SinoInsight 1
On Dec. 24, 2017, we heard from sources that China’s vice president Li Yuanchao was being held in shuanggui, a form of unofficial detention. Five days later, Li attended a Chinese People’s Political Consultative Conference tea party in Beijing.
Li’s public appearance doesn’t discount what we heard. Former security czar Zhou Yongkang and former military number two Xu Caihou also showed up in public despite rumors that they were in shuanggui. Later, both officials were formally purged.
OUR TAKE
1. Since the 19th Party Congress, Li Yuanchao has practically vanished from public view. Li even missed two high-key events where his presence was expected: 1) Li was not part of the welcoming party who met US President Donald Trump in Beijing; 2) Li was not on hand to meet Hong Kong chief executive Carrie Lam when she was in Beijing to deliver a work report to Xi. Li’s absence is peculiar because he is the deputy leader of the policy coordination group overseeing Hong Kong and Macau affairs.
2. In 2016, we heard from sources that a probe into Li Yuanchao came to a temporary halt after Hu Jintao intervened. Hu’s condition was that Li could not take the side of the Jiang faction against Xi.
3. We believe that Xi is trying to install Wang Qishan as the new vice president and task him with handling US-China relations.
SinoInsight 2
On Jan. 2, a high-level government internet financial risk group issued a document ordering local governments to clamp down on bitcoin mining using methods like reducing power usage to miners. In 2017, the central authorities had too instructed local governments to cut off power to bitcoin miners in a bid to force bitcoin businesses to wind up.
OUR TAKE
1. Decisions by the central authorities is an unavoidable political risk faced by all businesses in China.
2. The crackdown on bitcoin coincides with China’s central bank developing a state-backed digital currency. We believe that Beijing has plans to use digital currency, the Belt and Road Initiative, and the implementation of 5G networks to internationalize the renminbi. An internationalized RMB could challenge the US dollar’s position as the global reserve currency.
SinoInsight 3
AT&T recently announced plans to roll out a true 5G network in a dozen markets by the end of 2018. Meanwhile, China Telecom plans to launch a commercial trial 5G network at the beginning of June, while China Mobile and China Unicom are planning to roll out their trial 5G networks in early 2019 and launch their true 5G networks in 2020.
OUR TAKE
1. 5G networks represents a new arena of competition between China and the U.S. The Trump administration considers 5G a national security matter.
2. The CCP has included the promotion of 5G networks along the Belt and Road countries as part of its Belt and Road Initiative three-year plan (2018-2020) that was released in December 2017.
3. Trump’s National Security Strategy views China as America’s strategic “competitor.” We believe that the U.S. could check China’s Belt and Road expansion in the military and economic sphere in future.
