Standing Committee meeting; Inflation deflation; Support for the RMB; AI chip restrictions
The Supreme Court holds oral arguments in TikTok’s appeal on Friday. How do we think they will rule?
Summary of today’s Essential Eight:
1. Standing Committee meeting - There were two readouts of a Standing Committee meeting. One was about the now annual January SC meeting “to hear a series of work reports from the leading Party members' groups of state institutions, including the top legislature, central government, top political advisory body, top court and top procuratorate”, the other about the SC’s instructions on disaster relief for the Tibet earthquake. Official English announcements and reports no longer use Tibet and instead use Xizang, a shift that has been building for a couple of years.
2. Inflation deflation - Official data says the consumer price index rose 0.2% in 2024, well short of the 3% target. The producer price index dropped 2.2 percent in 2024. As Rhodium noted in a recent report “economists associated with China Finance 40 Forum, a think tank, recently argued that consumer price index (CPI) growth over the past three years was around –2%, well below official figures.”.
3. Support for the RMB - Following official signals of support for a stable RMB a few days ago, The PBoC announced it would sell RMB60 billion of offshore central bank bills in Hong Kong. Yicai reported on this coming sale on Monday, writing that:
this round of central bank bill issuance is not a rollover of maturing bills but a brand-new offering, and its scale exceeds the largest single issuance to date, signaling a strong effort to withdraw offshore RMB liquidity. At this point in time, the move sends a significant policy signal that the PBOC is determined to maintain exchange rate stability, suggesting that it is dissatisfied with the current offshore RMB exchange rate. The central bank will firmly keep the exchange rate stable and will not proactively allow it to depreciate. If depreciation pressure on the RMB intensifies in the future, the PBOC may further increase its issuance of offshore RMB central bank bills.
4. USTR Notorious Markets list - US Department of Defense added Tencent to an updated list of “Chinese military companies operating in the US” earlier this week, but USTR has removed the company from its annual list of notorious markets for counterfeiting and piracy. Several other PRC firms made the list, including DHgate, Taobao, Pinduoduo, Baidu and, for the first time, Bytedance’s Douyin as well as “seven physical markets around China known for the manufacture, distribution, and sale of counterfeit goods”.
5. New US rules on AI chip exports imminent - Bloomberg reports that as soon as Friday the US will announce an “expansion of semiconductor trade restrictions to most of the world…The regulations, which could be issued as soon as Friday, would create three tiers of chip curbs…At the top level, a small number of US allies would maintain essentially unmitigated access to American chips. A group of adversaries, meanwhile, would be effectively blocked from importing the semiconductors. And the vast majority of the world would face limits on the total computing power that can go to one country...The third, most restrictive tier affects China, Macau and all countries for which the US maintains an arms embargo.” The industry sounds very unhappy with the new rules.
6. US to release connected vehicle rule next week - Commerce Secretary Raimondo told Reuters that the final rules for connected vehicles, targeting China, will be done next week, just before the Biden Administration leaves office. She told Reuters “"It's really important because we don't want two million Chinese cars on the road and then realize... we have a threat.” The hacking and prepositioning of malware in key US infrastructure helped garner support inside the US government for these rules.
7. Ministry of Commerce on EU’s Foreign Subsidies Regulation - The Ministry of Commerce issued a its final conclusion on the trade and investment barrier investigation concerning the European Union’s Foreign Subsidies Regulation (FSR). The MoC spokesperson said Thursday that the “there are many unreasonable practices in the European Commission’s FSR investigation concerning China, which restrict and hinder Chinese companies’ products, services, and investment from entering the EU market, thus undermining the competitiveness of these Chinese enterprises and their products in the EU market. In view of this, the Ministry of Commerce has lawfully determined that the relevant practices in the EU’s FSR investigation constitute a trade and investment barrier.” Does the return of Trump make the EU more likely to cut a deal, and the PRC more likely to push a hard line because they link Trump's return makes EU countries more eager to repair ties with the PRC?
8. Beijing’s use of the Fengqiao Experience to improve governance in the capital city a model of modern urban governance? - So says an article on the page 9 theory page of the January 9th People's Daily by the Beijing Party Building Research Association. “Beijing’s ‘Responding Immediately upon Receiving Complaints’: Upholding and Developing the New-Era ‘Fengqiao Experience’” praises the city’s adaptation of the “Fengqiao Experience” and its policy of “Responding Immediately upon Receiving Complaints 接诉即办”. The article discusses the importance of technology for modernizing governance:
Through deep mining of 150 million cumulative citizen requests and over 3 million enterprise data entries, the city has established a data-based system of “daily reporting, weekly analysis, monthly briefings, and annual checkups,” continuously fostering data-driven situational awareness and data-based decision-making. This makes it more sensitive to identifying public demands, more efficient in allocating public resources, and more precise in tackling governance bottlenecks, thus propelling governance in this megacity to transform from labor-intensive to “human-data interactive,” and from experience-driven to data-driven.
The article concludes with the section “Grasping China’s Changing Position in the World, Creating a Capital-City Model of ‘Chinese Governance’”
Both “Responding Immediately upon Receiving Complaints” and the “Fengqiao Experience” share the same lineage, deeply rooted in Chinese soil and grassroots realities, serving as typical examples of the grand social governance practice known as “Chinese governance.” From a practical standpoint, “Responding Immediately upon Receiving Complaints” displays distinct Chinese characteristics. From a governance paradigm perspective, it is also of its time—incorporating both the common features and universal laws of social governance in China, thus offering governance principles and methods applicable across different regions and countries worldwide. Against the backdrop of China’s rising prominence on the global stage, with ever-closer ties to the world and deeper mutual influence, “Responding Immediately upon Receiving Complaints” is not just a systematic response to the major question of “how to build and manage the capital,” but also a model that showcases the results of modern urban governance and the development of a people’s city. It carries the mission of telling China’s story well, enhancing China’s image, and contributing the wisdom of a major nation’s capital to resolving global governance deficits.