Beidaihe; Rate cuts and bad economic data; Sun Chunlan visits Hainan; Common prosperity
Xi Jinping and the top leadership still have not reappeared in public from the assumed Beidaihe sojourn. I expect them to start reappearing imminently, and for the rumors about what may have gone on there to start flying. Please be very skeptical of any claims that the makeup of the next Politburo and Standing Committee were set in the last couple of weeks.
Summary of today’s Essential Eight:
Rate cuts and bad economic data - July economic data were worse than expected and in a sign that policymakers are increasingly concerned they cut two key interest rates. Urban youth unemployment is now at 19.9%, and will probably rise given the millions of new graduates hitting the market. I have lived through several PRC economic down cycles, are we now in the worst once since the PRC joined the WTO? And how do things improve so long as the dynamic zero-Covid policies remain in place?
Outbreaks - Vice Premier Sun Chunlan visited Hainan over the weekend. She only visits regions with outbreaks when the situation is bad, and harsher measures and lockdowns tend to follow her visits.
Another US Congressional delegation visits Taiwan - US Congressional delegations, or CODELS, to Taiwan are normal course of business for the US for many years. The PRC always complains but does not do much more, though after the Pelosi visit and increasing efforts to reset the status quo we should expect stronger reactions from the PRC side. We should also expect the US lawmakers to keep going to Taiwan, perhaps in even greater numbers after the reaction to Pelosi’s visit.
Xi-Biden meeting? - The Wall Street Journal reports that Xi is preparing to meet Biden sometime in November, during what would be Xi’s first overseas trip since January 2020, unless that Guardian report last week that Xi would visit Saudi Arabia soon is true. I have been skeptical of that story, but a question at today’s Foreign Ministry press briefing (China-Arab TV: How does China assess its relations with Saudi Arabia?) has me wondering.
Germany can’t get “tough on China” - It would have been hard enough before the Russian invasion of Ukraine and the damage that war is doing to the German economy, but now the PRC has even less to fear from Germany. Marx would understand.
Qiushi publishes Xi’s 2021 speech on new development philosophy - The Qiushi article by Xi is his speech from the January 28, 2021 Politburo study session. In his speech Xi mentions "common prosperity 共同富裕" 13 times, and says that “Promoting the common prosperity of all the people is a long-term task, but also a realistic task that can not be rushed but also can not wait. We must give it a more important position, work hard for a long time, and make more active efforts toward this goal”. While there may have been some pull back in the last year from policies that seemed too rushed on the road to common prosperity, the goal has far from gone away, and we will probably hear more about it at the 20th Party Congress.
Propaganda films and fake film festivals - A fascinating story from the China Media Project on the business of making propaganda documentaries and getting them praise and awards from fake film festivals. My guess is that there is also a financial grift somewhere in here, as the budget for external propaganda work is not small and there are lots of propaganda entrepreneurs trying to get their turn at the trough.
Heat and drought - Parts of the PRC are undergoing a massive heat wave. It was so hot Monday that to make the list of the top ten hottest areas one had to hit at least 43 degrees Celsius or 109 Fahrenheit. Those top ten hottest areas were all in Chongqing, Sichuan or Hubei.
A new feature for Sinocism subscribers:
Substack, whose platform I use to publish Sinocism, has announced a pilot of a new community feature called “Threads”. We get to be one of a handful of pilot publications to try it out. If you are using the app you will see the new “thread icon”, the bolded one second from the left in the image below, when you update the app.
I have already started a couple of threads here.
The app only works on iOS devices now, an Android version is in the works and eventually Threads will be available through a web browser too. This does not replace the current weekly discussion or the Discord server, but I am excited to try it as a new space to kick around ideas with you, some of the smartest people on China in the world, and I would much prefer to do it in these new threads than in the toxic cesspool that Twitter has become.
Thanks for reading, and I hope many of you will download the Substack app and join us in the new Sinocism Threads.
The Essential Eight
1. Rate cuts and bad economic data
July economic data were worse than expected and in a sign that policymakers are increasingly concerned they cut two key interest rates. Urban youth unemployment is now at 19.9%, and will probably rise given the millions of new graduates hitting the market. I have lived through several PRC economic down cycles, are we now in the worst once since the PRC joined the WTO? And how do things improve so long as the dynamic zero-Covid policies remain in place?
Industrial production rose for a third straight month in July, gaining 3.8 percent from a year ago, according to figures the National Bureau of Statistics released today. But that was below a market consensus for 4.6 percent growth and slower than June’s 3.9 percent.
Retail sales climbed for a second month in a row, gaining 2.7 percent, but fell short of an expected 5 percent gain and 3.1 percent growth the month before. Fixed-asset investment jumped 5.7 percent from January to July, versus a 6.2 percent market forecast and 6.1 percent growth in the first six months of the year.
The People's Bank of China (PBOC) said it was lowering the rate on 400 billion yuan ($59.33 billion) of one-year medium-term lending facility (MLF) loans to some financial institutions by 10 basis points (bps) to 2.75%, from 2.85%.
In a poll of 32 market watchers last week, all respondents had forecast the MLF rate would be left unchanged and 29 had predicted there would be a partial rollover..
The PBOC attributed its move to "keep banking system liquidity reasonably ample". And with 600 billion yuan worth of MLF loans maturing, the operation resulted a net 200 billion yuan of fund withdrawal…
The central bank also injected 2 billion yuan through seven-day reverse repos while cutting the borrowing cost by the same margin of 10 bps to 2.0% from 2.1%, according to an online statement.
The PBOC lowered both rates by 10 bps in January.
China’s urban youth unemployment rate reached 19.9% in July, the highest level since record keeping began in January 2018, according to National Bureau of Statistics (NBS) data released on Monday.
It’s the fourth consecutive month of record high unemployment among urbanites from 16 to 24 years old, with the rate increasing 0.6 percentage points from June.
Fu Linghui, a spokesperson for NBS, cited the slow recovery of the service industry, hampered by Covid-19, and the large cohort of graduates entering the job market during the graduating season around July and August, as reasons for the heightened youth joblessness.