SinoInsight 1
In promoting environmental protection and trying to stay “politically correct” after the 19th Party Congress in October, various provincial administrations are cutting coal use and switching to natural gas. The coal-to-gas conversion, however, has created problems in Northern China; the mass eviction of Beijing’s “low-end population” residents in December is a case in point.
Now according to a Chinese scholar’s estimate, China will have to import an additional 24 million tons of natural gas in 2019 to meet Beijing’s three-year production plan (2019-2021). There is no official information available on how China would import, store, and distribute the required gas.
The scholar also estimates that over 80 percent of China’s natural gas supply would have to be reserved for residential use in northern China, where the winters are particularly harsh. If the gas is indeed distributed according to the scholar’s projection, then electrical companies and certain industries (ceramics and fertilizer) are set to be adversely affected.
SinoInsight 2
Liu Shiyu, the director of China Securities Regulatory Commission (CSRC), carried out a work inspection of the CSRC’s Inspection Bureau on Jan. 2. He instructed regulators to systematically investigate the capital markets, and “focus on major and important cases; comprehensively implement the work requirements for regulating financial chaos; and unerringly crackdown on individuals and organizations that behave recklessly, evade oversight, and are a bad influence.”
OUR TAKE
1. After the 19th Congress, we assessed that the Xi administration would prioritize rooting out corruption in the financial sector.
2. Of the three “tough battles” that the Politburo identified at the December economic work conference—“major risks, poverty, pollution”—curbing financial risks comes first.
3. In 2017, the CSRC decided on 224 administrative punishments and collected a record-high total of 7.48 billion yuan ($1.14 billion) in fines. The total fines handed out was about 75 percent higher than in 2016.
Liu Shiyu became CSRC director after the 2015 China stock market crash. Since his appointment in February 2016, Liu has regulated the financial markets with an iron fist. We believe that Liu and other regulators would exert greater efforts in 2018 to rectify China’s financial sector.