CCP’s attempt to fix formalism could worsen the problem; China’s July trade data fails to dispel worries over economic outlook

  1   CCP’s attempt to fix formalism could worsen the problem

On Aug. 6, the General Office of the CCP Central Committee and the General Office of the State Council issued the regulations on rectifying formalism and reducing burdens on grassroots governments (整治形式主義為基層減負若干規定; henceforth referred to as the Regulations), along with a notice requiring all regions and departments to conscientiously implement them.

The Regulations seek to more thoroughly rectify the problems of formalism and bureaucratism, improve the long-term mechanism for reducing burdens on grassroots governments, guide Party members and cadres to establish the so-called “correct view of political achievements,” and unleash vitality at the grassroots level. The Regulations call for its measures to be strictly implemented, for coordinated burden reduction and empowerment, and for strengthened supervision and accountability.

Divided into seven main sections, the Regulations contain the following key points:

1. Effectively streamline documents

• Have strict control over the number of documents issued
  • The number of issued documents must only decrease, not increase.
  • Coordinating bodies are prohibited from issuing directive documents to lower levels.
• Improve document quality
  • Limit word count (comprehensive documents should not exceed 5,000 words; specialized documents should not exceed 4,000 words).
  • Supporting documents must not simply be copies of higher-level documents.
• Strengthen assessment and review
  • Conduct consistency reviews for burden-reduction and legal compliance.

2. Strictly streamline meetings

• Have strict control over the number of meetings
  • Comprehensive work meetings should be held no more than once a year,
  • Avoid layered meetings (i.e. repeats of the same meeting held at higher levels at the lower levels).
  • Coordinate annual meetings to reduce participation by grassroots leaders.
• Control scale and specifications
  • Limit the scope and level of participants to avoid “accompanying attendance” at multiple levels (i.e. lower level officials who are not required to attend higher-level meetings should not be made to attend them).
  • Central and provincial meetings must not require participation from lower-level units.
• Improve quality and efficiency
  • Shorten meetings and speeches (main reports should not exceed one hour);
  • Group discussions should not exceed 1.5 days, and other meetings should be held within half a day.
  • Teleconferences or online video meetings should be the preferred method.

3. Coordinate and standardize inspections, supervision, and assessments

• Have strict planning and filing management:
  • Each central department may initiate no more than one item per year, merging similar work.
  • Coordinate internal and system-wide inspections.
  • Report unplanned matters on a case-by-case basis.
  • Do not conduct inspections under the guise of research.
  • Limit the frequency of on-site inspections.
• Improve methods
  • Do not require meetings with primary leaders or frequent form-filling.
  • Allow sufficient time for feedback and rectification.
  • Implement the “three distinctions” to avoid generalized accountability.
  • Reduce indicators and avoid adding excessive layers of requirements.
  • Simplify evaluations.
• Strictly control the total volume of grassroots inspections, supervision, and assessments
  • Coordinate to prevent duplication and clustering.
  • Conduct merged evaluations at the county level and below, with other units not subject to separate evaluations.

4. Standardize the secondment of cadres

• Do not second cadres to units at the county level or below.
• Strictly control the secondment of cadres to units at the city level or above
  • Secondments shall not exceed six months, with extensions not exceeding an additional six months.

5. Standardize the management of government mobile internet applications

• Clean up and consolidate grassroots-facing apps:
  • Central departments are limited to one app, not extending to the county level.
  • Avoid arbitrary data requests and repeated data submissions (“report at most once”).
  • City and county-level apps should gradually integrate with provincial platforms.
• Strictly manage development
  • Require project approval and inclusion in unified oversight.
  • Promote interconnectivity and avoid redundant development.
  • Prohibit mandatory features such as check-ins, points systems, or online duration tracking
• Prevent functional distortions
  • Do not mandate promotion or evaluate usage rates.
  • Do not require uploading photos, videos, or other materials unless necessary.

6. Standardize and clarify grassroots powers and responsibilities

• Establish and improve responsibility lists
  • Provincial authorities should guide the standardization and consolidation of township (sub-district) responsibility lists.
  • Village (neighborhood) committees should not be treated as administrative responsibility entities.
• Improve the access system for matters outside the list
  • No responsibilities may be delegated or indirectly transferred without provincial approval.
  • Public services may be purchased through market mechanisms.
• Standardize work mechanisms, signage, and certification requirements
  • Streamline village (community) work mechanisms.
  • Unify the number and naming of signboards.
  • Eliminate certification requirements without legal basis.
• Define petition work responsibilities in accordance with laws and regulations
  • Do not evaluate based on petition volume.
  • Do not rank or publicize matters already reviewed.
  • Focus on conflict resolution.

