Tech in Focus during Xi's Jiangsu Visit - Janet Yellen's Beijing Visit - New Regulation for Private Investment Funds & VCs
Let’s begin today with a look at coverage in the paper over the weekend. On Saturday, the newspaper carried a detailed report on Xi Jinping’s visit to Jiangsu. Xinhua also has a detailed English report. The report says that Xi, accompanied by the provincial secretary Xin Changxing and governor Xu Kunlin, visited Suzhou and Nanjing.
At the Suzhou Industrial Park on July 5th, Xi said:
“hi-tech industrial parks bear a significant and glorious historical mission in the pursuit of technological self-reliance and strength. It is imperative to strengthen dovetailing between technological innovation and industrial innovation, boost deep integration of industries, universities, and research institutes with enterprises as mainstay, promote the industrial application of scientific and technological achievements, and continuously nurture new industries and lead in industrial upgrading with new technologies. It is important to continually expand international collaboration, working hard to develop open and innovative world-class hi-tech industrial parks.” Xi then visited the Suzhou HYC Technology Co., Ltd.
The next morning, he visited the Pingjiang Historic and Cultural Block, and called it a “great treasure for preserving and carrying forward fine traditional Chinese culture and promoting socialist cultural-ethical progress.”
By the afternoon, Xi was in Nanjing. There he visited the Purple Mountain Laboratories, which has a 6G comprehensive lab. There, he said:
“Xi stressed that given the rapid development of information technology nowadays, disruptive technologies may appear at any time. He urged scientists there to conduct innovation in a down-to-earth manner, so as to score achievements in promoting higher-level scientific and technological self-reliance and strength.”
He also visited NARI Group Corporation, which is a hi-tech enterprise in the energy interconnection field affiliated to State Grid Corporation of China. Xinhua reports:
“Xi paid an inspection visit to the company, where he was briefed about the efforts made by Nanjing to build a national-level advanced manufacturing cluster of intelligent power grids, and watched an exhibition of products of controllable technology developed by NARI Group Corporation. At the intelligent manufacturing production zone, he learned about how the company has been making breakthroughs in the development of core technologies, and the efforts it has made to ensure power grid safety, power supply and energy transformation. He noted that energy supply and safety directly concern our country's development and the people's wellbeing, which is one of the country's most fundamental interests that allows no negligence. He called for efforts to promote the upgrading of key technologies and core products, and the development of new and smart technologies, so as to strengthen the capacity for ensuring national energy safety and supply. When leaving the company, Xi encouraged the young researchers to aim high but stay grounded, advance step by step with confidence, vigor and the spirit of ‘devoting their whole life to accomplishing a single cause’ to make breakthroughs in cutting-edge technologies, thus leading a rewarding life, just as a blacksmith in the past would spend years forging a perfect sword.”
Finally on July 7, Xi heard reports by the Jiangsu’s leadership, before offering his views. Key points that Xi made:
“Xi pointed out that the key to Chinese modernization lies in the modernization of science and technology. He urged Jiangsu to be a leader in making new breakthroughs in this regard, and build a national industrial hub for science and technology innovation, so that the high-quality development of the province is largely powered by innovation-driven growth. He called for efforts to reinforce the principal role of enterprises in innovation, encourage the flow of innovation resources to enterprises, and constantly promote the industrial application of scientific and technological achievements. It is important to further reform management system for science and technology, and the systems and mechanisms for talent development, in order to establish a foundational system for all-around innovation. Xi also stressed the need to increase investment in science and technology through diverse channels, strengthen legal protection of intellectual property rights, and unlock the creativity of talent in different fields.”
“Adhere to the real economy and build a modern industrial system in order to pursue development in the province. This involves consolidating the leading position of traditional industries, accelerating the development of strategic emerging industry clusters with international competitiveness, promoting the deep integration of digital economy with advanced manufacturing and modern services, and comprehensively upgrading the industrial foundation and industrial chain modernization. He called for efforts to accelerate the development of a modern industrial system with advanced manufacturing as the backbone. To smooth positive interplay between domestic and international economic flows, it is important to actively address bottlenecks and connectivity issues, and continuously innovate new ways and measures to attract foreign investment and open up wider. It is also essential to build a globally attractive and two-way open hub to spur innovation and development in foreign trade, as well as expand international markets.”
