Xi visits Shenyang; Regulators discuss measures to help capital markets; A TikTok deal “short of divestiture”?; “Anesthetics Not anesthetizing and laxatives not laxating”

Summary of today’s Essential Eight:

1. Xi visits Shenyang - During his pre-Spring Festival visit to Liaoning Xi also went to Shenyang. We still do not have the full propaganda package from this trip. As a Global Times article notes "since assuming the Party's top post in November 2012, Xi has made it a tradition to spend time with members of the public ahead of the Spring Festival, especially those in disadvantaged groups, extending festive greetings to them. The tradition started in 2013, when Xi went to villages located in a hostile natural environment in Northwest China's Gansu Province, asking villagers whether they had enough food, sufficient subsistence allowances, and access to medical and educational resources.”

2. Financial regulators hold a press conference to discuss measures to help capital markets - Following the Wednesday release of the “Implementation Plan on Promoting the Entry of Medium- to Long-Term Funds into the Market”, the State Council Information Office held a press conference Thursday in which “relevant officials from the China Securities Regulatory Commission (CSRC) and other departments introduced the situation regarding vigorously promoting the entry of medium and long-term funds into the market to promote the high-quality development of the capital market. According to the press conference the National Financial Regulatory Administration “will launch the second batch of long-term stock investment pilots for insurance funds, with a planned scale of 100 billion yuan, and will first approve 50 billion yuan for stock market investment before the Spring Festival.” So perhaps this is the mechanism policymakers are hoping will bring happy feelings to the stock market before the New Year? Markets were not impressed Thursday.

3. AmCham China “China Business Climate Survey Report” - The chamber released its annual survey Thursday. Rising tensions in US-China relations remained the top challenge, for the fifth year in a row. The full “China Business Climate Survey Report” is here.

4. A TikTok deal “short of divestiture”? - General Atlantic CEO Bill Ford is on the board of ByteDance and his firm is a big shareholder in ByteDance. He gave multiple interviews at Davos in which he expressed confidence a deal for TikTok in the US would happen, and possibly in ways “short of divestiture”. As I wrote Tuesday, in the Executive Order suspending enforcement President Trump also appears to open the door to some version of the version of the rejected Project Texas, something that the law does not allow:

I have the unique constitutional responsibility for the national security of the United States, the conduct of foreign policy, and other vital executive functions. To fulfill those responsibilities, I intend to consult with my advisors, including the heads of relevant departments and agencies on the national security concerns posed by TikTok, and to pursue a resolution that protects national security while saving a platform used by 170 million Americans. My Administration must also review sensitive intelligence related to those concerns and evaluate the sufficiency of mitigation measures TikTok has taken to date.

Ford’s comments about a possible solution “short of divestiture” sure sounds like some attempt to revive the inadequate Project Texas.

That is not possible under the current law, so he must be confident that it will be repealed or amended. The Supreme Court has already upheld the law impacting TikTok so it is unlikely to review it again, and the Trump Executive Order is highly unlikely to withstand a legal challenge. It will be very risky for any buyer to try to complete a deal that is not fully compliant with the existing law. Perhaps there will be a meaningful effort to overturn the law in Congress, but I doubt the Rand Paul and Ro Khanna bill introduced Wednesday is that meaningful effort.

5. Philippines-PRC - The Philippines justice minister told media that the country is close to choosing where to file a new South China Sea arbitration case against the PRC, this one over environmental damage. US Secretary of State Rubio had a call with his Philippines counterpart in which Rubio said “the PRC’s behavior undermines regional peace and stability and is inconsistent with international law” and “underscored the United States’ ironclad commitments to the Philippines under our Mutual Defense Treaty”. To complete the trifecta of things to annoy Beijing this week, a senior Philippine government source told Reuters that the US military has moved Typhon launchers from “Laoag airfield…to another location on the island of Luzon”. The PRC Foreign Ministry spokesperson said “that by bringing this strategic offensive weapon into this part of the world, the Philippines is essentially creating tensions and antagonism in the region and inciting geopolitical confrontation and an arms race. This is a highly dangerous move and an extremely irresponsible choice for its own people, the people of the other Southeast Asian countries, and regional security”.

