China Politics Weekly

China Politics Weekly aims to keep business leaders, investors, diplomats, scholars and other China hands up to date on important trends in China. It is produced by Trey McArver, a London-based consultant providing advice and intelligence to firms and investors engaged in China and the region. You can find out more about Trey and CPW in this interview.

Issue No. 62 – July 20, 2015

Still not grown up

In a speech at the OECD on July 1, Premier Li Keqiang said, “We have both the confidence and the capabilities to meet the [GDP growth] target set for this year”. So it should have come as little surprise that China’s Q2 growth- announced Wednesday- came in right on target at 7%.

It should also have come as no surprise that the latest GDP print has reignited the debate over the reliability of China’s GDP statistics. The figure came in above consensus, and many economists worry that the numbers may have been massaged to meet the target. Official Chinese media has even gotten defensive about the doubts.

Regardless of what, exactly, GDP growth is, it is safe to say that China is in the midst of a structural shift that will see the economy further slow for many years. The government’s stability bias means that we are unlikely to have a hard landing. The recent stock market interventions show that the government is very sensitive to any disruption in the economy and is not afraid to take active measures to support growth if it thinks them necessary.

Many will argue that the government’s interventionist tendencies preclude the implementation of structural reforms that will create a healthier, more sustainable economy. But this assumption bears scrutiny. It’s possible to be pro-stability and pro-reform. What the government is trying to do is to strike a balance. The government understands the risks of moral hazard; what it wants to do is gradually introduce accountability into the economy. Even with their interventions in the stock market, plenty of investors lost a lot of money and now understand the risks of margin trading in a way that they did not two months ago. It reminds one of some of the “managed” corporate defaults that we have seen over the past 18 months. Instead of having everybody go broke, the government comes in pays off part of the debt but everybody still loses money and learns that they shouldn’t just assume that everything will be okay. Beijing is paternalistic, but they don’t spoil their children. They want to help their children learn to be responsible, while also letting them know that, ultimately, their parents love them.

Regardless, it’s still disappointing to see the Premier constantly assuring everybody that China will hit its growth target. If- as the Premier also says- we are now focusing on the “quality” of growth instead of the quantity, then why is he always promising to hit quantitative targets? It sends contradictory signals.

The best thing that China could do would be to jettison its GDP growth targets. With planning for the 13th Five Year Plan now entering its most important phase, this is the perfect time to do just that. Discussions at the upcoming leaders’ retreat in Beidaihe will focus on the plan, the outline of which will then be unveiled at the Fifth Plenum in October. Fingers crossed that the central government follows Shanghai’s lead and gets rid of specific growth targets.

Like a good neighbor

Tensions with Japan and Vietnam have risen markedly under the Xi administration, but Beijing now appears to be trying to improve relations with both countries. The head of Japan’s National Security Council was in Beijing this week, which looks to be a preparation for a possible Xi-Abe summit later this year. Meanwhile, Executive Vice Premier Zhang Gaoli made a three-day trip to Hanoi where he met with top leaders of the Vietnamese Communist Party and promoted bilateral relations.

Better, faster, stronger

Xi made a three-day inspection tour to Jilin this week. As part of his tour he visited two state-owned enterprises (SOE), Jilin Aodong Medicine and Changchun Railway Vehicles Company. Xi praised SOEs as playing an important role in China’s economic development and encouraged reforms to make SOEs more competitive. It’s an important reminder that SOE reform is not about relinquishing state-control, but rather using market mechanisms to make SOEs stronger and more efficient.


PBSC Week in Review
Xi Jinping July 19 Xi and Mauritanian President Mohamed Ould Abdel Aziz exchanged congratulatory messages celebrating 50 years of diplomatic ties. 
  July 18 Xi visited the 16th Army Group in Changchun, Jilin. 
  July 17 Xi did an inspection tour to Changchun, Jilin. 
  July 16 Xi made an inspection tour to Yanbian, Jilin. 
  July 15 Xi met with Fijian Prime Minister Voreqe Bainimarama. 
    Xi met with German Social Democratic Party (SDP) chairman Sigmar Gabriel. 
  July 14 Xi and Bolivian President Evo Morales Exchanged Congratulatory Messages on 30th Anniversary of Diplomatic Ties 
Li Keqiang July 17 Li met with Shotaro Yachi, head of Japan’s National Security Council. 
  July 16 Li held talks with Fijian Prime Minister Voreqe Bainimarama 
    Li met with World Bank President Jim Yong Kim. 
  July 15 Li chaired an executive meeting of the State Council. 
  July 14 Li met with South African Vice President Cyril Ramaphosa. 
Zhang Dejiang    
Yu Zhengsheng July 17 Yu chaired a CPPCC chairpersons meeting.Decided that next CPPCC Standing Committee meeting will be at the end of August and will discuss Socialist Core Values.


    Yu met with a delegation of representatives of youth associations from Hong Kong and Macao. 
  July 16 Yu chaired a seminar for local CPPCC member to exchange work experience. 
  July 13 Yu met with a delegation of ethnic minorities from Taiwan. 
Liu Yunshan July 15 Liu attended the graduation ceremony for the Central Party Schools spring term. 
Wang Qishan     
Zhang Gaoli July 18 Zhang attended a luncheon with Vietnamese government officials and businessmen. 
    Zhang visited the grave of Ho Chi Minh. 
  July 17 Zhang met with Nguyen Phu Trong, general secretary of the Communist Party of Vietnam. 
  July 16 Zhang held talks with Deputy Prime Minister of Vietnam Nguyen Xuan Phuc. 
    Zhang met with Vietnamese Prime Minister Nguyen Tan Dung. 
  July 13 Zhang met with Deputy Prime Minister of New Zealand Bill English. 



Issue No. 63 – July 27, 2015 

  July 21 Zhang met with a delegation of Hong Kong business leaders. 
  July 20 Attended Cheng Siwei’s cremation. 
Yu Zhengsheng July 21-24 Yu made an official visit to Thailand.Met with Prime Minister Prayut Chan-ocha; Met with Princess Maha Chakri Sirindhorn; Met with the President of the Privy Council Prem Tinsulanonda; held talks with President of the National Legislative Assembly Pornpetch Wichitcholchai.

Visited industrial and project zones such as the Thai-Chinese Rayong Industrial Zone in China and a royally-launched anti-narcotic agricultural project.


  July 20 Attended Cheng Siwei’s cremation. 
Liu Yunshan July 22 Attended the cremation of Wan Li. 
  July 20 Attended Cheng Siwei’s cremation. 
Wang Qishan July 22 Attended the cremation of Wan Li.
  July 20 Attended Cheng Siwei’s cremation. 
Zhang Gaoli July 22 Attended the cremation of Wan Li. 
  July 21 Zhang spoke at a conference one the “One Belt One Road” initiatives. 
  July 20 Attended Cheng Siwei’s cremation.
China Politics Weekly – July 20-27, 2015
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