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THIS WEEK:

Post-plenum economic policy surge on the horizon, natural disasters remain a political headache, China moves to consolidate its environmental laws, United States upgrades military command in Japan, and ping-pong is the latest arena for cross-strait relations.

1. Post-Plenum Economic Policy Surge on the Horizon

What Happened: The aftermath of the Third Plenum was met with a distinct market yawn, and investors, expecting a turbocharged economic boost, were underwhelmed by Beijing’s cautious medium- and long-term goals.

Increasing Liquidity: In a bid to counter sluggish economic activity, the People’s Bank of China slashed the one-year medium-term lending facility rate by a surprising 20 basis points, from 2.5% to 2.3%, signaling clear intent to support the economy with increased liquidity. Analysts viewed this move as an urgent response to slowing economic growth, evidenced by GDP growth decelerating to 4.7% year-on-year in Q2 and a quarter-on-quarter slowdown to 0.7%.

Palpable Urgency: The July Politburo meeting conveyed a strong sense of urgency, with surprising emphasis on weak domestic demand and consumption. Acknowledging increasing external pressure, the Politburo stressed the need for countercyclical and active fiscal measures to stimulate consumption. For the first time, it also addressed the issue of “involutionary vicious competition” as a symptom of industrial overcapacity. Analysts are betting on enhanced stimulus for both consumption and the ailing property market, further fiscal initiatives, more forceful support for real estate trade-in programs, and rate cuts on existing housing loans.

Why It Matters: With growth targets hanging in the balance, the market’s patience is wearing thin. Prompt and effective policy actions are essential to restoring confidence and preventing prolonged economic difficulties. The detailed policy measures following the Politburo meeting will be pivotal in shaping market expectations and investor confidence.

By Lizzi C. Lee, Fellow on Chinese Economy, Center for China Analysis

Learn More: Lizzi gave her economic diagnosis as one of four experts on a CCA webinar that shared reactions to outcomes of the Third Plenum and Xi Jinping’s plan for the country.

2. Natural Disasters Remain a Political Headache

What Happened: On July 25, General Secretary Xi Jinping chaired a Politburo Standing Committee (PSC) meeting to discuss ongoing flood control and disaster relief amid heavy flooding in many parts of China, especially the Yangtze and Yellow River basins.

Disastrous Period: Xi declared “major initial success” in handling this year’s peak flood and typhoon season, usually from July to August. Since the meeting, Typhoon Gaemi has claimed at least 22 lives in eastern Hunan Province, while northerly Liaoning Province suffered heavy rain and serious flooding, submerging at least 60,000 acres of crops and displacing over 50,000 people. 

Questionable Track Record: Last summer, heavy flooding in the Beijing-Tianjin-Hebei area left over 100 people dead or missing. Netizens were incensed by reports that Hebei officials diverted floodwaters away from the Xiong’an New Area, a virtually empty urban development championed by Xi, and toward several rural villages. Many people also remember the 2008 Sichuan earthquake, which killed nearly 90,000 people but drew a slow response from Beijing.

Why It Matters: The Party rarely publicizes PSC meetings, but 23 of 38 since Xi took office have focused on public safety issues. Xi established the Ministry of Emergency Management in 2018 to enhance Beijing’s coordination in responding to such issues. Responses to natural disasters are a key test of Beijing’s state capacity and the Communist Party’s legitimacy.

By Neil Thomas, Fellow on Chinese Politics, Center for China Analysis, and Lobsang Tsering, Senior Research Associate, Center for China Analysis

Learn More: CCA Fellow Taylah Bland explained why “China Will Accelerate Climate Resilience as a Security Priority” in China 2024: What to Watch.

3. China Moves to Consolidate Its Environmental Laws

What Happened: The Chinese Communist Party’s Third Plenum decision confirmed that China will consolidate its myriad environmental laws into a unified Environmental Code, with a draft slated for internal review by the end of 2024.

China’s Second Code: This marks the first time a so-called Environmental Code has been proposed in a central document, following its inclusion in the National People’s Congress’s five-year work plan last September and in the annual work plan this May. If enacted, the compilation of laws would become China’s second legal code, following the Civil Code in 2020.