“Xi pointed out that building a modern civilization of the Chinese nation is an essential requirement for advancing Chinese modernization and a significant aspect of promoting the socialist cultural-ethical progress. Jiangsu must strengthen the protection, inheritance, and innovative development of fine traditional culture, and actively participate in the construction of the Yangtze River National Cultural Park and the Grand Canal National Cultural Park. He called for great endeavors in the development of modern scientific, technological and educational undertakings to comprehensively improve the scientific and cultural literacy of the people. He also called for work to develop the cultural industry and undertakings, make public cultural services in urban and rural areas more standardized and equitable. Solid efforts should be made to raise cultural-ethical standards in both urban and rural areas. Moral education for citizens should be strengthened, making for a society that values reading, and advancing civility.”
“Xi stressed that Jiangsu must take the lead in ensuring and improving the people's wellbeing and modernizing its governance. The province is urged to optimize its social security, its mechanism for boosting employment and its public service system for employment, and do a good job in providing key groups with employment opportunities. Jiangsu is required to carry on and develop ‘Fengqiao Experience’ and ‘Pujiang Experience’ in the new era, improve its governance system, refine the urban and rural primary-level governance system and the mechanism for advancing village-level governance, and digitalize governance. It is imperative to modernize emergency management system and capacity, further efforts to secure workplace safety, so as to prevent the occurrence of severe and major accidents.”
“Xi noted that as the country is entering a pivotal period for flood control from mid-July to mid-August, rivers, lakes and reservoirs will be under threat of flood disasters, while at the same time, some parts are suffering from severe drought, which greatly increased the risk of forest fires. All localities and relevant departments should prepare for major floods, drought and other natural disasters, put the people and their lives first, fulfill their responsibilities and do their work well, and give top priority to safeguarding people's lives and property. It is also imperative to detect hidden dangers of natural disasters through careful patrol and inspection, get well prepared for disaster relief and work hard to minimize losses. Transportation departments should safeguard important infrastructure works, and energy and electricity departments, especially state-owned enterprises directly under the central government, should make every effort to ensure the supply of energy resources and power, so as to keep society and the economy running normally against natural disasters.”
The final paragraph is really interesting. It talks about implementing the Xi Thought education campaign. He then lays down some requirements for cadres:
“Firstly, all Party members and officials must establish a view of performance that benefits the people, uphold people-centered philosophy of development, and pursue high-quality development. Xi urged them to refrain from pursuing excessive scale, blindly following foreign examples, taking reckless actions, or playing to the gallery. They should take effective measures for tangible results, and never engage in going for ostentation, playing tricks for personal gains, and data falsification. They should lay a solid foundation for long-term development instead of pursuing short-term gains, and never exhaust resources for immediate interest, only to waste money and manpower.”
“Second, they should have an enterprising spirit to fully perform their duties, boldly take on responsibilities, meet challenges head-on, and have the courage to fight. Work needs to be done to fight against unhealthy tendencies such as being choosy about jobs, lying flat and passing the buck, going through the motions and doing work half-heartedly. Instead, mechanisms should be improved to motivate and protect those who take responsibility and act.”
“Third, it is imperative to create an atmosphere for implementing the decisions and plans of the CPC Central Committee to the letter, and take a proactive approach and pool collective strength to put them into practice. Xi stressed the perseverance to hammer away until a task is done, focus on practical issues for implementation and achieve substantial results in this regard.”
Also worth noting over the weekend are reports on the visit by US Treasury Secretary Janet Yellen. NYT has a great feed on the visit. I recommend going through it.
