April Politburo meeting; Manus mess; Hostile foreign forces encouraging "lying flat"; New US semiconductor restrictions?

Today’s top items:

1. April Politburo meeting - The Politburo held its April meeting Tuesday to “analyze the current economic situation and economic work”. There are no signs in the readout of more “stimulus”; the policy approach remains steady as she goes with some tweaks. The diagnosis of the current situation, per the readout:

China’s economy has gotten off to a strong start, with key indicators performing better than expected, demonstrating great resilience and vitality. At the same time, certain difficulties and challenges remain, and the foundation for the economy’s sustained stable and positive trajectory still needs to be further consolidated. Confidence must be strengthened, and economic work must be carried out with greater force and more concrete measures.

我国经济起步有力，主要指标好于预期，彰显强大韧性和活力。同时，也面临一些困难和挑战，经济持续稳中向好的基础还需进一步巩固。要增强信心，以更大力度和更实举措抓好经济工作。

Other highlights from the readout:

The meeting noted that it is necessary to uphold “making progress while maintaining stability” as the overall keynote of economic work; to fully, accurately, and comprehensively implement the new development philosophy; to accelerate the building of the new development pattern; to better coordinate the domestic and international overall situations; to coordinate development and security; to unswervingly deepen reform and opening-up; to advance scientific and technological self-reliance and self-strengthening and autonomous control of industrial supply chains; to implement a more proactive fiscal policy and a moderately accommodative monetary policy with precision and effectiveness; to continuously expand domestic demand and optimize supply; to grow the increment and activate the stock; to focus on stabilizing employment, stabilizing enterprises, stabilizing markets, and stabilizing expectations; to strengthen the intrinsic drivers of economic development; to further strengthen the domestic circulation; to optimize the domestic-international dual circulation; and to strive for a strong start to the 15th Five-Year Plan.

会议指出，要坚持稳中求进工作总基调，完整准确全面贯彻新发展理念，加快构建新发展格局，更好统筹国内国际两个大局，统筹发展和安全，坚定不移深化改革开放，推动科技自立自强、产业链自主可控，精准有效实施更加积极的财政政策和适度宽松的货币政策，持续扩大内需、优化供给，做优增量、盘活存量，着力稳就业、稳企业、稳市场、稳预期，增强经济发展内生动力，进一步做强国内大循环，做优国内国际双循环，努力实现”十五五”良好开局。

The meeting emphasized that the building of a modernized industrial system must be accelerated, maintaining a reasonable share for manufacturing. The building of a unified national market must be advanced in depth, with “involution-style” competition resolutely rectified. The “AI+” initiative must be fully implemented, developing new forms of the intelligent economy and improving AI governance. Reform of state-owned assets and state-owned enterprises must be further deepened. External shocks and challenges must be addressed in a systemic manner, the level of energy and resource security must be raised, and various uncertainties must be countered with the certainty of high-quality development.

会议强调，要加快建设现代化产业体系，保持制造业合理比重。纵深推进全国统一大市场建设，深入整治”内卷式”竞争。全面实施”人工智能+”行动，发展智能经济新形态，完善人工智能治理。进一步深化国资国企改革。系统应对外部冲击挑战，提高能源资源安全保障水平，以高质量发展的确定性应对各种不确定性。

The mention of the AI+ initiative with the call to “全面实施’人工智能+’行动 fully implement the AI+ initiative” is paired with developing “new forms of the intelligent economy” and improving “AI governance”. And 算力网 computing power networks is in the “six networks” infrastructure project list along with water networks, new-type power grids, next-generation communications networks, urban underground utility networks and logistics networks.

That call to “深入整治’内卷式’竞争 deepen the rectification of involution-style competition” did not appear in last year’s April readout, so should be seen as a sign of intensifying crackdowns on that problem.

“External shocks and challenges must be addressed in a systemic manner, the level of energy and resource security must be raised, and various uncertainties must be countered with the certainty of high-quality development” is clearly a reference to the disruptions from the Iran war.

The risks section mentions “resolving the problem of overdue payments to enterprises” along with the usual areas of real estate and local debt, so it must be a very significant problem now:

The meeting noted that risks in key areas must be effectively prevented and defused. Efforts must be made to stabilize the real estate market and advance urban renewal in a solid manner. Local government debt risks must be resolved in an orderly fashion, with focus on resolving the problem of overdue payments to enterprises. Reform of small and medium financial institutions must be pushed forward, and confidence in capital markets must be stabilized and enhanced.

会议指出，要有效防范化解重点领域风险。努力稳定房地产市场，扎实推进城市更新。有序化解地方政府债务风险，着力解决拖欠企业账款问题。推动中小金融机构改革，稳定和增强资本市场信心。

“Confidence in capital markets must be stabilized and enhanced” could be seen as bullish for stocks, but confidence is earned not mandated.

I have posted a full translation of the readout in the body of this section.

We should know the topic of the April Politburo study session Wednesday. Last year’s was “uphold self-reliance and self-strengthening, maintain an application-oriented approach, and promote the healthy and orderly development of artificial intelligence 坚持自立自强 突出应用导向 推动人工智能健康有序发展”, and I wrote about it in “April Politburo Study Session on AI is bad news for Nvidia”.