7. Standardize creation of demonstration and compliance-certification activities

• Streamline types and quantity
  • Reduce activities, and no new activities may be added without approval.
  • City, county, and lower levels shall not conduct such activities.
• Emphasize practical outcomes in demonstration activities
  • Avoid “campaign-style” approaches.
  • No debt financing.
  • No fees or disguised fees.
• Do not conduct compliance activities at the grassroots level

  What are formalism and bureaucratism?

Formalism and bureaucratism are two concepts commonly used in CCP political and administrative contexts to criticize issues of work style.

Formalism refers to officials and cadres superficially keeping up forms, procedures, and outward appearances in work, while neglecting substantive content and practical outcomes. Its root cause is often a distorted view of political performance, where officials prioritize superficial achievements for career advancement and personal gain.

Bureaucratism refers to a work style where officials are detached from the masses and reality, behave in a superior manner, shirk responsibilities, and exhibit low efficiency. Its root cause lies in unchecked power and officials’ reliance on a rigidly hierarchical system, leading to inefficient administration and encouraging corruption.

Formalism and bureaucratism are closely intertwined and mutually reinforcing. Formalism often stems from coping with pressure from superiors or leveraging bureaucratism, frequently resulting in resource waste and overburdening grassroots levels. Bureaucratism is rooted in official-centric thinking, often leading to decision-making errors, public dissatisfaction, and corruption.

  Our take

1. The Regulations appear to be part of Xi Jinping’s effort in his third term to improve the CCP’s governing efficiency amid a string of governance failures in recent years (notably “zero-COVID”) and mounting crises for the regime.

Party Central has launched at least eight major Party-wide tasks aimed at improving discipline, with the underlying goal of bolstering the officialdom’s loyalty to Xi and increasing governing efficiency, since the 20th Party Congress:

1. March 2023: Beijing rolled out a work plan for “promoting investigation and research across the Party,” which requires all CCP members to conduct in-depth grassroots research to “understand situations and solve problems.”
2. April 2023: Beijing launched a “thematic education” campaign requiring leading cadres at the county level and above to “study and implement Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era.”
3. Whole of 2023: Beijing required Party organizations at all levels to “study, publicize, and implement the spirit of the 20th Party Congress.” This entailed the holding of educational campaigns, and thematic seminars.
4. April to July 2024: Beijing mandated Party discipline education to “consolidate thematic education outcomes” and “deepen discipline learning.”
5. March 2025: Beijing launched a study and education campaign to promote the central Eight-Point Regulations (introduced in Xi’s first term). The campaign called for Party-wide education to “institutionalize style construction.”
6. March 2025: The Central Leading Group for Party-building held a meeting to discuss the central Eight-Point Regulations campaign. The meeting required leading cadres to fulfil their responsibilities to the campaign and transmit pressure downwards to lower levels of government.
7. April 2025: Beijing published a book on the “achievements and experiences in implementing the central Eight-Point Regulations since the 18th Party Congress” and required CCP cadres and members to study the book thoroughly as part of the education campaign.
8. June 2025: The 21st study session of the Politburo called for establishing long-term mechanisms for implementing the central Eight-Point Regulations and addressing the “four winds” (formalism, bureaucratism, hedonism, extravagance). The meeting also called on the whole Party to strictly enforce supervision and discipline, and to fulfill responsibilities for governing and administering the Party.

Ironically, the aforementioned Party-wide tasks and the latest Regulations to combat formalism are more likely to reduce rather than improve governing efficiency. Take the case of grassroots officials which the Regulations target. Fulfilling the requirements of the Regulations and other tasks would see grassroots leaders and officials conduct studies, supervisory work, and evaluations, as well as create and run specialized oversight and dialogue mechanisms. They are also involved in meetings to convey directives, maintenance of records (i.e. study notes, problem lists, etc.), regular political education (e.g. thematic democratic life meetings, Party spirit analyses, etc.), and performance assessments. All in all, such tasks are likely to occupy at least 20 percent to 25 percent of grassroots cadres’ work time, conservatively estimated (at least 39 hours per month, or between nine to 10 hours per week). The work and non-work time spent by grassroots cadres on the Regulations and other Party-wide tasks eat into the limited time they have to perform their normal duties, impacting governing efficiency.