In terms of Chinese readouts from the visit, Xinhua’s report on the meeting between Premier Li Qiang and Yellen says that:
“Last year, the two heads of state met in Bali and reached a series of important understandings, charting the course for China-U.S. relations. Mutual respect, peaceful coexistence and win-win cooperation are the basic principles of state-to-state interactions, and also the right way for countries to get along with each other. ‘Chinese culture values peace above everything else, as opposed to hegemony and bullying,’ Li said. It is hoped that the U.S. side will adopt a rational and pragmatic attitude, and work with China in the same direction to push bilateral relations back onto the right track at an early date. Noting that the economic interests of China and the United States are closely intertwined, Li said that mutual benefits are the essence of China-U.S. economic relations, and strengthening cooperation is the realistic demand of and right choice for both sides. ‘China's development is an opportunity rather than a challenge for the United States, and a gain rather than a risk,’ Li said. He added that politicizing economic cooperation or overstretching the concept of security on such cooperation does no good for the economic development of the two countries and the whole world. Li called on both sides to strengthen communication and seek consensus on important bilateral economic issues through candid, in-depth and pragmatic exchanges. He called on the two countries to inject stability and positive energy into China-U.S. economic relations. China and the United States should strengthen coordination and cooperation, work together to cope with global challenges, and promote common development. Yellen said the U.S. side does not seek to decouple or sever supply chains, and has no intention of hindering China's modernization process.”
Also note this: “Referring to a rainbow Yellen saw when she arrived in Beijing on Thursday, Li said China-US relations can also see ‘more rainbows’ after a round of ‘wind and rain,’ according to footage of the meeting published by Phoenix Satellite Television.” In her remarks, Yellen reiterated that “we seek healthy economic competition that is not winner-take-all but that, with a fair set of rules, can benefit both countries over time.”
On Saturday, Vice-Premier He Lifeng met Yellen. Xinhua reported: “the two sides had in-depth, candid and practical exchanges on the economic and financial situation of the two countries and the whole world as well as on working together to address common global challenges. The talks were constructive.”
It added: “Noting that the overstretching of national security does no good to normal economic and trade exchanges, the Chinese side expressed concerns over the sanctions and restrictions imposed by the United States on China.”
Finally, let’s go through Yellen’s press briefing after the meetings. She said:
“President Biden and I do not see the relationship between the U.S. and China through the frame of great power conflict. We believe that the world is big enough for both of our countries to thrive. Both nations have an obligation to responsibly manage this relationship: to find a way to live together and share in global prosperity.”
My objective during this trip has been to establish and deepen relationships with the new economic leadership team in place in Beijing. Our discussions are part of a broader concerted effort to stabilize the relationship, reduce the risk of misunderstanding, and discuss areas of cooperation. (Yellen reportedly met with former Chinese Vice Premier Liu He, Yi Gang, Zhou Xiaochuan, Finance Minister Liu Kun and Pan Gongsheng, who is now in charge at the PBOC). She said that her “conversations were direct, substantive, and productive.”
“There is an important distinction between decoupling, on the one hand, and on the other hand, diversifying critical supply chains or taking targeted national security actions. We know that a decoupling of the world’s two largest economies would be disastrous for both countries and destabilizing for the world. And it would be virtually impossible to undertake. We want a dynamic and healthy global economy that is open, free, and fair – not one that is fragmented or forces countries to take sides.”
“Fair treatment is critical so American firms and workers compete on a level playing field – and benefit economically from trade and investment with China and the huge market it presents for American goods and services. I also expressed my worries about a recent uptick in coercive actions against American firms.”
“we also spoke about national security and human rights. I emphasized to my counterparts the necessity of clear and direct communication on the actions we are taking – and why we are taking them. Senior-level engagement is particularly vital during moments of tension. The U.S. will continue to take targeted actions that are necessary to protect our national security interests and those of our allies. As we do so, we adhere to a set of important principles like making sure our national security actions are transparent, narrowly scoped, and targeted to clear objectives. Importantly, these actions are motivated by straightforward national security considerations. They are not used by us to gain economic advantage.” — (Comment: I don’t think anyone in Beijing will be buying this line of argument. Look at what Li and He Lifeng reportedly told Yellen.)
“On debt distress in developing countries and emerging markets, we welcomed recent progress on individual cases such as Zambia. I reiterated the importance of timely and comprehensive participation by all bilateral official creditors in other urgent cases. Our Administration believes that improving the debt restructuring process is crucial for the world economy. In addition, we believe that China, as the world’s largest bilateral creditor, can gain from the greater certainty provided by those improvements.”
