. As the excellent NPC Observer explained in its post about the meeting announcement, no mention “does not necessarily mean one is not forthcoming. Chinese law allows the NPCSC to delay the disclosure of selected agenda items until after they have been approved. Last October, for example, it approved, without prior notice, the issuance of special treasury bonds (and a corresponding budgetary amendment) to fund disaster relief efforts.” NPC Observer also tempers expectations for any sort of “stimulus” announcement before November 8: “the package won’t be revealed until after the NPCSC approves it on November 8, probably first on CCTV’s 7 p.m. Xinwen Lianbo program. And its details might not be released until later that evening.” I have seen some speculation that the delay in the meeting was to consider the results of the US election before announcing any new bond issuance, but I am skeptical given that it is quite possible we will not know the results of the US election by November 8.

2. October Politburo meeting - The Politburo met Monday, there was no mention into the readout of anything about the economy, The stated topic was reviewing "Comprehensive Report on the Third Round of Inspections by the 20th Central Committee."

3. October Politburo Study Session - After the Politburo meeting Xi chaired a study session on “on building a strong cultural nation”. Wang Bo, Vice President and Professor of Peking University and Vice Dean of Yenching Academy, was the discussant. According to the readout Xi said that “China must anchor to the strategic goal of building a cultural powerhouse by 2035, adhere to Marxism as the fundamental guiding ideology, root itself in the profound Chinese civilization, and adapt to trends in information technology development”. He also commented on efforts to increase international influence: “in terms of international influence, Xi emphasized the need to enhance national cultural soft power and Chinese cultural influence. This involves restructuring international communication, innovating online external publicity, building multi-channel, multi-dimensional external communication, actively promoting Chinese propositions and culture, conducting diverse international cultural exchanges, and learning from all excellent human civilizations.” I am very curious about what "推进国际传播格局重构，创新开展网络外宣，构建多渠道、立体式对外传播格局 restructuring international communication, innovating online external publicity, building multi-channel, multi-dimensional external communication" means in practical terms. Is that a recognition that the current efforts to push external propaganda have been less than successful?

4. State Council Executive Meeting - Premier Li chaired the weekly meeting last Friday, and now we now why so many top officials were out on research and inspection tours in the last several weeks. According to the readout: “In recent weeks, State Council leaders have conducted field research across various regions to assess the current economic situation and implementation of the package of incremental policies, following the spirit of the September 26 Political Bureau meeting. The meeting discussed these findings and studied related work.” The meeting also “emphasized the need to focus on achieving the year's economic and social development goals, continuously implementing the package of incremental policies, timely evaluating and optimizing policies, increasing counter-cyclical adjustment efforts, and further enhancing macroeconomic regulation effectiveness. It also stressed the importance of better interaction between policies and markets, fully mobilizing enthusiasm from all sectors, and better stimulating growth momentum”. Does stressing “the importance of better interaction between policies and markets” mean they realize how badly they communicated with investors after the September 26th Politburo meeting?

5. Phone hacking with PRC characteristics - The US government has disclosed to multiple media outlets allegations that PRC hackers have gotten into the phones of people connected to the Trump and Harris campaigns. The PRC of course denies it. This is a remarkably brazen effort on the eve of the US election.

6. Evading US chip controls The excellent SemiAnalysis Substack has a long piece outlining all the ways Huawei has gotten around US chip controls, in full knowledge of the US government. One example: “Sanctions violations are egregious. SMIC produces 7nm-class chips including the Kirin 9000S mobile SoC and Ascend 910B AI accelerator. Two of their fabs are connected via wafer bridge, such that an automated overhead track can move wafers between them. For production purposes, this forms a continuous cleanroom and effectively one fab. But for regulatory purposes, they are separate! One building is entity-listed by the U.S. and working on advanced logic for AI chips, a clear national security concern. The other is free to import “dual use” tools as it runs only “legacy processes.” Do you believe they aren’t sharing anything over the wafer bridge?…In addition to utilizing SMIC, Huawei is also aggressively snapping up their equipment for its new fab network. This is a sanctions-evading scheme, closely supported by the Chinese state”. Industry capture of the US Department of Commerce should be a much bigger story.

7. New pro-natal measures - The General Office of the State Council released "Several Measures to Accelerate the Improvement of Fertility Support Policy System and Promote the Construction of a Fertility-Friendly Society" on October 28, 2024. “The document lists 13 specific measures across 4 main areas: strengthening fertility service support, enhancing childcare service systems, reinforcing support measures in education, housing, and employment, and creating a fertility-friendly social atmosphere.“

8. Backing off private tutoring crackdown? - Reuters reports that “China is quietly easing regulatory pressure on private tutoring operators”. The easing may have been signaled by the August 3rd release of the State Council “guideline on boosting high-quality development of service consumption”, though no shift was ever officially announced. As I wrote at the time “would the government come out and say they are backtracking, or just move forward with policies that allow the return of the tutoring industry, to spur consumption and employment?”. But Caixin reports in a story today about the new birth support measures that “policies such as the “double reduction” initiative, which aims to reduce the burden of excessive homework for pupils and reduce the financial anxiety of parents facing extra educational costs, will be reinforced”. So is there some easing on the margins but still no going to back to what the industry was once allowed to do?