Guo Shuqing: A whirlwind set to shake up China’s banks

A significant reshuffle of key financial and economic officials?

Whirlwind Guo (郭旋风 Guō Xuànfēng) is a nickname given to the official put in charge of China’s chaotic stock markets in 2011. He only lasted 17 months in that role, but during that brief stint, The New York Times reports (paywall) that “he issued 80 major directives, trying to stop chronic insider trading, curb market manipulation and remove barriers for foreign investors.” He was apparently sidelined in 2013, becoming the governor of Shandong Province, but now he’s back with a mandate to fix China’s troubled banking sector. His real name is Guo Shuqing 郭树清, and he was named chairman of the China Banking Regulatory Commission. The Times says his appointment “offers a sign that China is taking a financial overhaul seriously.” Another shake-up in the financial sector is the resignation of the Ding Xuedong 丁学东, head of the sovereign wealth fund China Investment Corporation (CIC), reported by Caixin today.

State media also announced new names for two top economic policy making roles: He Lifeng 何立峰 has been named chairman of the National Development and Reform Commission, while Zhong Shan 钟山 will become head of the Ministry of Commerce. He and Zhong were both the number two officials in their organizations and have succeeded their bosses, who had reached the mandatory retirement age of 65, which the Times sees as a “commitment to the status quo,” in contrast to Guo’s appointment. However, the South China Morning Post notes that both He and Zhong have previously worked under president Xi Jinping, which may give them the authority to undertake unpopular but necessary reforms.

Note: The image above shows Guo Shuqing, then chairman of China Construction Bank (CCB), and Hu Xiaolan, then deputy governor of the People’s Bank of China, toasting CCB’s IPO in 2005.

What ails China’s high-speed rail operator?

China’s high-speed railway system is justifiably famous, but the state-owned company that operates it is beset by problems, according to Caixin. China Railway Corporation (CRC) runs the world’s biggest rail network, which includes conventional as well as high-speed trains. The article says that “despite its attempts to behave like a company,” the state-owned entity still behaves like an old-fashioned state-owned enterprise, with a “bloated payroll of 2 million employees,” an inability to innovate, and debt amounting to 4.3 trillion yuan ($625 billion). Other issues that CRC is facing include falling freight traffic (probably connected to the country’s slowing economy) and failure to find new sources of revenue or raise private sector investment. The prestigious high-speed project itself is a significant drag: Revenues from the now 22,000-kilometer (13,670-mile) network do not even cover the interest of the loans used to construct it.

Drone footage of Great Wall covered in snow

If you have a few minutes to spare, watch this short film of drone footage of a section of the Great Wall covered in snow, shot recently by Beijing resident Tom Van Dillen.

—Jeremy Goldkorn, Editor in Chief

Today on The China Project

Is Chinese nationalism really the threat it’s made out to be? In his monthly The China Project column, Kaiser Kuo reflects on Chinese nationalism and its interpretation.

This week on The China Project

• Will Xi’an become a megalopolis at the heart of the New Silk Road?
• People’s Daily: A “currency cold war” is brewing among developed countries
• A Spring Festival celebration in Qingdao
• Rhino horn and organized crime, from Africa to China and Vietnam

This week’s news roundups are:

• Feb 20: A beheading at a noodle shop
• Feb 21: 5 million yuan rewards for informants in Xinjiang
• Feb 22: Chinese lab to study Ebola and other dangerous pathogens
• Feb 23: Is the U.S. ignoring China’s nuclear threat?

This issue of the The China Project newsletter was produced by Sky Canaves, Lucas Niewenhuis, Jia Guo, and Jiayun Feng. More China stories worth your time are curated below, with the most important ones at the top of each section.

BUSINESS AND TECHNOLOGY:

• China is developing its own digital currency / Bloomberg
  China’s central bank, the People’s Bank of China (PBOC), has begun testing a cryptocurrency similar to bitcoin that has been in development since 2014. Bloomberg sees the project partly as a reaction to the popularity of bitcoin and digital payment services such as Alipay and WeChat, which pose “a challenge to the PBOC’s status as the central bank of both the digital and physical realms.” At the same time, regulators are increasingly determined to exert control in various ways over both digital payments and bitcoin trading. At least when it comes to cryptocurrencies, some believe the state’s influence has limits: In December last year, one entrepreneur told The China Project that he believes “bitcoin has outgrown the stage where a single government can profoundly affect its development.”
• In fintech, China shows the way / The Economist (paywall)
  China has several thousand peer-to-peer (P2P) platforms that allow internet users to lend to companies and people, near-ubiquitous use of mobile payment systems, and a growing array of digital financial services for investment. Last year, Chinese companies took four of the top five positions on a ranking of the “world’s most innovative fintech firms.” So it’s no surprise that the Economist says China is the “world’s leader in fintech,” or financial technology. The breakneck speed of development is a constant challenge for China’s regulators — today, for example, Caixin reported that P2P loan platforms are “now required to appoint commercial banks as fund custodians.”

