China Week in Review
Week of Sept. 17, 2018
China and the world
- The third Moon-Kim summit and the signing of the Pyongyang Declaration bring North Korea closer to the orbit of South Korea and the United States.
- U.S. policy and attitudes toward the People’s Republic of China (PRC) continue to harden, an approach that U.S. allies and partner nations are adopting.
Sept. 16: Taiwan leader Tsai Ing-wen calls on Taiwanese to be wary of fake news and avoid spreading it. She noted that some of the fake news comes from the PRC and the misinformation is intended to divide Taiwan society.
Sept. 18:
- South Korean leader Moon Jae-in meets North Korean leader Kim Jong Un for a three-day summit. During the summit, their third this year, Moon and Kim signed the Pyongyang Declaration. South Korea’s Blue House characterized the Declaration as a proclamation to end the Korean War. (See below our analysis below.)
- The European Union published its ideas for reforming the World Trade Organization, including suggestions on how to tackle unfair trading practices and excessive government subsidies. The EU’s proposal appears to be aimed at discouraging the U.S. from leaving the WTO over the body’s inability to penalize the PRC’s misbehavior.
Sept. 19:
- The German government is “working very intensely” on measures to counter a surge in Chinese ownership of German technology firms, according to a Reuters report. One of the measures is the creation of a billion euro fund to allow the government to step in if no private investors can be found to replace potential Chinese bidders.
- U.S. Secretary of State Mike Pompeo said in an interview with Fox News: “But longer term, if you’re looking at the things that threaten American livelihoods, that put America truly at risk of its continued economic growth, China presents the far greater threat to the United States.”
Sept. 20:
- The U.S. government sanctioned the PRC military’s equipment development department and its director over the purchase of Russia military equipment in violation of a 2017 ruling. (See below for analysis.)
- A Singapore parliamentary Select Committee reported that state-sponsored disinformation operations have to be dealt with to safeguard the country’s sovereignty and safety, and recommended the creation of a national strategy to counter such operations.
- In an interview with Fox News, President Donald Trump said: “It’s time to take a stand on China. We have no choice. It’s been a long time. They’re hurting us.”
- When introducing a new national cyber strategy that allows for offensive cyber operations against malign cyber actors without consultation, U.S. National Security Advisor John Bolton noted that countries like China, Russia, Iran, and North Korea need to be countered. “We are going to do a lot of things offensively. Our adversaries need to know that,” he said.
Sept. 22:
- Huang Xueping, deputy head of the Central Military Commission’s office for international military cooperation, summoned the acting military attaché at the US Embassy to protest the Sept. 20 sanctions, according to state media. Huang also said that the PRC would immediately recall PRC navy commander Shen Jinlong, who was participating in the 23rd International Seapower Symposium in the U.S. Also, the PRC will postpone an upcoming meeting (Sept. 25 to Sept. 27) between the military joint staff departments of the U.S. and the PRC.
Sino-U.S. trade war
- The U.S. imposes $200 billion worth of tariffs on Chinese imports, resulting in a rejection of proposed Sino-U.S. trade talks.
- The Chinese Communist Party (CCP) propaganda clamps down on discussions about the Sino-U.S. trade war on the mainland.
- Western mainstream media outlets run articles blaming Trump for launching a new “economic Cold War” against China. These articles, however, are only mildly critical or silent about China’s trade abuses and other malpractice.
Sept. 17:
- The PRC sends think-tank experts to Washington and Chicago from Sept. 17 to Sept. 19 to have dialogues with American think-tank experts about resolving the Sino-U.S. trade war, according to Xinhua.
- President Trump announced 10 percent tariffs on $200 billion worth of Chinese goods, and threatened to tariff approximately $267 billion of additional imports should China take retaliatory action.
Sept. 18:
- State Council vice premier Liu He convenes a meeting to discuss government response to the U.S. tariffs, according to Bloomberg.
- The PRC announces 5 to 10 percent tariffs on $60 billion worth of U.S. goods. Mainland media avoids discussing the escalation in Sino-U.S. trade tensions.
Sept. 19:
- Less than 30 minutes after Chinese vice premier Li Keqiang delivered a keynote speech at the World Economic Forum, two U.S. Republican congressmen held an ad hoc press conference where they called on China to stop “stealing and cheating” and take action to stop the trade war. “Talk is cheap. Actions are what matter,” said Darrell Issa, a congressman from California. Issa described Li’s comments on protecting intellectual property rights and treating foreign companies equally as “encouraging but not new.”
Sept. 22:
- The PRC pulled out of trade talks with the U.S. due to the latest escalation in the trade conflict, according to The Wall Street Journal.
Sept. 23:
- In an interview with Fox News, Secretary Pompeo said: “The trade war by China against the United States has been going on for years. Here’s what’s different in this administration: to the extent one wants to call this a trade war, we are determined to win it.”
Politics
- The CCP strengthens its control over the legal sector.
- The Vatican and Beijing signed a secret agreement that critics are describing as a sellout to the CCP regime.
- Nur Bekri, head of China’s energy administration and former Xinjiang number two, is purged.
Sept. 17:
- Speaking at the national legal industry Party-building meeting, justice minister Fu Zhenghua said that the Party would provide “comprehensive leadership” to the legal industry. Fu noted that the setting up of Party cells and other organizations to facilitate “Party-building” would be finished by the end of the year.
Sept. 21:
- The Central Commission for Discipline Inspection announced the investigation of top official Nur Bekri. (See below for analysis.)
Sept. 22:
- The Vatican and the PRC sign a confidential agreement that gives the Holy See a key role in appointing bishops in China. Cardinal Joseph Zen, the former archbishop of Hong Kong who is outspoken on PRC abuses, said that the Vatican is “giving the flock into the mouths of the wolves. It’s an incredible betrayal.” Recently, the PRC has stepped up the destruction of crosses and churches, as well as the persecution of Christians in China.
