Following the announcement of the Phase One trade deal, two things are confirmed based on the interviews and texts given by Chinese and US officials. First, the tariff escalation has paused for now and the US agreed to cut the September tariff hike of 15% on $120bn Chinese goods by half, to 7.5%.
As Beijing continues to carry on the de-risking campaign, more troubled firms are getting exposed and started to default in the domestic bond market. By the end of last week, the total amount of publicly-traded bond defaults was RMB 63bn in 2019, and it is on track to surpass last year’s RMB 69bn.
The new pattern makes provincial vice party secretary position much more important for officials seeking top provincial jobs, and an important bellwether to identify emerging, future leaders. It also means that when officials were appointed provincial vice party secretaries or governors, they were already expected to become governors and eventually provincial party secretaries.
The trade war between China and the US has lasted for over 18 months and this has caused damage. China has suffered, but it is not losing very big yet. In fact, its current account surplus rebounds in 2019 and is on track to hit over $200bn (1.5% GDP) for 2019, defying speculations that the country was about to fall into current account deficit.
On 4 December 2019, Bengbu city of Anhui province appointed Zhou Weixin (周伟新), former Bank of China Anhui Branch vice president, as vice mayor. Zhou is the third financial vice mayor appointed in Anhui in the past two weeks. On 28 November 2019, Huangshan city of Anhui province appointed He Yi (何毅), former PICC Operation Department deputy general manager, as vice mayor. One day before on 27 November 2019, Ma’anshan city of Anhui province appointed Zheng Xiuxu (郑琇煦), former ICBC Private Banking Department deputy general manager, as vice mayor. The role of these financial vice mayors will likely focus on driving financial development in Anhui, a financially-backward inland province that now needs to catch up with Shanghai, Jiangsu, and Zhejiang—China’s most financially-advanced provinces—because of Anhui’s inclusion into the Yangtze River Delta integration initiative.
The US Congress is paying significantly more attention on China and the stance is increasingly hawkish with bipartisan support. Following the recently passed bills on Hong Kong, the Uyghur Human Rights Policy Act (UHRPA) will likely pass tomorrow. we expect more bills to become law in 2020 on Taiwan and 5G. These will irritate Beijing but have little impact on the Chinese economy.
On 30 November 2019, incumbent Shanxi party secretary Luo Huining (骆惠宁, b.1954) officially retired due to age limit, and has been succeeded by Shanxi governor Lou Yangsheng (楼阳生). Lou was a close confidante of President Xi, with whom Lou worked closely in Zhejiang from 2002 to 2007. Particularly, it was under Xi’s watch that Lou was promoted to become Lishui party secretary in 2003, the second full-prefectural job and the first prefectural party secretary job of Lou. In June 2014, Lou was transferred to Shanxi to help clean up the corruption mess of the province. The prevalent corruption activities and deeply-rooted corruption networks uncovered by central inspection in 2014 took down an incumbent Shanxi vice party secretary, four Shanxi Party standing committee members, one former Shanxi Party standing committee member, one vice governor, and one Shanxi CPPCC vice chairman, alongside dozens of departmental/prefectural-ranking officials in the province. Lou played a vital role in restoring political order in the province and has been sinced rewarded with positions in Shanxi.
On 29 November 2019, Central Organization Department (COD) announced the appointment of Yu Hongqiu (喻红秋, b.1960) as the new chairman of All-China Federation of Supply and Marketing Cooperatives. Prior to the latest appointment, Yu was Henan vice party secretary, and was the province’s political and legal affairs commission (PLAC) chairwoman until 9 October 2019 (please see our briefing on 12 October 2019). Her concurrent appointment at PLAC was taken away on 9 October, signaling her promotion as the COD does not want to create two vacancies (Henan vice party secretary and PLAC chairmanship) at the same time following her then-upcoming promotion. The latest promotion makes Yu Hongqiu one of the only four full-ministerial-ranking female officials born after 1960. The others include Jiangsu CPPCC chairwoman Huang Lixin (黄莉新, b.1962), Zhejiang CPPCC chairwoman Ge Huijun (葛慧君, b.1963), All-China Women Federation party secretary Huang Xiaowei (黄晓薇, b.1961). Under the existing political rules, each one of the four branches of Chinese government, the Party, the State Council, the National People’s Congress (NPC), and the CPPCC, is required to have a female leader. The incumbents are Politburo member and vice premier Sun Chunlan (孙春兰, b.1950), NPC vice chairwoman Shen Yueyue (沈跃跃, b.1957), and CPPCC vice chairwoman Li Bin (李斌, b.1954). Sun and Li will retire on 20th Party Congress due to age limit, leaving at least two state-ranking vacancies to be filled by female leaders of provincial ranking.
The Party’s leadership put environmental protection as one of the three key “tough battles” and asked local governments to reduce air-pollution level by 18% in 2020 from that of 2015. So far, most provinces have beat the targets thanks to tough restrictions on the industrial sector, especially in winter when pollution is worse.
Traditional political factions, which used to be important in understanding China’s political dynamics, have been weakened by the anti-corruption campaign and lost their prominence, and other groups are on the rise. Among them, a couple groups of technocrats stand out. They are the rocket scientists and bankers. Some of them are expected to join the 25-people Politburo in the upcoming party congress and become the country’s most powerful leaders.
