(Preview) New Year, Same Plans for the Economy; PRC Tariffs on Canadian Exports; A Trump-Xi Birthday Summit?; When Facebook Tried to Enter China
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Hello and welcome to Sharp China. I'm Andrew Sharp and you are listening to a free preview of today's episode. The markets in China, they're not really going to crash during the MPC, not that they would have, but this was just a...

Trying to project a, you know, we have things under control and we have to make some changes and some tweaks. But in general, we're not panicking. Right. And so the markets essentially reacted with a shrug to what was announced. I think so. But actually, I mean, the thing that was most, I think, bullish and you saw it, at least some of the trading over the last week in Hong Kong, in the tech related stocks, is just that there was a lot of language just showing, again, just increasing support for stocks.

high-tech technology sectors for, you know, again, in this new quality productive forces concept, which is basically, you know, redoing the economy around technology, breaking through the U.S. technological blockades. You know, there's a lot of policies and budget in here that are, again, we're seeing as being very bullish on those sectors. And I think, you know, one of the things they said in one of the, you know, the

The government work report lists out a series of tasks. They mapped quite well with the series of tasks that came out of the Central Economic Work Conference back in December. No surprise, right? There is a real policy consistency here. But in the second one, it's titled, Developing New Quality Productive Forces in Light of Local Conditions and Accelerating the Development of a Modernized Industrial System,

You know, they talk about how they will, you know, it says we will establish a mechanism to increase funding for industries of the future and bolster and foster industries such as biomanufacturing, quantum technology, embodied AI, which is say AI and robots.

for example, and 6G technology. 6G, here we go, yeah. And so again, they're just this, they're very, very, and then they're doubling down on this AI Plus initiative, which again, I think is a part of the, it's a plan to help diffuse AI much faster than I think people expect into the massive industrial base that China has and it continues to grow.

continues to advance. And so again, it's from a technology perspective, if you're a technology company or technology investor, this is

These all sound pretty positive. You know there will be government support. Right. And you tie that back to the February meeting with the private entrepreneurs where, again, it's all related. And this just looks very positive. And so I think that's why you saw last week, at least when this report first came out, you saw the stocks in Hong Kong that are in these sectors really jump a lot. And I think that...

it's not surprising. And there's been the overall vibe shift, right? DeepSeek has created this sort of change in narrative about China's technology and that it is actually, the narrative now is it's breaking through and it has already broken through in a lot of, it leads in a lot of areas, especially around like renewable energy, EVs, et cetera. So I think that that, I think if you're the leadership and this is speculation on my part, but if you're leadership and you look at what's going on in the economy,

Yeah, there are a bunch of problems, but they're actually bright spots. And so you're going to tweak things and keep things going, but you're not going to overdo on... You're not going to sort of panic and overdo on stimulus when you still see actually relatively...

positive momentum. Yeah. I mean, you sent me over a New York Times piece that I think captured the vibe well. They wrote that Xi has turned the meeting of the National People's Congress into a meticulously orchestrated week-long salute to himself and his vision. And, quote, he urged China to forge ahead in advanced technologies, including artificial intelligence, biotechnology, and new weapons, which,

Again, dovetails with a lot of the priorities and points of emphasis that have become familiar over the last couple of years here. In terms of a reflection of where she and the party are today, does the shift in the atmosphere surrounding these meetings resonate with you? Because that's part of what the New York Times said.

was writing about in 2025. I mean, do you identify with that? No, I think absolutely. And you look at, you just look at the relative performance of like, say, PRC tech stocks traded in Hong Kong versus like the NASDAQ. And it's like, it's like a 50%, 50% more, more performance gap over the last, you know, since the beginning of the year. Because it's, you know, and maybe a lot, a lot of that may be driven, it is driven by, by mainland investors who can

send money out to the Hong Kong market through this Southbound Connect, not so much global investors. But again, it's all part of this general... I think from the leadership's perspective, they can point to things and say, this is why we're confident, this is why you should be confident. And again, there are lots of problems in the Chinese economy. And I don't think there was not... You don't look at what the government report

was in the government report at the, you know, last week and say, I guess it was ratified today. And you don't say, okay, they're going to solve the housing problem. They're going to solve the local debt problem. They're going to solve the local finance, the fiscal situation, right? Those are long, hard slogs that still remain to be dealt with. Right. But, but, but they are, they are grind as we've, you know, grind is a, is a common theme, I think of how the party operates and they are grinding through these problems while at the same time, if you read through,

not only the work report, the premier's work report, but also this NDRC plan, there's a lot of talk about the non-economic ways to preserve stability around things like the Feng Chao experience, you know, improving grassroots social governance, you know, which is effectively, you know, they have this