“No one visit will solve our challenges overnight. But I expect that this trip will help build a resilient and productive channel of communication with China’s new economic team.”
Now to today’s paper. Here are the key reports and articles that I found noteworthy from the People’s Daily's edition on Monday, July 10, 2023.
Page 1: At the top of the page today is a Zhong Yin commentary, which is based on Xi’s comments in Jiangsu on the need for Party members and officials to establish a view of performance that benefits the people.
The article then says: “People-orientedness is the essential attribute of Marxism, and Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era is a theory that originates from the people, is for the people, and brings benefits to the people.” 人民性是马克思主义的本质属性，习近平新时代中国特色社会主义思想是来自人民、为了人民、造福人民的理论.
It calls on cadres and officials to keep in mind that “benefiting the people is the greatest political achievement.” It adds that one must “adhere to the fundamental purpose of serving the people wholeheartedly” when planning and carrying out one’s work; one must “take the number of tangible benefits provided to the people as an important criterion for evaluating political achievements”; and one must “ensure that the achievements of Chinese-style modernization benefit all the people more equitably…” 广大党员干部要深刻把握“必须坚持人民至上”等党的创新理论的立场观点方法，牢记“为民造福是最大政绩”，谋划推进工作必须坚持全心全意为人民服务的根本宗旨，坚持以人民为中心的发展思想，坚持发展为了人民、发展依靠人民、发展成果由人民共享，把为老百姓办了多少好事实事作为检验政绩的重要标准，让中国式现代化建设成果更多更公平地惠及全体人民，努力创造经得起历史和人民检验的实绩.
It emphasises the pursuit of high-quality development, for which one must “coordinate the effective improvement of quality and reasonable growth of quantity.” “It is necessary to properly handle the relationship between stability and progress, establishment and destruction, falsehood/emptiness/pretence and reality, secondary aspects/symptoms and the roots, and the immediate and long-term, consciously integrate the new development concept into the whole process of economic and social development, and do not engage in pursuing greed, blind recklessness, and in seeking popularity through sensationalism…” 要处理好稳和进、立和破、虚和实、标和本、近和远的关系，自觉把新发展理念贯穿到经济社会发展全过程，不搞贪大求洋、盲目蛮干、哗众取宠，以推动高质量发展的新成效检验主题教育成果.
The next paragraph reiterates this point from Xi’s comments: “take effective measures for tangible results, and never engage in going for ostentation, playing tricks for personal gains, and data falsification.” It calls for putting an end to “rhetorical-, declaratory- and package-style implementation.” 坚决杜绝口号式、表态式、包装式落实的做法.
It adds: “It is crucial to deeply understand that the goals and tasks set at the 20th Party Congress include short-term, medium-term, and long-term objectives. It is necessary to distinguish between priorities and urgencies, striving for comprehensive advancement while highlighting key areas. While paying attention to the immediate situation, we must also focus on the long-term, do more things that lay the foundation for long-term benefits, and prevent formalism and bureaucracy. For urgent tasks, we should promptly take action and ensure swift implementation, avoiding procrastination. For long-term tasks, we need to maintain strategic determination and patience, adhere to our strategic blueprint until the end, and achieve success through persistent efforts. We should strike a balance between visible/obvious achievements and hidden contributions, striving not only for immediate gains but also for long-term progress. We should avoid seeking immediate benefits at the expense of long-term interests, short-sighted actions that exploit resources without considering the consequences, and waste money and manpower. Instead, we should pursue modernisation in a practical and steadfast manner.” 必须深刻认识到，党的二十大确定的目标任务有近期的，有中期的，也有长期的，要分清轻重缓急，既要全面推进，又要突出重点；既要狠抓当前，又要着眼长远，多办打基础、利长远的事，防止搞形式主义、官僚主义。对当务之急，要立说立行、紧抓快办，不能慢慢吞吞、拖拖拉拉。对长期任务，要保持战略定力和耐心，坚持一张蓝图绘到底，滴水穿石，久久为功。要把握好潜绩和显绩的关系，既要做显功，也要做潜功，不搞急功近利、竭泽而渔、劳民伤财，扎扎实实、踏踏实实地搞现代化建设.