It is possible that the Xi leadership is deliberately engaging officials and cadres in exhaustive Party-wide tasks to keep them thoroughly occupied and without spare time to plot against Xi and the regime. The Party-wide tasks also create a political environment where it becomes very difficult for cadres and officials to openly express dissatisfaction with Xi and must constantly demonstrate their loyalty. While this environment certainly can help Xi to further consolidate and maintain his grip on power, it also comes at the cost of reduced governing efficiency and increased formalism and bureaucratism.

2. The ills of “formalism” and “bureaucratism” are intrinsic to the CCP’s authoritarian system and have never been resolved since the PRC’s inception. Historically, formalism and bureaucratism led to serious policy failures, including famines during the Great Leap Forward (grassroots workers falsifying data to meet quotas, etc.) and four successive CCP leaderships continuing with Deng Xiaoping’s “one-child policy” even when it was clear that the mandate was exacerbating severe demographic problems for China.

The Xi leadership sought to address formalism and bureaucratism as early as 2016 by bringing up the concept of “fallacy of composition” (合成謬誤), and finally tackling the issue head-on late in Xi’s second term by explicitly criticizing pernicious behavior among the officialdom. But these troubles were never eradicated and created massive problems for the Xi leadership during the implementation of “zero-COVID” lockdowns. The pervasiveness of formalism and bureaucratism in the regime creates various socio-economic problems (formalism and bureaucratism saw a recent austerity campaign severely impact the catering industry), traps the Xi leadership in an information bubble of “good news” and increasingly untethers Beijing from reality, and lays the groundwork for Xi Jinping to make more flawed decisions and deployments.

3. Compliance with the Regulations could result in even more formalism and bureaucratism as officials create specialized mechanisms, carry out inspections, generate more paperwork, and hold even more meetings. Alternatively, officials could go to the other extreme and compromise on work quality and implementation through producing very few and sparsely written documents, holding overly abbreviated meetings, and having the bare minimum of inspections and supervision.

Either way, Xi Jinping’s attempt to micromanage matters and work within the CCP system to fix the regime’s problems is likely to backfire.

  2   China’s July trade data fails to dispel worries over economic outlook

  Official PRC data for July and first 7 months of 2025

On Aug. 8, the PRC General Administration of Customs released trade data for July 2025 and the first seven months of the year.

July 2025

• Total trade volume was up 5.9 percent year-on-year to $545.32 billion (the growth rate was up 5.6 percent compared with official PRC data for 2024).
• Exports were up 7.2 percent year-on-year to $321.78 billion (up 7.1 percent compared with official PRC data for 2024), faster than June’s 5.8 percent growth and a new monthly high for the year, exceeding expectations.
• Imports were up 4.1 percent year-on-year to $223.54 billion (up 3.5 percent compared with official PRC data for 2024).
• China’s trade surplus was up 16.1 percent year-on-year to $98.24 billion.
  • Trade surplus with the EU was up 22.2 percent year-on-year to $25.46 billion.
  • Trade surplus with the U.S. was down 23 percent to $23.74 billion.
  • Trade surplus with ASEAN was up 71.7 percent year-on-year to $23.22 billion.

January to July 2025

• Total trade volume was down 2.4 percent year-on-year to $3.57721 trillion (no change in growth rate compared with official PRC data for 2024).
• Exports were up 6.1 percent year-on-year to $2.13036 trillion (up 6.2 percent compared with official PRC data for 2024).
• Imports were down 2.7 percent year-on-year to $1.44685 trillion (down 2.8 percent compared with official PRC data for 2024).
• China’s trade surplus was up 32 percent year-on-year to $683.51 billion.
  • Trade surplus with the EU was up 21.4 percent year-on-year to $168.23 billion.
  • Trade surplus with the U.S. was down 13.2 percent year-on-year to $165.52 billion.
  • Trade surplus with ASEAN was up 40.7 percent year-on-year to $157.08 billion.

China’s exports to major trading partners in July

• EU: Up 9.2 percent.
• U.S.: Down 21.7 percent.
• ASEAN: Up 16.6 percent.
• Russia: Down 9.1 percent.
• Latin America: Up 7.7 percent.

China’s exports to major trading partners during the January-July period

• EU: Up 7.3 percent.
• U.S.: Down 12.4 percent.
• ASEAN: Up 13.6 percent.
• Russia: Down 8.8 percent.
• Latin America: Up 7.4 percent.