6. “Anesthetics Not anesthetizing and laxatives not laxating” - There is a growing scandal around the efficacy of generic drugs purchased through the centralized procurement program. In "Generic Drugs 'Anesthetics Not Anesthetizing'? What's the Difference with Original Drugs?" The Beijing News covers one area of concern, that anesthetics are not actually working as expected. An anonymous researcher who has posted lots of interesting data in the past posted to Bluesky that they believe they have found data fraud in clinical trials for generic drugs. This has not been confirmed, but is worth paying attention to, and if there really is a wide scale problem with drugs bought through the centralized procurement program then the government is going to have a big mess to clean up. Given the broader crackdown underway on corruption in the medical sector, this latest proposal in Shanghai may be seen as helpful, so long as the public opinion pressures can be managed.

I first mentioned this issue in the Tuesday newsletter - “There may be a problem with some of the domestically produced drugs listed for centralized procurement. Medical experts and representatives to the Shanghai People’s Political Consultative Conference raised concerns about the quality and efficacy of some of those drugs, sparking a bit of an online uproar. In response the National Healthcare Security Administration (NHSA) is sending a team to Shanghai to investigate and to “listen in person to the opinions and recommendations of the relevant CPPCC members and experts regarding the policy on centralized procurement of drugs and the quality assurance of selected products. They will particularly focus on collecting clues about quality and efficacy problems with clinical data support and statistically significant differences.”

7. Zhong Caiwen - The Five 'Must-Coordinate' Imperatives - Zhong Caiwen 钟才文 , a pen name used for commentaries from the Central Finance and Economic Affairs Commission 中央财经委员会 I believe, has a piece on the entire page 9 of the January 23 People's Daily - "Unite Around the 'Greatest Consensus,' Grasp the Five 'Must-Coordinate' Imperatives, and Strive to Excel in Economic Work". As the editor’s note explains:

At the Central Economic Work Conference held late last year, General Secretary Xi Jinping summarized and refined our Party’s understanding of the laws governing economic work. Among these insights, he highlighted five areas in which “we must coordinate”: we must coordinate the relationship between an effective market and a capable government, we must coordinate total supply and total demand, we must coordinate cultivating new growth drivers and upgrading old ones, we must coordinate optimizing incremental growth and revitalizing existing stock, and we must coordinate improving quality and expanding total quantity. These five “must coordinate” requirements are imbued with dialectical thinking and vividly reflect the stance, viewpoint, and methodology of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era in the economic realm. We must study and understand them thoroughly, continually enhance our levels of awareness and our capacity for implementation, and strive to do our economic work well. In so doing, we will fulfill our primary task of achieving high-quality development, and by promoting Chinese-style modernization, we will comprehensively advance the construction of a strong country and the great cause of national rejuvenation. Today’s Theory page features a bylined article by Zhong Caiwen, providing an authoritative and accurate interpretation of the profound meaning behind these five “must coordinate” requirements.

8. Have PRC auto exports peaked? - A new report from Rhodium Group argues that they have:

Trade barriers and outright bans in major markets like the US threaten to stall export momentum. Slumping export growth will put pressure on Chinese automakers, potentially leading to industry consolidation. But incumbent carmakers shouldn’t celebrate too much—even with slower export growth, Chinese carmakers are transforming into formidable global competitors in the auto market

Shockingly, the report also says that the PRC exporters may have been stuffing the channels overseas, as “Chinese OEMs now hold nearly a year’s worth of unsold inventory abroad, much more than the two months of average retail sales inventories in China or the US”. And the inventory overhang in the EU is even greater - 28 months. Have those automakers booked the exports as sales, even if the cars are sitting unsold somewhere overseas?

Thanks for reading. Look for this week’s episode of Sharp China in your inboxes Friday afternoon.