Next, there’s a long feature article marking the 20th anniversary of Zhejiang’s double eight strategy. The strategy identified eight strengths of Zhejiang in terms of economic structure, geological position, industries, coordinated development of urban and rural areas, ecology, mountain and ocean resources, environment, and culture, as well as eight measures the province is taking to take further advantage of these strengths. This was obviously under Xi Jinping’s tenure as Zhejiang Party Secretary.
Finally, there’s a report on the new regulation on the supervision and administration of private investment funds, which has been approved. This will come into effect on September 1. The full regulation is also available on Page 10.
Xinhua reports that “The regulation clarifies the scope of application, specifies the obligations and requirements of private fund managers and custodians, regulates fundraising and investment operations, and strengthens supervision and management as well as legal liability. The new rules also make special provisions for venture capital funds, showing that China is encouraging investment into technology companies and start-ups.”
Reports also inform that “As of May 2023, there are 22,000 private equity fund managers registered in the Asset Management Association of China (AMAC), with 153,000 funds under management, totalling 21 trillion yuan ($2.9 trillion).”
The report says that:
Private investment funds of different forms, such as contract-based, corporate-based, and partnership-based funds, are included within the scope of the regulation. 一是明确适用范围。将契约型、公司型、合伙型等不同组织形式的私募投资基金均纳入适用范围，规定以非公开方式募集资金，设立投资基金或者以进行投资活动为目的依法设立公司、合伙企业，由私募基金管理人或者普通合伙人管理，为投资者的利益进行投资活动，适用本条例.
The regulations clarify the circumstances under which an individual may not become private fund managers or related parties such as controlling shareholders, actual controllers, directors, supervisors, or senior management personnel. (See Articles 8 to 10 of the regulation for this) It also clarifies that employees should receive compliance and professional ability training in accordance with regulations. Private fund managers are required to fulfil registration procedures with the securities regulatory authority entrusted by the State Council, and circumstances for de-registration are clarified. Actions by shareholders, actual controllers, and partners of private fund managers that are prohibited are clarified in the regulation. The regulation also puts forward requirements that private fund managers should continue to meet. The responsibilities of private fund managers and custodians are also clarified. 二是明确私募基金管理人和托管人的义务要求。明确不得成为私募基金管理人及其控股股东、实际控制人、董事、监事、高级管理人员等相关主体的情形，明确从业人员应当按照规定接受合规和专业能力培训。规定私募基金管理人应当依法向国务院证券监督管理机构委托的机构履行登记手续，明确注销登记的情形。列举私募基金管理人的股东、实际控制人、合伙人禁止实施的行为，明确私募基金管理人应当持续符合的要求。明确私募基金管理人、私募基金托管人的职责。
A private investment fund shall raise or transfer funds to qualified investors, and the cumulative number of investors of a single private investment fund shall not exceed the number prescribed by law. The fund manager shall match products of different risk levels according to the investor's risk identification ability and risk bearing ability. The regulation strengthens the supervision and monitoring of private investment funds after they are raised; it also clarifies the scope of private equity fund asset investment and the business activities that are not allowed to be conducted; it also stipulates the investment level of private investment funds and regulates the conduct of private fund managers and their employees. 三是规范资金募集和投资运作。私募投资基金应当向合格投资者募集或者转让，单只私募投资基金的投资者累计不得超过法律规定的人数。私募基金管理人应当根据投资者风险识别能力和风险承担能力匹配不同风险等级的私募投资基金产品。加强私募投资基金募集完毕后的监管监测。明确私募投资基金财产投资的范围以及不得经营的业务，规定私募投资基金的投资层级。规范私募基金管理人及其从业人员的行为.
On VCs, the regulation says that the state shall provide policy support to venture capital funds, and encourage and guide them to invest in growing and innovative entrepreneurial enterprises. It also clarifies the conditions that venture capital funds should meet, and implements differentiated supervision and self-discipline management for VC funds that are different from other private equity funds.四是对创业投资基金作出特别规定。国家对创业投资基金给予政策支持，鼓励和引导其投资成长性、创新性创业企业。加强监督管理政策和发展政策的协同配合，明确创业投资基金应当符合的条件，对创业投资基金实施区别于其他私募投资基金的差异化监督管理和自律管理.