Economy
- The escalation of the Sino-U.S. trade war and talk of implementing a mixed private-public enterprise in China have frightened investors. Several senior CCP officials have since spoken up to appease investors.
- The People’s Bank of China (PBoC) boosts liquidity, and prepares to issue bills in Hong Kong.
- The Ministry of Housing and Urban-Rural Development consults several provinces on canceling the property pre-sale system, causing some panic in the property markets.
Sept. 16:
- At the China Economists 50 Forum’s symposium to mark the 40th year of reform and opening up, concepts like the survival of the private sector and the advancement of the public sector over the private sector are hot topics. Liu He and PBoC president Yi Gang make an appearance.
Sept. 17:
- Liu He attends the 2018 World Artificial Intelligence Conference in Shanghai, and says in a speech that the PRC government supports private sector development.
- The PBoC lends 265 billion yuan via one-year medium-term lending facility (MLF) to financial institutions. Cumulative net investment reached 595 billion yuan in 6 days since the restart of reverse repurchase operations on Sept. 12.
Sept. 18:
- Li Keqiang instructs local governments to keep social security collection policy “stable.” Pursuing historical arrears is strictly prohibited, he added. (Read our analyst on China’s taxation and social security collection changes.)
Sept. 19:
- Li Keqiang makes promises of reform in his keynote address at the World Economic Forum in Tianjin.
Sept. 20:
- The PBoC signs a memorandum of understanding with the Hong Kong Monetary Authority to issue central bank notes in Hong Kong. (We believe that this move is a way for the CCP to curb the depreciation of the offshore renminbi exchange rate and temporarily avoid the pressure of domestic interest rate hikes.)
Sept. 21:
- The Guangdong Real Estate Association issued an emergency notice to its vice presidents regarding the Ministry of Housing and Urban-Rural Development’s consultations with Guangdong, Sichuan, Jiangsu, Henan, Liaoning, and other provinces about scrapping the property pre-sale system. Meanwhile, a chief analyst at Centaline Property Agency estimated that ending property pre-sales would lead to the failure of more than half of the real estate companies in China.
Society
Sept. 18:
- The U.S. Embassy in China posted President Trump’s tariff announcement on its official Weibo account. The post attracted an outpouring of support and sparked heated debate among Chinese netizens. Some netizens called on America to “do as you promise” on the tariffs, while others thanked the U.S. for “taking down the sickle and hammer.” One comment thanked Trump for “respecting the sentiment of the Chinese people,” and urged him to “persevere with the trade war until the end.”
SinoInsight 1
On Sept. 20, the U.S. government imposed sanctions on the Central Military Commission’s Equipment Development Department and its director Li Shangfu for purchasing Russian military equipment in 2017 and 2018. The penalties were applied under the Countering America’s Adversaries Through Sanctions Act, which was passed in 2017 to punish Russia for its involvement in the Syrian civil war and aggression in Ukraine.
The sanctions block Li and his department from applying for export licenses and participating in the U.S. financial system. Li’s U.S. property or assets, if he has any, would be frozen, and he is banned for receiving a U.S. visa.
OUR TAKE
The U.S. may find that sanctioning individual Chinese officials for wrongdoing to be an effective move. Many CCP officials have immediate family members and assets in America. According to a 2012 Hong Kong media report, about 90 percent of the 17th Central Committee had relatives who immigrated abroad, mostly to the U.S., Canada, and Europe. The CCP’s policy on the U.S. would inevitably shift over time as individual officials strive for self-preservation.
If Sino-U.S. competition becomes particularly intense, it cannot be ruled out that the U.S. will not use various means to divulge controversial information about the family members of senior CCP officials living in America. Exposés of this sort could raise doubts about the Chinese regime to Chinese communities on the mainland and abroad.
SinoInsight 2
Nur Bekri, a deputy head of China’s National Development and Reform Commission and the National Energy Administration director, was placed under investigation for severe discipline violations, the CCP’s anti-corruption agency announced on Sept. 20.
Nur Bekri’s arrest garnered attention abroad because it occurred against the backdrop of severe suppression of Uyghur Muslims in Xinjiang Province. Before heading the energy administration in 2014, Bekri, an ethnic Uyghur, was governor of Xinjiang. He is also one of very few senior officials of Uyghur ethnicity in the Chinese regime.
OUR TAKE
Based on our research, Nur Bekri had a career that marks him as a Jiang Zemin faction affiliate. His recent purge appears to be more in line with a Wang Qishan-era tactic of “luring the enemy away from his base” to facilitate investigations rather than an extension of the persecution campaign in Xinjiang.
Bekri spent 31 years in the Xinjiang local government and made his mark during the Jiang era. He appeared to have found favor with Wang Lequan, the former Xinjiang Party secretary and Jiang faction associate who advocated the use of brutal suppression tactics in the province. Nur Bekri has long taken the CCP’s side on the issue of suppressing Uyghurs, and once served as deputy head of Xinjiang’s Political and Legal Affairs Commission from Dec. 2000 to Jan. 2005. Eventually, Bekri was promoted to the number two official in Xinjiang.
We have observed a pattern during Xi Jinping’s tenure of purged senior officials being transferred to another position and staying there for a period of time before meeting their downfall. Shifting away officials who have spent many years building up networks allows anti-corruption investigators to better dig up dirt and overcome potential political roadblocks. In the case of Nur Bekri, he was transferred to Beijing to head the energy administration and serve on the reform commission in Dec. 2014 before being purged four years later. A similar fate could be awaiting Zhang Chunxian, the former Xinjiang head and Jiang faction member who was transferred to Beijing in 2016.