This section is why I said that meeting was more bad news for Nvidia in China:

Xi Jinping emphasized that to seize the initiative and gain the advantage in the AI field, breakthroughs must be achieved in fundamental theories, methods, tools, and more. We must continuously strengthen basic research, concentrate resources to overcome challenges in core technologies such as high-end chips and foundational software, and build an independent, controllable, and collaboratively functioning AI foundational hardware and software system [集中力量攻克高端芯片、基础软件等核心技术,构建自主可控、协同运行的人工智能基础软硬件系统]. We should use AI to lead a paradigm shift in scientific research and accelerate technological innovations and breakthroughs across various fields.

2. Manus mess - The Wall Street Journal reports that Meta is planning to comply with the order to undo the Manus acquisition. Maybe they are happy to get a mulligan for the hasty, overpriced acquisition of a company with little proprietary technology, or maybe they realize there is no point in fighting the order, as they would if the US government made it, given the lack of recourse available and the leverage the PRC government has over Meta. Reuters reports that:

Meta conducted only a few weeks of due diligence to complete the acquisition in December, while neither Meta nor Manus sought Chinese regulatory approval for the deal or its relocation to Singapore, said five sources with knowledge of the matter.

That is remarkable, and makes the PRC move more justifiable, and, if the government wants to make an example of the case, perhaps provides the pretext to go after not only Manus and its executives but also the VCs, lawyers and accountants involved in the deal, all of whom should have known the rules around regulatory approval.

Meta clearly overpaid, so maybe this will turn out to be a positive for the company, even as it sends a chilling message to PRC entrepreneurs and investors.

3. Hostile foreign forces encouraging lying flat - It turns out that the “lying flat” phenomenon is a plot by hostile foreign forces to weaken Chinese youth and China. That is according to the MSS, which on Tuesday posted to its WeChat account “Foreign Organizations are Heavily Funding “Lying Flat Influencers” and Systematically Conducting “Lying Flat Brainwashing” 国安部披露：某境外组织大力资助”躺平网红”，系统性开展”躺平洗脑”. I have posted a full translation here. It is nicely timed for May 4 Youth Day, and as usual, when all else fails, blame the foreigners...

Here is an excerpt from the MSS post:

Numerous cases show that anti-China hostile forces are holding the “lying flat” banner aloft and “working hard” to corrode the thinking of Chinese youth. State security agencies have found in their work that one foreign organization has funded various anti-China media outlets and think tanks to manufacture narratives such as “striving = being exploited” and “class solidification = effort is useless”; another foreign organization has heavily funded “lying flat influencers” to mass-produce short videos pushing themes like “lying flat is justice” and “anti-involution = anti-exploitation,” systematically carrying out “lying flat brainwashing.”

诸多案例显示，反华敌对势力高举”躺平”旗帜，正”努力”地侵蚀中国青年的思想。国家安全机关工作发现，某境外组织资助各类反华媒体、智库，炮制”奋斗=被剥削”“阶层固化=努力无用”等叙事；某境外组织大力资助”躺平网红”，批量生产”躺平即正义”“反内卷=反剥削”短视频，系统性开展”躺平洗脑”。

What makes this all the more ironic is that while inciting us to “lie flat,” they themselves are working off their feet. In recent years, the countries in question have rolled out a series of economic bills, revitalization projects, and talent programs, even poaching global talent at high salaries. Clearly, they have never accepted “lying flat” themselves; they only want our youth to lie flat, so that they can hand over our development dividends, our strategic opportunities, and the future of our nation on a platter...

更讽刺的是，在煽动我们”躺平”时，他们自己正忙得脚不沾地。近年来，有关国家推出系列经济法案、振兴工程、人才计划等，甚至高薪挖角全球人才。可以看出他们从来不认同”躺平”，他们只希望我们的青年”躺平”，将我们的发展红利、战略机遇、民族未来拱手相让。

Good luck to policymakers if they believe foreigners are really the cause of “lying flat”, but perhaps this post is a harbinger of a coming patriotic campaign against the phenomenon?

Here is an MSS officer reading the post, with a stirring soundtrack:

4. US actions ahead of Xi-Trump meeting - According to Reuters, the US ordered multiple chip equipment companies to halt some shipments to China’s No. 2 chipmaker Hua Hong. It is not clear how effective that order will be if the letters sent to the chip equipment companies did not specify that their foreign subsidiaries are also subject to this order, but regardless, PRC officials may see it as a violation of the Busan “understanding”. The move seems risky so close to the summit, especially if it is empty if it does not include the foreign subsidiaries, but perhaps the Trump team is now more concerned about PRC progress in developing their own, good enough AI chips?

The US Treasury Department warned “financial institutions to the sanctions risks associated with independent “teapot” oil refineries in China, primarily in Shandong Province, given their continued role in importing and refining Iranian crude oil”. Whatever “stability” there is in the US-China relationship right now is very tenuous.