The regulation stipulates that the supervision and management of private investment fund business activities shall implement the Party and state guidelines, policies, decisions and arrangements. It clarifies the regulatory responsibilities and measures of the securities regulatory authority under the State Council. It stipulates that the securities regulatory authority under the State Council shall establish a cooperative mechanism for information sharing, statistical data submission and risk disposal of private investment funds with relevant departments under the State Council and provincial people's governments. In addition, the legal liability for violating these regulations is clearly defined. (This is in Chapter 6 of the regulation.) 五是强化监督管理和法律责任。规定私募投资基金业务活动的监督管理应当贯彻党和国家路线方针政策、决策部署。明确国务院证券监督管理机构的监管职责及监管措施等。规定国务院证券监督管理机构会同国务院有关部门和省级人民政府建立私募投资基金监督管理信息共享、统计数据报送、风险处置协作机制。此外，对违反本条例的法律责任作了明确规定。
Page 3: Two pieces to note. First, there’s an article with comments from Colombia’s Ambassador to China, Sergio Cabrera Cárdenas. He says that “China has become a model for the world in climate change governance.” While attending the Eco Forum Global Guiyang 2023 in Guiyang, he said that “China's achievements in clean energy development, greenhouse gas emission control, and other areas make it an exemplary model for the world to learn from and exchange experiences with.”
The report informs that over 80 Chinese companies have invested and are operating in Colombia, and Cabrera praised their “sense of social responsibility”, “ecological preservation work” and “harmonious relationship with local communities.” 中国是哥伦比亚第二大贸易伙伴和亚洲最大直接投资来源国，有80多家中国公司在哥伦比亚投资兴业，积极参与哥基础设施、通信、新能源、数字经济等建设，树立了专业高效和具有高度社会责任感的良好形象。卡夫雷拉表示，中国企业在哥伦比亚经营过程中注重环境保护，与当地居民的合作非常融洽。
Also on the page is a report on the opening of the new China-Latin America and Caribbean, or China-LAC Technology Transfer Center. This opened in late June in Dongguan, Guangdong. Reports inform that the “LAC center will focus on in-depth cooperation among enterprises, research institutes and universities from China, Latin America and the Caribbean.” Ma Hongwei from the Dongguan University of Technology said that “For the next three years, we plan to focus on several fields, including new energy, next-generation information technology, disaster prevention and emergency response. Scientific research institutions and companies in China, especially in the Greater Bay Area, have rich experience in these areas."
Page 6: A report informing that in 2022, the non-fossil fuel energy generation in the country reached 3.1443 trillion kilowatt-hours, accounting for 36.2% of the total power generation, an increase of 1.7 percentage points compared to the previous year. The proportion of coal-fired power generation decreased by 1.6 percentage points compared to the previous year. Also in 2022, the standard coal consumption of power supply for coal-fired power plants with 6,000 kilowatts and above was 300.7 g/kwh, 1.0 g/kwh lower than the previous year. 显示，我国电源结构优化调整步伐加快，2022年全国非化石能源发电量31443亿千瓦时，占总发电量的36.2%，比上年提高1.7个百分点，煤电占总发电量比重比上年降低1.6个百分点。同时，电力能效指标持续向好，污染物排放控制水平进一步提升。2022年，全国6000千瓦及以上火电厂供电标准煤耗300.7克/千瓦时，比上年降低1.0克/千瓦时.
Page 15: Nothing particularly noteworthy on the international page. The lead story is critical of the plan to discharge Fukushima wastewater.
The piece says that Japan must “respond to the legitimate concerns of the international community, maintain a responsible attitude towards the marine environment and human life and health; it must stop pushing the plan of discharging nuclear polluted water into the sea, and properly dispose of nuclear polluted water in a scientific, safe, transparent and consultative manner.” 在国际原子能机构日前发布日本福岛核污染水处置综合评估报告后，日本国内及国际社会反对核污染水排海的声浪持续高涨。各方再次敦促日方本着对海洋环境和人类生命健康负责任的态度，回应国际社会正当关切，停止强推核污染水排海计划，切实以科学、安全、透明、协商的方式妥善处置核污染水.