Neican: Three Child, Cyber attribution, Competitive purchase, MeToo

1. More children please

As expected when the Three Child Policy was announced, the Chinese Government has now followed up the ease of restriction with some carrots to incentivise child-rearing.

In the announcement, this pro-birth policy has been infused with a sense of nationalism, characterised as “a major issue concerning the development of the Chinese nation” 关系中华民族发展的大事情. Appealing to nationalism was also used when restricting births decades earlier.

The announcement listed four reasons for implementing the Three Child Policy. One of the reasons — economic — is also used in countries like Australia for supporting a high immigration level. The announcement explains that the Three Child Policy is:

conducive to maintaining China’s human resource endowment advantages and for responding to a world undergoing great transformations unseen in a century. Population is critical to social development as well as a key variable affecting sustainable economic development. 


Measures mentioned in this announcement included cancelling “social maintenance fee” 取消社会抚养费, which is the fine levied on people who have extra children, and de-linking schooling and employment from birth status. In the One Child era, having more children means a hefty fine, which can be onerous for an average worker, while rich people can just flout the One Child Policy. In addition, those who have extra children can also be fired from their jobs if they work in a state-owned enterprise.

The new measures aim to reduce the disadvantages of women having children. This includes “strictly” implementing maternity leave 严格落实产假 and providing training for women whose careers were disrupted due to childbirth. Currently, women of childbearing age face discrimination in recruitment. It remains to be seen whether concrete changes will end this practice.

On tax and housing, the Government announced that it will investigate and promote tax-deductibility of child care expenses, as well as give preferential treatment to families with children when allocating public housing. It is also asking local governments to investigate preferential policies in housing purchase for families with children 购买房屋的优惠政策. As real estate is important in family decision-making, with an expectation that parents save up to buy their sons (and now daughters too) a property, whether this preferential policy would have an effect on their decision to have children would be interesting.

Many people in China are reluctant to have more children despite the ease of restriction. Partly this is due to cultural shifts associated with the One Child Policy, but also the cost of having children has skyrocketed. The cost is related to the hyper-competitive nature of the labour market, and by extension, education.

We’ve mentioned last week that the Government is looking to ease pressure on students, which if successful, would alleviate the pressure and cost of having children. The newly introduced measures also aim to reduce the cost of education by promoting more even development in education to solve the problem of “school choice fever” “择校热”难题.

However, I’m not convinced that the focus on education would reduce pressure. For most people, education is a means to an end, which is employment. So unless the labour market becomes less competitive, I don’t think the pressure on education will ease.

2. Cyber

The US, the EU, NATO, along with Canada, the UK, Japan, Australia and NZ have jointly condemned China for its cyber activities, including the hacking of Microsoft Exchange servers.

In the past few years, while countries often hinted that China was behind some cyberattacks, they often did not formally attribute. One of the reasons is that while such attribution damages diplomatic relationships, it usually does not deter future attacks, so the cost/benefit balance was not worth it. The attacking country would always deny that they’re responsible, and concrete evidence for attribution can never be publicly released.

All countries with offensive cyber capabilities engage in cyber intrusion and espionage. Australian Signals Directorate’s motto is “Reveal their secrets. Protect our own.” IISS has assessed that the US is the only tier-one cyber power:

Dominance in cyberspace has been a strategic goal of the United States since the mid-1990s. It is the only country with a heavy global footprint in both civil and military uses of cyberspace, although it now perceives itself as seriously threatened by China and Russia in that domain.

But perhaps China’s hacking of Microsoft is different in nature to US cyber espionage activities. For example, it affects more than just foreign governments, but also many private organisations and individuals, and it is targeted at Microsoft rather than a government agency.

As we’re moving to a realm where commercial and economic interests are more closely intertwined with national interest, and indeed, national security, the divide between commercial and national interests in international norms has become more blurry. This means new norms might be necessary.

In the same month, Amnesty International revealed that Israeli company NSO Group has been helping numerous governments (including possibly India, Mexico, and Saudi Arabia) in their surveillance and monitoring efforts against politicians, journalists, and activists. It will be interesting to see international reactions around that.

3. Spending to compete

Australian taxpayers may end up funding the purchase of Digicel Pacific, a telecommunications company servicing the Pacific and owned by an Irish billionaire. The reason behind the taxpayer funding is all about China — concerns that China might buy it.

Joe Hockey, Australia’s former Treasurer and Ambassador to the US and now working as a consultant for Digicel, apparently said he has a “patriotic interest” to prevent China from buying Digicel’s assets. Just how much he is getting paid for his “patriotic interest” is anyone’s guess.

But according to AFR:

However, the governments are uncertain how much legitimate interest China has in acquiring Digicel and if its Irish billionaire owner Denis O’Brien could be exaggerating China’s interest to create bidding tension and maximise a sale price.

A former adviser to former Australian foreign affairs minister, Philip Citowicki, said there was “very little evidence” China Mobile was seriously interested in the carrier.

Concerns around China’s geopolitical ambitions have created some perverse incentives here. Private companies operating in the Pacific have an incentive to hype up the China angle in order to get a higher price for the assets they are selling. And it may not be easy for governments such as Australia to know how real or legitimate China’s interests are. In any case, should the Australian Government buy up assets simply because China is interested?

As the G7 is set to increase their infrastructure spending to compete with China, we should expect asset prices to go up, which could mean lower returns for buyers but higher profit for sellers. But we need to acknowledge the different incentives at play and be careful to disentangle private interests from national interests.

4. MeToo

Before the flood tragedies in Henan, the biggest trending topic on social media this week was sexual assault allegations around Kris Wu 吴亦凡. Wu is a Chinese Canadian singer and actor whose career is mostly based in South Korea and China.

The explosive allegations were posted by Du Meizhu 都美竹, also one of the alleged victims. The accusations involved three issues:

  1. Wu allegedly used his star power to entice girls by promising them a career in the industry;
  2. Some of the victims were allegedly underage; and
  3. Wu allegedly raped the victims.

Wu has denied all the allegations. But general public opinion appears to have turned against him. Sponsors have also dropped Wu while the investigation is ongoing.

I hope this will encourage more victims to come forward. However, Du is paying a personal price for going public. Like many women before her, going public with a sexual harassment allegation often result in reputational damage for the victim as well, sometimes even more so than for the perpetrator.

Some of the nationalist voices online have also used this opportunity to accuse Wu, a Chinese Canadian, of “using” Chinese women. As many sportspeople have found out, when you’re successful, many countries compete to claim you, but when you’re disgraced, you’re cast out as a foreigner.