• Victoria’s Secret models are heading for Shanghai as brand opens first lingerie store in China / SCMP
• China considers faster IPO approval to lure large tech deals – sources / Reuters
• Mega-mansions in this L.A. suburb used to sell to Chinese buyers in days. Now they’re sitting empty for months / LA Times
• China says no intention of using currency devaluation to its advantage / Reuters
• Trump contradicts Mnuchin over China’s currency manipulator label / SCMP

POLITICS AND CURRENT AFFAIRS:

• Travel card provides convenience for local commuters / China Daily
  “Beijing-Tianjin-Hebei integration” (京津冀一体化 jīng jīn jì yītǐhuà), or the collective development of China’s two largest northeastern cities together with the province that surrounds them, has been a goal of the central government for years. In 2016, the People’s Daily put “Jing-Jin-Ji” — as the planned supercity area of 130 million people is called in Chinese — on a year-end list of President Xi Jinping’s favorite phrases. However, with the exception of some road and railway construction, the plans have largely been rhetoric since being announced. Today, the China Daily notes that “a new travel card will enable passengers to use all metro systems throughout Beijing, Tianjin and Hebei Province by the end of this year.” This may become the first concrete step that allows residents of all three zones to feel part of a larger geo-economic zone. Also today, Xinhua published a report (in Chinese) that highlights President Xi’s emphasis of Jing-Jin-Ji’s important place in China’s most recent five-year development plan. See here for a 2015 New York Times story and video (paywalled) by Ian Johnson describing the ambitious plans.
• China and North Korea reveal sudden, and deep, cracks in their friendship / NYT (paywall)
  The New York Times reports that the long-held “facade” of friendly China-North Korea relations is cracking, to the point that some Chinese analysts have said that recent weeks have marked the relationship’s “lowest point since the founding of the North as a separate country after World War II.” The separate events of China ceasing coal imports from the rogue nation and the assassination of North Korean leader Kim Jong-un’s half brother, who was assumed to be under the protection of China, were already significant strains on relations between the two countries. Divisions were laid clear, however, when North Korea’s state media directed “some of the most damning insults in its playbook” toward China, such as that the country is “dancing to the tune of the U.S.” Soon after the unusual breach of media protocol between the two countries, the further revelation that North Korean assassins may have used a rare, outlawed chemical weapon in their mission has likely further dimmed Chinese leaders’ view of North Korea.

• China’s North Korea problem – further analysis on what the assassination of Kim Jong-nam means for China / The New Yorker
• Former Guangdong vice governor stands trial for graft / China Daily
• Chinese factory in Myanmar ransacked by hundreds of angry workers / SCMP
• The Philippines pivots to China / The Economist (paywall)
• China’s premier urges poultry markets to shut as bird flu fears grow / Reuters

SOCIETY AND CULTURE:

• Nobel laureate courts controversy over decision to come back to China / Global Times
  World-renowned physicist and Nobel laureate Yang Zhenning 杨振宁, together with Turing Award winner and computer scientist Yao Qizhi  姚期智, has given up his American citizenship and joined the Chinese Academy of Sciences (CAS). Yang, 94, went to the U.S. for his Ph.D. In 1957, he received the Nobel Prize in Physics with Li Zhengdao 李政道, becoming the first Nobel laureates of Chinese origin. Seven years later, Yang was granted American citizenship. Chinese netizens are divided on Yang’s return — see this Weibo comment thread (in Chinese). Some applaud Yang’s decision and view it as a sign of China’s growing appeal to talents. Others insinuate that his real motive is to dodge high inheritance taxes in the U.S. Yang has previously been the subject of a controversy: In 2004, at the age of 82, he married a 28-year-old master’s student.

• ‘Grey wall of China’: The town at the frontline of a looming aging crisis / The Guardian
• No baby boom for China after end of one-child policy / Financial Times (paywall)
• Two men stand trial in Beijing for human trafficking – accused of “smuggling in dozens of women from the Philippines and Indonesia” to work as domestic helpers / Caixin
• Divorced Chinese women stare death in the face to regain control of their lives – “Participants lie in shallow pits to contemplate that their lives are precious after all” / SCMP
• China believes domestic tourism can promote ‘ethnic unity’ / The Economist (paywall)
• That viral video of tigers chasing a drone is from a slaughter farm, folks / Vice Motherboard