SINOWEEKLYPLUS

Would Kim accept Democrats denuclearization demands; Fan Bingbing tax evasion probe and China’s political situation

SinoInsight 1
On June 6, the Central Commission for Discipline Inspection (CCDI) published a list of 50 fugitives. Named in the list are five Shanghai officials, as well as Yan Bo, the general manager of China Unicom’s international section.

OUR TAKE
1. Shanghai is the base of the Jiang Zemin faction, and local Shanghai officials have long been loyal to the faction. Meanwhile, China Unicom was controlled by Jiang Mianheng, the elder son of Jiang Zemin. The names on the CCDI fugitive list suggest that the Xi Jinping administration is not letting up on purging the Jiang faction.

2. Since the 19th Party Congress, nine of 11 members of the Shanghai Municipal Party Committee have been replaced, including the Party secretary, mayor, CCDI chief, united front work chief, and propaganda chief. Their replacements do not appear to be members of the Shanghai Gang/Jiang faction.

3. If ex-China Unicom executive Yan Bo is repatriated, Jiang Mianheng would be at greater risk of being investigated.

SinoInsight 2
U.S. Commerce Secretary Wilbur Ross said on June 7 that a deal has been reached with ZTE on reversing a 7-year business ban.

ZTE would have to pay a $1 billion fine, put $400 million in escrow, change its board and management within 30 days, and retain a new U.S.-selected compliance team. Any future violations by ZTE within a 10-year period would see the reactivation of the 7-year ban on buying U.S. components and services.

In other words, ZTE has been put on “probation”—just as we first predicted first on May 4 after the conclusion of the first round of Sino-U.S. trade talks. On June 1, China’s State Council removed Zhu Guangyao from the post of vice finance minister, and appointed Liao Min as his replacement.

OUR TAKE
How did we know that the U.S. had made good progress on trade talks with China and would “spare” ZTE in exchange for Beijing’s concessions a month in advance? That’s because we understand that virtually all issues in China can be traced back to political issues, and political issues are determined by factional struggle in the Chinese Communist Party (CCP).

The various CCP factions and camps would do anything to gain an edge in the life-and-death factional struggles. And the back-and-forth in elite CCP politics would be reflected in China’s geopolitics, foreign affairs, and most recently, the Sino-U.S. trade talks.

Our research into elite CCP politics allows us to accurately forecast the direction of Sino-U.S. issues, the situation with North Korea, and assess political risk in China.

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