  US transshipment tariffs

The Trump administration imposed reciprocal tariffs on dozens of countries on Aug. 1, 2025. The administration also announced that goods considered by U.S. Customs to be transshipped will be subjected to an additional 40 percent tariff.

The current base U.S. tariff rate on Chinese goods is 30 percent.

  Our take

1. China’s foreign trade in July 2025 outperformed expectations, driven by a sharp increase in exports and a notable recovery in imports. There are several reasons for this:

i) The PRC benefited from a “rush to export” effect. Firms accelerated shipments to circumvent the expiration of the first 90-day U.S.-China tariff truce following bilateral talks in Switzerland. This was particularly evident in electronics and machinery.

ii) Improved demand ahead of year-end holidays in Western markets boosted China’s imports by 4.1 percent. This marked two consecutive months of positive growth and narrowed the cumulative year-to-date decline.

iii) The PRC likely sustained U.S. exports despite the tariffs via third-country transshipments. This is evidenced by a 21.7 percent drop in direct Chinese exports to the U.S., but a 16.6 percent and 9.2 percent rise in Chinese exports to ASEAN countries and the EU respectively. Meanwhile, U.S. exports to China fell from 15.2 percent of total exports in 2024 to 11.1 percent, while ASEAN’s share rose from 15.6 percent to 17 percent and the EU’s from 15.2 percent to 15.5 percent. In absolute terms, a $13.68 billion increase in exports to ASEAN and the EU offset a $7.76 billion decline in Chinese exports to the United States.

Another sign of increased Chinese transshipments is the 7.7 percent rise in China’s exports to Latin America (8.3 percent of total exports).

2. There are several noteworthy data points in the PRC’s official trade data for July and the first seven months of the year:

i) Trade between China and Russia has noticeably declined since March 2025. Bilateral trade is down 8.8 percent and imports have declined 7.3 percent during the January t0 July period, likely due to the threat of U.S. sanctions and tariffs. Russia is also partly responsible for the drop in trade as Moscow moves to prevent Chinese goods from dominating the market (Russia imposed a 55.65 percent tariff on Chinese furniture components in late 2024) and crack down on alleged quality issues with Chinese imports (Russia revoked certification permits for selected models of four Chinese truck brands on July 30, 2025; Chinese trucks make up 27.6 percent of market share in Russia).

ii) Despite the PRC’s rare earth export ban to the U.S. in April 2025 in retaliation for tariffs, China’s rare earth export volumes rose 13.3 percent in the first seven months of 2025 even as revenue from rare earths fell 24.2 percent. This suggests that transshipment and a rare earth price war have been taking place, both of which undermine the ban’s effectiveness.

iii) China’s grain imports fell 21.6 percent in volume and 23.3 percent in value ($9.8 billion), while grain exports surged 36.6 percent in volume and 24.9 percent in value ($195 million). The persistence of natural disasters affecting China’s grain-producing areas suggests that the grain figures reflect population decline rather than agricultural surplus.

iv) Coal and lignite imports fell 13 percent in volume and 34.6 percent in value, while iron ore imports dropped 2.3 percent in volume and 17.9 percent in value. These trends may constrain future export sustainability.

3. China’s economy shows no clear signs of recovery despite the strong official export figures for July and the first seven months of the year.

The PRC may find it difficult to sustain its trade numbers. Uncertainty in U.S.-China trade talks and a 40 percent U.S. tariff on transshipped goods could slow exports in the second half of 2025. Exports rose 6.1 percent in the first seven months of 2025, outperforming imports, which fell 2.7 percent. However, total trade edged up only 2.4 percent, underscoring how weak import demand weighed on overall performance.

Meanwhile, official and private indices confirm a July contraction in manufacturing activity. Industrial profits fell 1.8 percent year-on-year in H1 2025, with a 4.3 percent drop in June alone. Declining manufacturing activity entails weaker trade figures in the months ahead.

The PRC’s impending trade problems could not have come at a worse time. Beijing’s regulations mandating social insurance contributions came into effect on Sept. 1, 2025, a move which would likely raise enterprise costs and reduce household incomes — further deepening deflation. This development would make China even more reliant on exports for growth. Yet surging exports mean that the PRC faces more accusations of dumping overcapacity, heightening trade frictions and the risks of sanctions. Overcapacity would also intensify domestic price competition and worsen China’s economic problems.