Tag Archives: National Development and Reform Commission

China To Exclude Private Sector From News Media And Cryptomining

THE REMOVAL OF the private sector from China’s education market was abrupt and disruptive. Doing the same to media is being handled more carefully but will likely have far more extensive ramifications.

The newly published draft by the National Development and Reform Commission (NDRC), the country’s top economic planning agency, of its ‘negative list’ of industry sectors in which private investment, Chinese or foreign, will not be allowed, includes a broad swathe of media activities.

‘Non-public’ (ie, private) capital will not be allowed in any newsgathering, editing and broadcasting business. Nor will it be permitted in the establishment and operation of news organisations, including news agencies, newspaper publishing units and radio and television broadcasting organisations.

Private capital will also be barred from reproducing in China news content released by non-Chinese entities abroad and online live streaming events that could sway public opinion — a catch-all covering any topic.

Media would become a wholly state-owned sector.

It is unclear how existing private investment in media will be affected at this point, including media organisations that have both private and state investors. However, the new regulations are likely directed towards the big tech platforms like Weibo and WeChat that carry plenty of news.

A move in that direction was foreshadowed in the pressure applied earlier this year to the Jack Ma-founded tech giant Alibaba to divest its media holdings during the regulatory scrutiny of its fintech affiliate, Ant Group.

Authorities were concerned about Alibaba’s potential influence over public opinion, especially via social media. Alibaba owns the South China Morning Post, among other media properties.

The NDRC’s proposal mentions explicitly excluding private capital from any involvement with media outlets’ social media accounts.

The new constrictions on media ownership fit a pattern of tightening control over public discourse that has ranged from showbusiness to academia, with authorities pushing to eliminate the publishing of content that violates the core values of socialism.

Overall, the proposed changes will cut the negative list by six sectors from the current 123 once approved. Some sectors would see their barriers to entry reduced.

Apart from media, the other eye-catching headline is that cryptocurrency mining will join the proscribed list. That extends the continuing crackdown on cryptocurrencies.

The seven-day public consultation is due to last until October 14.

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Debt Bondage

THE NATIONAL DEVELOPMENT and Reform Commission, China’s top economic planning agency, has chipped in its two-fen-worth on the country’s local-government debt problem, saying that debt levels overall are under control but it will curb the “disorderly expansion” of further debt.

All much as would be expected. But what caught this Bystander’s eye was the NDRC’s suggestion that some of the local government captive commercial investment vehicles used to get round restrictions on direct borrowing by provincial and municipal governments would be allowed to issue bonds to replace high-short-term debt carrying high interest rates.

That is perfectly sensible financial management but it also marks a radical advance in what has been cautious steps in broadening bond issuance. It may suggest the strains on the financial system, and particularly the shadow banking system, which would be the most likely source of high-interest debt, are more acute than is being publicly acknowledged.

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Carmakers Get A Taste Of China’s Changing Business Climate

Another foreign industry pining its hopes of future growth on the Chinese market has fallen under the beady eye of the National Development and Reform Commission (NDRC), the country’s top economic planner. This Bystander reads reports that the NDRC has put the China Automobile Dealers Association (CADA) to work researching the price of foreign cars sold in China, both those imported and those locally produced. This is not attention carmakers will relish.

The nominal issue at hand is whether foreign carmakers are setting a minimum retail price for their vehicles, which could break the 2008 anti-monopoly law. Last month, state media accused foreign luxury carmaker carmakers of reaping what they said were exorbitant profits in China and should face an antitrust investigation. It now seems that they knew of what they wrote.

The NDRC has already been successful in getting foreign milk-powder producers to pay fines and lower their prices. It recently fined five of them, including Mead Johnson Nutrition, Danone and Fonterra, and one local firm a total of $110 million for anti-competitive behaviour in effectively setting prices for retailers. Earlier this week, five Shanghai-based jewelry firms were fined $1.7 million for price fixing. Foreign drug makers are also feeling the pressure for making payments to doctors to use their drugs. Some three score of foreign and local pharma firms are under investigation for possible price manipulation.

That a mix of foreign and local companies are being punished is significant, even if foreign firms are bearing the brunt. Authorities have never been above targeting foreign companies for an abuse when they want to send a message to local firms that it is equally unacceptable from them. Tackling corruption within the Party and the government has become a core policy for the new leadership, but it also needs to break a similar culture in business that companies, if sufficiently well connected, can be above the law, too.

If China is to have the better corporate governance that it will need as it develops and rebalances its economy, the grey areas in which many firms now operate will shrink. Carmakers are only the latest to be given an indication of that.

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A Stimulus By Any Other Name

When is stimulus spending not a stimulus package? When it is previously planned projects just being brought forward, apparently. State media are reporting that Beijing is saying that it is not going to stimulate the economy in the way it did after the 2008 financial crisis (via Bloomberg). That pumped 4 trillion yuan ($600 billion) in to China’s economy, an steroid-like injection of credit whose side-effects are still being felt in persistent inflation, ailing bank debt and excess industrial capacity.

With the economy again slowing, the temptation is to fall back on tried and trusted methods of state capitalism, and the devil, again, take the consequences. Up to point. Latter this year a new generation of leaders will be ushered in who will have to establish their political legitimacy and sustain the Party’s legitimacy through making all Chinese better off. A delicate balance between a quick fix and sustainable growth will have to be found that still promotes the long-term rebalancing of the economy.

So all praise to five-year plans. The National Development and Reform Commission, the agency that oversees national planning and green-lights individual projects lower down the development food chain, has the capacity to advance 1 trillion-2 trillion yuan-worth of infrastructure projects. It has already approved nearly 900 projects in the first four months of this year, twice the number in the corresponding period of last year. If anything, the pace of new approvals is gathering.

The constraint on policymakers is anunwillingness to repeat 2008s reliance on bank lending to local authorities to finance the stimulus, and a reluctance of the big-state owned banks to make their balance sheets creak any more under a further burden of new loans. Hence the talk on more private-sector financing of the proposed infrastructure investment in railways, energy, green technology, telecoms, healthcare and education.

This month, Beijing has announced a series of measures to give more scope to private capital and to expand domestic demand by subsidizing sales of consumer goods (as it did after 2008). Whether China’s private lenders will provide better judges of risk than their state-owned counterparts is yet to be seen, especially when there are national development goals breathing down their necks. Yet there is also no getting away from the fact that lending outside the state-owned banking sector is rudimentary or informal. The big state owned banks will still have to do most of the heavy lifting of a new stimulus, however it is labeled. Everyone will want to keep their load as light as possible.

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China’s Growth Slowdown Accelerating In November

Red flag on the economy raised by Zhang Ping, chairman of the National Development and Reform Commission: economic indicators for November are showing an accelerating rate of slowdown in growth. Zhang was speaking at a press conference following the announcement of the 108 basis points cut in interest rates. “The crisis is spreading all over the world and its impact on China’s economy is deepening,” he added.

Zhang also said that the 4 trillion yuan stimulus package announced earlier this month should add one percentage point to China’s growth rate, a more conservative estimate than that of many private economists.

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