China Week in Review
Week of Sept. 10, 2018
China and the world:
- The United States and Europe pay greater attention to Taiwan’s plight.
- The FBI says that China is the agency’s top counterintelligence priority, and takes action to protect U.S. education and research institutions.
Sept. 11:
- A French delegation led by Michel Herbillon, member of the French National Assembly’s (FNA) France-Taiwan Parliamentary Friendship Group, met with Taiwan leader Tsai Ing-wen. The eight-member delegation also included FNA Foreign Affairs Committee vice-president Jacques Maire and others in the committee. During their week-long trip, the French delegation opened the France-Taiwan Science Festival to mark long-time scientific and research cooperation between the two countries.
Sept. 12:
- The European Parliament passed a resolution which called on the People’s Republic of China (PRC) “to refrain from further military provocations towards Taiwan and endangering peace and stability in the Taiwan Strait.”
Sept. 13:
- In an interview with CBS, FBI director Christopher Wray said: “If I look at our counterintelligence mission overall, China is our top priority in that space.”
- Bill Priestap, the assistant director of the FBI’s Counterintelligence Division, spoke to leaders of Texas medical, scientific research, and academic institutions about the “challenges of protecting educational and research opportunities while mitigating potential risks to U.S. national and economic security.”
Sept. 14: Republic of China’s foreign minister Jaushieh Joseph Wu calls on the United Nations to “stand up to external pressures and open its doors to Taiwan” in an article for The Diplomat magazine.
Sept. 15:
- Republican Congressman Chris Smith calls on the Trump administration to fully implement the Taiwan Travel Act and facilitate Taiwan’s participation in the international community in a letter to Secretary of State Mike Pompeo.
- Researchers at The University of Texas MD Anderson Cancer Center told The Epoch Times that four of 18 Center staff who were recently arrested, sacked, or made to resign were ethnic Chinese lecturers. At least one of the lecturers was suspected of having leaked classified material, and was part of the PRC’s Thousand Talents Program, which seeks to recruit top international experts for full employment in leading Chinese academic institutions. Previously, the FBI had gathered academic and medical officials from about 20 institutions, including MD Anderson Cancer Center, on Aug. 8 to warn them about security threats from foreign adversaries.
Sino-U.S. trade war:
- U.S. Secretary Steven Mnuchin proposes another round of trade talks with China.
- President Donald Trump looks set to go ahead with another round of tariffs this coming week.
- The PRC considers turning down new trade talks in the face of fresh tariffs.
Sept. 12: Mnuchin sent an invitation to Chinese vice premier Liu He to have trade discussions in Beijing or Washington later this month, according to The Wall Street Journal.
Sept. 13:
- Trump tweeted: “The Wall Street Journal has it wrong, we are under no pressure to make a deal with China, they are under pressure to make a deal with us. Our markets are surging, theirs are collapsing. We will soon be taking in Billions in Tariffs & making products at home. If we meet, we meet?”
Sept. 14:
- A China Daily editorial asserts: “But the Trump administration should not be mistaken that China will surrender to the US demands. It has enough fuel to drive its economy even if a trade war is prolonged.”
Sept. 15:
- According to Reuters, Trump could impose tariffs on $200 billion worth of Chinese goods as early as Sept. 17. Per the Journal, the tariff level would likely be at 10 percent instead of 25 percent.
Sept. 16:
- Facing imminent tariffs, the PRC is considering declining the Trump administration’s latest offer of trade talks, according to the Journal.
- Beijing holds a day-long meeting with top executives of prominent U.S. and China financial firms. Zhou Xiaochuan, former People’s Bank of China governor, and John Thornton, former president of Goldman Sachs, chaired the meeting. Meeting attendees are scheduled to meet Chinese vice president Wang Qishan on Sept. 17.
Politics:
- More officials in the domestic security and legal affairs apparatus are purged.
- The PRC continues to clamp down on religion.
- State media accuses Taiwan of “spying” on and “sabotaging” the PRC.
Sept. 13:
- Sixteen officials in Guanxian County’s (Shandong Province) public security bureau are investigated for gang-related activities, according to an official statement. Two of the 16 officials were formerly members of the bureau’s Party committee.
Sept. 14:
- Thirteen officials in Shanxi’s domestic security and legal affairs apparatus were investigated for “serious violations of discipline.” Nine of the 13 officials were prison staff.
- According to a document reportedly from the Central Military Commission and the PLA logistics department being circulated on Chinese social media, retired military officials are to be “thoroughly investigated” on the issue of participation in religious organizations. The document states that all retired military officials must fill up a form detailing their “religious situation.”
Sept. 15:
- Overseas Chinese language media report that the education bureau in Zhejiang Province requires all primary and secondary students and their parents to register their “religious situation” as part of an initiative to force students to give up their religious beliefs.
- State broadcaster CCTV airs the first in a series of “special reports” on Taiwan espionage. A day earlier, the authorities informed all work units and schools that the series was mandatory viewing.
