Eye on China: Xi’s Insecurities – Gwadar’s Airport – Indo-China Anniversary – Trade Deal Deadline – European Strategy

Eye on China is a weekly bulletin offering news and analysis related to the Middle Kingdom. This week Xi seeks to restore confidence in socialism; India-China mark anniversary of diplomatic ties; work starts to build Gwadar’s new airport, EU prepares for summit meeting with China and much more.

I. Inside Track

  • Xi’s Insecurities: A couple of reports over the past week tell us a little bit about some of the insecurities that perhaps keep Xi Jinping awake at night. First, the Party’s leading journal Qiushi published a 2013 speech by Xi. The thrust of the message is to double down on the significance of the Party-state model of governance under the banner of socialism with Chinese characteristics. The speech also frames a contest between Chinese socialism and capitalism. However, Xi does talk about the need to “carefully study and draw on the beneficial civilization achievements created by capitalism,” to “understand the self-regulating ability of capitalist society” and “fully estimate the objective reality of the long-term advantage of Western developed countries in economic, scientific, and military aspects.” This, observers point out, is a section that was unpublished previously. Minxin Pei tells SCMP that the republication of the speech indicates a need to restore confidence in Xi’s leadership amid recent troubles with the US, in particular.The second report is about two work regulations reviewed by the Politburo on March 29. These relate to rules regarding leading Party members group and education of Party members. Both of these are essentially about tightening Party control and ensuring that members are politically reliable and furthering central leadership agenda. Read these revisions along with the March 28 circular by the CPC General Office to advance Party-building in central and state organs, which came as the Central Committee put out its guideline on the issue. The documents for central and state organs to put political building first and take the lead in studying and implementing Xi Jinping Thought. This must be done along with “strengthening discipline and fighting against unfavorable work styles.” In addition, it lays down specifications about regulating political speech outside working hours, warning against “two-faced” behaviour.  That was followed by the first meeting of a central group to address the practice of “formalities for formalities’ sake,” which along with bureaucratism “are not only problematic work styles but also a political issue, affecting the implementation of the policies and decisions made by the CPC Central Committee. In order to ensure this, 15 teams of disciplinary inspectors were dispatched to three central government departments and 42 SOEs administered by the central government.

    – Swings and Cuts: There was an upward swing in economic data for March. The Caixin/Markit Manufacturing PMI expanded to 50.8 from 49.9 in February. That’s the highest level seen since July 2018. Importantly, Caixin’s findings show that factories added jobs in March, arresting a relentless spell of job shedding since October 2013. The Caixin/Markit services PMI for March also expanded to 54.4, up from February’s 51.1. Despite these upswings, mosts analysts and business surveys are striking a note of caution. It’s not yet clear that the economy has entered stable territory. What’s driven this rebound is government fiscal support and infrastructure spending. For instance, in gross local bond issuance for Jan-Feb period hit Rmb 782.1 billion, up from just Rmb 28.5 billion for the first two months of last year. Easing of tax and fees has been another tool used by the government. For instance, on Wednesday, the State Council announced a range of new cuts, such as slashing electricity costs, railways and ports charges, average broadband and mobile internet service rates, charges on real estate registration, etc. Via these cuts, the government says it will save businesses and individuals around RMB 300 billion this year. The cuts are further going to impact revenue, something that’s being factored into the budgets of central government departments. Caixin reports that out of the 102 central government departments that released their 2019 budgets this week, 46 reduced their general public spending budgets while 49 increased their budgets compared with last year’s actual spending. That’s a large number of entities cutting spending.

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