The recent Ministry of Industry and Information Technology (MIIT) report on settlement of NEV subsidies (2019-2020) for each automotive manufacturer reaffirms the trend of subsidy reductions. The MIIT plans to further cut the NEV subsidies by another 30% year-on-year in 2022 and fully terminate the subsidy scheme after 2022. Reacting to the subsidy cuts, both foreign and domestic automotive brands are adjusting their pricing strategy, but use different approaches.
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China’s industrial policy as well as the COVID-19 pandemic have driven up demand for cloud services in China. In 2017, Beijing proposed that one million companies should “go cloud”. In 2020, the Chinese government spent close to 5 billion CNY on cloud services. Only local companies can own and operate cloud infrastructure in the country, and services provided by foreign brands are increasingly marginalized in light of increasing geopolitical tensions.
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China's EV charging infrastructure is already leading globally in terms of public charging station number and density. But given the rapid expansion of China’s EV market, China’s economic planners decided to further speed up the build-up of charging infrastructure to support the fast-growing stock of EVs and maintain China’s global edge in the EV sector. Besides establishing more charging stations, China also aims to push the alternative option of battery swapping, possibly creating some competitive advantages for domestic players.
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Faced with a challenging demographic trajectory and a fast-aging population, reforming China’s pension system is of crucial importance for China’s government. In parallel to improving the coverage and level of the public pension system in times of tightening fiscal budgets, China also aims to develop an active and sizeable private pension market. The government attempts to catalyze this through tax exemption and policy support to encourage financial product innovation. A functioning three-pillar pension mix is sought to boost consumption in the long term and also offers opportunities for foreign companies to participate in the “sliver-hair” economy.
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Following the sanctioning of Russia by exclusion from SWIFT, heated discussions emerged in China about accelerating the build-up of an alternative international payment system based on RMB. Actually, China has made significant progress in ramping up its Cross-border Interbank Payment System (CIPS) since 2015. However, the prospects of CIPS largely depend on the pace of China’s capital account opening and China’s investment attractiveness for foreign institutions in the long run.
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As Russia’s assault on Ukraine is intensifying and relationships between the EU and Russia deteriorating quickly, the world is watching closely how China is positioning itself on the issue. The Chinese response is shaped by China’s strategic calculus to strengthen its geopolitical alignment with Russia in opposition to the US, while not jeopardizing the paramount trade relations with the EU, which are necessary for China’s continued economic growth. Although Beijing is trying to balance both interests, the tacit support for Moscow China has shown so far will likely have significant costs in its relationship with the EU.
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After announcing the goal of reaching the carbon peak by 2030 last year, China’s government is now elaborating its action plan to reach this target. Improving energy efficiency in energy-intensive sectors is an important part of the decarbonization roadmap in parallel with the increased use of renewable energy. Although the implementation process will remain ambiguous with economic interests taking priority at times, the energy efficiency upgrading guidance clearly signals China’s ambitions and provides foreign companies opportunities to establish greener supply chains in China.
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City clusters are China’s new administrative units to break local barriers and promote regional integration. Market integration and transportation inter-connectivity will be the two major policy focuses for the next five years, with land and labor reform measures to be first piloted in major city clusters. MNCs operating in China need to review synergies across their locations in China from the lens of the city cluster policies. They also need to pay close attention to the policy dynamics and coordinated regulatory enforcement within this “expanded” administrative boundary.
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While China is gradually reducing market access barriers in many sectors, it simultaneously increases import restrictions in areas of high strategic importance. Med-Tech is a prominent example: To reduce the high dependency on imports, China’s government emphasizes “import substitution” in the high-end med-tech market through directives such as “buy China” and “indigenous innovation” policies. Aligned with China’s overarching industrial strategy, digitalization is an essential part of innovation policy in med-tech, illustrated by the rapid development of online hospitals and remote diagnosis in China.
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The “14th Five-Year-Plan for National Informatization”, issued in December 2021 by China's Central Commission for Cybersecurity and Informatization, is an ambitious blueprint for China’s digital policy in the coming years. From its focus on securing “core technologies” to its emphasis on “serving the real economy”, the plan reflects general trends in Chinese policy. As the Chinese government is in the midst of a major overhaul of its digital tech sector, this plan is a crucial key to understanding current and future developments.
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