Sept. 16:
- An Fengshan, a spokesman of the PRC’s Taiwan Affairs Office, claimed that Taiwan had been stepping up espionage activities against the mainland with the aim of “infiltration” and “sabotage,” and that Taiwan should cease such activities.
Economy:
- China’s fixed asset investment growth in the first eight months of 2018 hit a record low.
- An article by a Chinese investment banker about abandoning private enterprise in China goes viral before being deleted.
- A move to use a part of civil servant salaries to buy local government bonds is revealing of China’s local debt crisis.
Sept. 10:
- Jack Ma says that he is resigning as Alibaba chairman in a year. He picked Daniel Zhang, Alibaba’s current CEO, as his successor.
Sept. 11:
- Wu Xiaoping, a former China International Capital Corporation senior official, argues in a short post on Chinese social media that China should abandon the private sector in favor of a hybrid state-private sector. Wu’s post, which went viral before it was deleted, sparked much controversy and speculation.
Sept. 12:
- According to a circular by a local financial bureau which was leaked to Chinese social media, the financial bureau staff of an unnamed county will see 30 percent of their income automatically deducted to purchase local government bonds starting in October.
Sept. 14:
- Data from the PRC’s National Bureau of Statistics show that national fixed asset investment from January to August increased by 5.3 percent from the previous year, the slowest growth rate ever recorded.
Society:
- Another case of indiscriminate killing in China suggests that social tensions are becoming incredibly intense.
- More P2P victims and military veterans take to the streets in protest.
Sept. 10:
- Over 5,000 military veterans protested in front of the new veterans affairs ministry. Dozens of veterans from Hebei Province held a sit-in outside Zhongnanhai. Meanwhile, nearly 700 veterans from Sichuan assembled in Chengdu for a rights protest, and got into violent skirmishes with the local police.
Sept. 12:
- A 54-year-old man drove an SUV into a crowded square in Hengyang, Hunan Province before getting out and attacking the crowd with a knife and a spade. At least 11 people were killed and 44 others were injured. The man said he wanted to “take revenge on society.”
- About two to three hundred P2P victims protested in front of the China Banking and Insurance Regulatory Commission building in Beijing. The police later arrested many of the protesters.
SinoInsight 1
On Sept. 10, Alibaba’s Jack Ma announced his retirement plans.
The following day, Wu Xiaoping, a former China International Capital Corporation senior official, called for China to phase out private enterprise and the creation of a state-private mixed ownership sector in a post on Chinese social media. Wu’s post went viral before it was deleted, and on Sept. 12, mainland Chinese media started criticizing Wu Xiaoping’s “ridiculous” idea.
OUR TAKE
1. Big Chinese technology companies like Alibaba have control over vast amounts of information and capital, and have a certain sway over the public discourse. In a sense, Jack Ma has become a sort of private sector “godfather.” Ma and Alibaba’s social and economic clout are a threat to the Chinese Communist Party (CCP), which strives for total control over society to safeguard its regime.
In recent years, the CCP has started to come to terms with its problems with private and public sector enterprises. State-owned enterprises (SOEs) are infamous for being inefficient and lacking in innovation. Meanwhile, very successful private companies are still somewhat out of the CCP’s control, and pose a legitimate danger to the regime’s authority. The CCP’s solution is to implement so-called “mixed-ownership reform,” or weakening private enterprises and the private sector to provide life-support to the SOEs. Private companies who are uncooperative are at risk of being investigated. Jack Ma is fully aware of this, and his high-profile retirement seems to be an attempt at self-preservation.
Indeed, Ma had once quipped in an interview that history has shown that “things don’t end well for mainland entrepreneurs,” and “history won’t change for today.” He added that a “lucky few” escape such a fate, but there “aren’t many” of them.
2. We believe that there is a very low probability of the CCP rolling back the private sector. First, the move does not stack with the reforms espoused by Xi Jinping and Li Keqiang in the past five-plus years. Second, while the scale of very successful private companies threatens the CCP, they have also helped the regime resolve some of its unemployment woes.
3. To fully consolidate power in his second term, Xi Jinping has to stamp his authority in the regime. In the process of stamping authority, however, Xi has created the widespread impression that he is trying to be a dictator like Mao Zedong.
This impression has inadvertently caused Chinese officials, scholars, and businessmen to become very self-conscious about displaying their loyalty to the CCP. Hence, JD.com boss Liu Qiangdong and other entrepreneurs were recently photographed making a “pilgrimage” to the CCP revolutionary base in Jinggang Mountains in guerrilla uniforms. Jack Ma also performed a Cultural Revolution-era model opera in guerrilla garb at a Lunar New Year event for entrepreneurs this year.
When viewed in this context, Wu Xiaoping’s post on creating a “state-private mixed ownership sector” seems to be a case of “better left than right” (ning zuo wu you) signaling for the sake of self-preservation. Regardless of Wu’s intent, there are signs which suggest that Xi Jinping’s political rivals are using Wu’s post to undermine Xi’s agenda.
