Exclusive Insight: How Wen Jiabao Promoted Housing Price Growth, and Liu He's Role in the 4 Trillion RMB Stimulus Plan
Welcome to today's issue of "The China Brief." In this issue, we discuss how China's former premier Wen Jiabao promoted housing price growth and the role of Liu He in the 4 trillion RMB stimulus plan. The New York Times reports on how China is increasingly being viewed as an antagonist in diplomatic talks worldwide. The Biden administration is developing a program to prohibit US investment in certain sectors in China to protect US technology advantages, according to the Wall Street Journal. Meanwhile, China's upcoming National People's Congress session is expected to reveal a new cabinet lineup, as reported by Nikkei. Reuters reports that Nvidia's plans to sell technology to Huawei could be thwarted if the US government tightens restrictions on shipments to the blacklisted company. Finally, the South China Morning Post reports on China's plans to use legal means to counter the impact of foreign sanctions.
Here’s today’s exclusive insight:
Exclusive Insight: How Wen Jiabao Promoted Housing Price Growth, and Liu He's Role in the 4 Trillion RMB Stimulus Plan
Under Zhu Rongji's premiership (1998-2003), real estate was used as a short-term emergency measure to stimulate the economy. However, during Wen Jiabao's government (2003-2013), it became a long-term practice.
Despite public complaints about soaring housing prices, Wen Jiabao's response was to "take action to prevent housing prices from rising too fast." His rhetoric was cleverly crafted to suggest that housing prices should rise, but not too quickly, resulting in a housing bubble and making real estate investments appear like risk-free, guaranteed investment products.
Before 2008, China's "Budget Law" strictly limited local government borrowing, which resulted in low levels of local government debt. However, the 2008 global financial crisis prompted Wen Jiabao's government to introduce the "4 trillion yuan" economic stimulus plan. To implement it, Liu He, then Deputy Director of the Office of the Central Leading Group for Finance and Economics, was sent to the US to discuss the plan with American experts. Upon his return, the central government invested 1 trillion yuan, while local governments invested 3 trillion yuan to stimulate the economy. However, local governments did not have sufficient capital to implement the plan independently, and the "Budget Law" limited their ability to raise debt on a large scale.
This series is authored by Li Weijun, a special analysis expert for "The China Brief."
NYT: China Increasingly Seen as Antagonist in Diplomatic Talks Around the World
China is increasingly being viewed as an antagonist in diplomatic talks around the world, often siding with Russia, according to an analysis by The New York Times. While Russia’s war in Ukraine has dominated diplomatic dialogue this past year, China’s increasing assertiveness is seen as a thornier problem for many nations, who see it as the greatest long-term challenge and the one nation with the power and resources to reshape the American-led order to its advantage. The United States and its allies maintain deep trade ties with China even as their security concerns and ideological friction with Chinese Communist Party escalate, and President Biden's administration is pushing for allies and partners to come together to constrain China.
WSJ: U.S. Prepares New Rules on Investment in China
The Biden administration is developing a program to prohibit US investment in certain sectors in China to protect US technology advantages during the growing competition between the two countries. The Treasury and Commerce departments are considering a new regulatory system to address US investment in advanced technologies abroad that could pose national security risks, with a focus on private-equity and venture-capital investments in advanced semiconductors, quantum computing and some forms of artificial intelligence. The US government has long scrutinized foreign investment into the US but this would be a new step, with rules regulating US investment abroad. The new program will be subject to public comment and the Treasury would administer it in consultation with the Commerce Department.
Nikkei: China's new cabinet will have no time to lose
China's upcoming National People's Congress session is expected to reveal a new cabinet lineup, which could shed light on how much Beijing will emphasize economic and scientific self-reliance for the next five years. The incoming premier, Li Qiang, will be challenged to implement a sound economic recovery program while coordinating numerous central government agencies and managing relationships among provincial heads. The new State Council will be seeking to build an economy that can withstand shocks from the outside world and generate growth that improves the prospects of everyone at home. Meanwhile, China's attempt at peacemaking in the face of its diplomatic challenges with the US and Europe is testing its new diplomatic team.
Reuters: Nvidia's plans for sales to Huawei imperiled if U.S. tightens Huawei curbs-draft
A draft report by a government contractor shows that Nvidia's plans to sell technology to Huawei could be thwarted if the US government tightens restrictions on shipments to the blacklisted company. The Biden administration has been considering limiting the items US companies are authorized to ship to Huawei, which was added to the US trade blacklist in 2019. The report suggested that Qualcomm would likely suffer a "moderate economic impact" from the change in policy, in contrast to Huawei, whose access to Qualcomm's modem chips is more important to its smartphone offering.
WSJ: China’s Xi Jinping Shrugs Off Criticism in Push for Even More Control
Chinese leader Xi Jinping and senior Chinese officials have agreed to plans to give the Communist Party more direct control in key areas such as security, finance, technology, and culture, while reducing the government's role in policymaking, according to sources. This follows protests that erupted in late 2021 against the government's zero-Covid lockdowns, which had a devastating impact on the country's economy. The new economic team, led by Li Qiang, the party's No. 2 official, is expected to try to address concerns among business leaders about the government's support for the slumping property market and tech industry, which has come under pressure from a regulatory clampdown. The National People’s Congress is expected to approve parts of the plan during its annual session, which started on 6 March.
SCMP: China’s ‘two sessions’ 2023: new laws to counter foreign sanctions planned
China is planning to use legal means to counter the impact of foreign sanctions by working on foreign policy legislation, according to a spokesman for the National People’s Congress. The US is reportedly working with its allies to impose sanctions on China if it provides military support for Russia in its war against Ukraine. Chinese firms have already been sanctioned for their ties with Russia and other grounds such as the surveillance of ethnic minorities and for facilitating Iran’s energy trade in violation of US restrictions. The Chinese parliament is working on the legal means to counteract these measures.