On the one hand, you've got your economic policies, and if you're in the West, the developed economy, you say, oh, these are the things that matter for social stability. But then they have this entire other system that deals with social stability that I think gives them the ability or the belief that they can weather tougher economic times in other countries because when they need to, they have a whole sort of...

step ladder of measures they can take to keep people in line from persuasive to coercive. Yeah. Well, and when I ask about the atmosphere, I mean, part of what I was referring to is the Times saying that she has turned the meeting into a meticulously orchestrated week-long salute to himself and his vision, because there's no question that she thinks they're on the right track. And

the question is whether he's right and whether there's room for dissent. They also wrote- We're gonna find out. The meeting in Beijing was once a stage for the Communist Party leaders to make a show of public consultation. Congress delegates, although handpicked by the party, sometimes chided officials over problems like pollution. There were even rare flashes of discord among senior officials.

And as someone who's followed the PRC only under she, that sort of display is honestly hard for me to even imagine. I mean, I don't know whether you have any thoughts on what it used to be, but there doesn't seem to be much consultation going on these days.

No, it's very scripted. It's also shorter than it used to be. They used COVID... In 2020, the meeting was actually delayed, I think, two months or so because of COVID, and it was shortened. It used to be really like a two-week pageant in a lot of ways. And when I was in Beijing in the years pre-Xi, it was also... The delegates would come in, and it was a big party. And I had friends who were effectively...

The lobbyists with Chinese characteristic Beijing friends, and they would spend the week whining and dining these delegates from all over the country to help their businesses and take them apartment shopping and all sorts of stuff. It was quite the scene. That is obviously not the case anymore. It's also now a week. And so it's shorter.

But it is very well scripted. The one thing that went off script, which is interesting, but at this point, I think I would caution against not taking the official statements at face value, is that the number three person in the standing committee, the number three ranked person standing committee, and the chairman of the NPC standing committee, Zhao Leji, was absent today from the closing ceremony and from a meeting yesterday. And the reason given is that he's sick.

You know, he's older. I think he's in his 70s, late 60s. Yeah, respiratory infection was, I think, the official explanation. Early March in Beijing. There's lots of stuff going around. It's totally plausible that he's sick. But that's not going to stop all sorts of rumors from going around. And they're already starting. But I would just say that, again, there's no reason not to take it at face value at this point. But it was definitely a...

Notable absence. Notable absence, yeah. Yeah. Well, I had a respiratory infection over the weekend, so it happens to the best of us. Yeah, I had one last week. No, it's definitely something going around. It's with someone earlier today who's sick, so I hope it'll get it again. I hope it already

Right. Well, and in terms of she and the direction that he has chosen for the party here, great. We're getting 6G and AI robots. But in terms of the economy, it is odd for me watching this as an outsider because there's definitely rhetorical acknowledgment.

of the issues surrounding domestic consumption. Like we saw Lee Chong say that vigorously boosting consumption was the government's top priority in 2025.

But again, that was the top priority at the Central Economic Work Conference. I know. And it continues. And so alongside rhetoric like that, and we've also seen Xi's speeches where he says that domestic consumption is necessary for both economic stability and economic security. But then alongside that sort of rhetoric...

consumption makes up only about 40% of gross domestic product in China compared with 50% to 70% in more developed countries. And then investment, including in the manufacturing sector, makes up about 40% of the PRC economy, which is twice as much as the same number in the US. And according to Bloomberg, that's a historic level compared to the rest of the world.

And so in the context of those realities, all the policies announced this year, along with a lot of what they have announced in the second half of last year and at the Central Economic Work Conference, all of it just looks like they're tweaking and not even attempting to reset the shape of the economy in any meaningful way.

much to the chagrin of trading partners around the world, and then maybe actual Chinese citizens who are dealing with a depressed domestic economy. And so none of that's necessarily new, but it's all notable in the face of real headwinds that are facing the PRC in 2025 here and in 2024. That's a fair assessment. And I think on the trade bit,

Again, we'll see. But if you're, say, working somewhere in the Trump administration and you're looking at trade issues with China, there's nothing in this report that's going to lead you to believe that they're going to address what the U.S. considers to be significant overcapacity problems. In fact, they're more likely to continue. They are continuing on their quest for total dominance of advanced manufacturing and industrial production globally. And they're doubling down on that.

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