Thirty-Three to One: According to scholars, China has at least 33 laws directly or indirectly related to ecological and environmental protection, accounting for around 10% of its total number of laws. The proposed code would consolidate these laws into a single document with five key sections: general principles, pollution prevention, ecological protection, green and low-carbon development, and legal liability. The code is expected to be finalized in 2026.

Why It Matters: The Environmental Code will rectify overlapping or conflicting clauses in China’s extensive patchwork of environmental laws, which have undergone a period of rapid revision and strengthening in recent years. Yet adjusting or amending certain laws may become more difficult. The new code will focus on the issues core to China’s environmental governance, leaving newer or more challenging areas — including some related to climate change — to be addressed separately.

By Kate Logan, Associate Director of Climate, Asia Society Policy Institute, and Fellow, Center for China Analysis

Learn More: For additional background on China’s climate change ambition and governance, see Climate Change in China’s Governance: Agenda, Agents, and International Cooperation by CCA Senior Fellow Guoguang Wu. 

4. United States Upgrades Military Command in Japan

What Happened: On Sunday, the United States announced a major revamp of its military command in Japan, labeling China as the “greatest strategic challenge” facing the region.

China in the Crosshairs: Following “2+2” security talks in Tokyo between U.S. Secretary of State Antony Blinken and Secretary of Defense Lloyd Austin and their Japanese counterparts, the United States announced it will upgrade U.S. Forces Japan to a joint force headquarters with expanded missions and operational responsibilities. Austin called the upgrade “the most significant change to U.S. Forces Japan since its creation and one of the strongest improvements in our military ties with Japan in 70 years.” The joint statement raised “serious concerns” with China’s foreign and security policies in the region, saying Beijing “seeks to reshape the international order for its own benefit at the expense of others.”

China’s Response: Chinese media was highly critical of the move, saying it reflected Washington’s intent to use “Japan as an outpost in the Asia-Pacific region to boost its nuclear deterrence to contain countries such as China.” China’s foreign and defense ministries have yet to comment. 

Why It Matters: The changes to the U.S. command will facilitate deeper interoperability and cooperation on joint bilateral operations with Japan. However, they will also exacerbate tensions with China, which views U.S. alliances in the Asia-Pacific as “containing” its rise. 

By Lyle Morris, Senior Fellow for Foreign Policy and National Security, Center for China Analysis

Learn More: Watch a recent Asia Society event on the Japan Maritime Self-Defense Force’s approach to growing security concerns.

5. Ping-Pong: The Latest Arena for Cross-Strait Relations

What Happened: On July 28 at the Paris 2024 Olympics, China’s Yingsha Sun and Chuqin Wang defeated Taiwan’s Szu-Yu Chen and Yun-Ju Lin in a fierce, hour-long mixed-doubles table tennis quarterfinal.

Bridge and Battlefield: Table tennis remains a historically significant activity for cross-strait exchanges, with many players being friends and many fans supporting players from either side. However, pride can quickly turn into unease when facing the risk of losing, especially for Taiwan. Some Taiwanese media have questioned Yun-Ju Lin’s Taiwanese identity due to his decision to “hire mainland Chinese coaches for training.”

Beyond the Arena: Taiwan recently held military exercises and air raid drills to prepare for potential attacks from mainland China. During these drills, Taiwanese authorities released a trailer for a TV show titled Zero Day, which depicts a Chinese invasion. China has increased its military activities around Taiwan. On July 27, U.S. Secretary of State Antony Blinken emphasized the importance of maintaining peace and stability across the Taiwan Strait after meeting with his Chinese counterpart, Wang Yi, in Laos.

Why It Matters: China emerged victorious. This match, like many other Olympic events, reflects the intersection of sports, nationalism, and politics, highlighting the rare and symbolic nature of such encounters and their broader geopolitical implications.

By Yi Qin, Research Associate, Center for China Analysis

Learn More: Explore CCA’s initiative, Taiwan's Past and Future: Complexity and Contestation, to learn more about cross-strait relations.