SinoInsight 1
On March 12, mainland media reported that parents of students from a well-known school in Chengdu, the capital of Sichuan Province, accidentally found out that the school had been serving their children rotten and moldy food.
The next day, thousands of parents took to the streets in protest. The local government mobilized thousands of police to suppress the protest, and 12 parents were arrested. The arrested parents were made to sign “self-confessions” before they were released.
In recent days, parents of the students from the Chengdu school began circulating pictures of the spoiled food which the school was serving on the Chinese internet. Many netizens expressed shock and disgust at the photos and the incident. Ironically, the Chengdu school had a reputation in the area of having the “model school canteen in Sichuan,” a “canteen that’s the talk of the town,” and serving food that “tastes just like mom’s cooking.”
Mainland media noted that the Chengdu incident was not an isolated food safety issue, and may involve another 20 or 30 prominent schools and companies. The rotten food supplied by one company, Sichuan Deyu Logistics Management Service Co. Ltd., had reportedly been served to over 100,000 students.
OUR TAKE
1. Based on our longtime research into the operations of the CCP regime, we believe that the rotten school food incident in Chengdu definitely involves corruption by education officials. For instance, education officials could allow certain companies to monopolize food supply to schools in an area in exchange for bribes. Once the companies establish a monopoly, they begin to ignore food safety issues in pursuit of bigger profits.
2. China’s State Administration for Market Regulation has been sufficiently alarmed to order an investigation into the Chengdu incident. The incident has the potential to become another Changchun vaccine scandal, a serious public health safety issue in 2018.
3. Because the CCP is facing a severe political crisis, it will likely try to downplay and cover up the Chengdu school food safety incident. Low-ranking officials, however, are at high risk of arrest.
Still, the recent public health safety incidents in China have shocked the middle class, a sizeable, important, and potentially volatile segment of the population. The steady accumulation of serious social problems raises the probability of political Black Swan events being triggered in China.
SinoInsight 2
Data released by China’s National Bureau of Statistics on March 14 revealed weak figures for industrial, consumption, and fixed asset investments in February. Growth rates were generally in decline across the board, with industrial growth hitting a 17-year low.
Meanwhile, China’s foreign exchange balance decreased 330 million yuan ($49.084 million) from the previous month to 21.254124 trillion yuan, the seventh consecutive month of decline.
The poor economic data appeared to have an effect on China’s stock markets. The Shanghai Composite Index fell below the 3,000 points level, and 103 stocks in both A-shares markets hit limit down. Less than 15 percent of stocks in both markets saw gains.
OUR TAKE
1. China’s February economic data and the recent performance of the stock markets affirm our pessimistic view of economic trends in the regime. Given the present economic fundamentals, the CCP will find it very difficult to prop up the technical “bull market” for extended periods. Also, excessive speculation can trigger another stock market crash, and a crash would in turn harm the real economy and exacerbate China’s economic woes.
2. While Li Keqiang pledged tax cuts, fee cuts, and reduced government intervention in his government work report, we believe that those policies will not have a significant impact in rescuing the economy given the inherent contradictions of CCP authoritarian rule. On the contrary, the policies may end up causing more problems for companies.
