SinoInsight 1
On July 31, the PRC’s Central Military Commission promoted 10 military and armed police officers to the rank of general. Xi Jinping presented the generals with the certificates of promotion at a ceremony at the CMC headquarters in Beijing.
The 10 new generals are:
- Li Shangfu, director of the CMC Equipment Development Department;
- Yuan Yubai, commander of the Southern Theater Command;
- Wu Shezhou, political commissar of the Western Theater Command;
- Fan Xiaojun, political commissar of the Northern Theater Command;
- Zhu Shengling, political commissar of the Central Theater Command;
- Shen Jinlong, commander of the PLA Navy;
- Qin Shengxiang, political commissar of the PLA Navy;
- Ding Laihang, commander of the PLA Air Force;
- Zheng He, president of the National Defense University;
- An Zhaoqing, political commissar of the People’s Armed Police
OUR TAKE
1. The recent military personnel reshuffles affirm our analysis in November 2017 about why Beijing downsized the CMC:
- Xi is buying time to reassess the loyalties of senior generals;
- Xi has a loyalty issue with the PLA’s current crop of senior generals that were promoted during Jiang Zemin’s era of dominance (1997-2012);
- Xi is grooming a new military leadership guard.
2. The 10 newly promoted generals were all born in the late 1950s and are now between the ages of 61 to 64. In examining their career trajectory, all of them were stuck at the rank of major general during the Jiang era when the Jiang faction controlled the CMC. During the Xi era, the 10 officers found themselves rapidly promoted to the rank of general.
Of the 10 officers, Shen Jinlong was promoted the quickest from major general to full general (6 years), but took the longest to reach the major general rank. Meanwhile, Ding Laihang and Li Shangfu took the longest to go from major general to general (over 10 years); Ding was promoted to major general as early as 2003. Of the remaining officers, three took over nine years to be promoted from major general to general, while the remaining four took over seven years to get promoted.
Most of the 10 officers received “exceptional promotions” (破格提拔) from lieutenant general to full general. Four of the 10 took over four years to get the promotion, while the remaining six were promoted to general in 2016, or only after three years of holding the rank of lieutenant general. Lieutenant generals are typically promoted to full general after serving four years or more at their rank; while there is technically no restriction for the promotion of CMC members to full general, the “four years or more” rule is still observed in most cases.
3. Typically, the directors of the CMC departments, service branch chiefs, and theater command heads hold the rank of general. However, many of the aforementioned senior officers were not at the general rank until very recently. In 2017, 11 members of the new CMC departments, service branch chiefs, and theater command heads were just promoted to lieutenant general in 2016, while two others were only promoted to lieutenant general in 2017.
There are currently five senior officers who have not been promoted to the general rank:
- PLA Rocket Force commander Zhou Yaning and Eastern Theater Command Political Commissar He Ping were promoted to major general in 2009 and to lieutenant general in 2016. Both officers seem to be lacking in career credentials, which would impede their eligibility for promotion. He Ping could also still be evaluated for loyalty issues because he previously served in the Chengdu Military Region and the 14th Group Army, which have links to the clan of Bo Xilai, a purged Jiang faction member, Party princeling, and Politburo member.
- Sheng Bin, the head of the National Defense Mobilization Department of the Central Military Commission, and Li Qiaoming, the commander of the Northern Theater Command, were both promoted to lieutenant general in 2017, and have another two years to go before hitting the standard four-year promotion “eligibility” mark.
- Liu Guozhi, director of the CMC’s Science and Technology Commission, was promoted to lieutenant general in 2013. However, age could be a factor hampering his promotion because he was born in the 1960s. There is a chance that Liu could receive his promotion next year when he turns 60.
The delayed promotions could be due to Xi Jinping being cautious about provoking an internal backlash in the military given the sweeping changes he made since 2015, including reorganizing the PLA and promoting a new leadership guard to top office. The CCP factional struggle is a key factor behind Xi’s military moves; to gain full authority and control over the military, Xi had to purge it of Jiang faction influence and senior officers.
SinoInsight 2
On July 26, Chinese property developer R&F Properties issued an internal document which called on all regional companies to “ensure that sales tasks are completed.” According to the document, the company will suspend land purchases in the second half of 2019 and focus on driving sales and collecting funds owed to the company. The document used bold letters in emphasizing that “the first priority is to achieve sales targets for projects and to maximize project revenue based on sales volume.
On July 29, the People’s Bank of China held a symposium in Beijing on the adjustment and optimization of credit structure of banking and financial institutions. Key points raised during the symposium include:
- Financial institutions must understand the necessity and urgency of credit structure adjustments from a “political perspective”;
- Financial institutions are strictly forbidden from taking out consumer loans and spending it on purchasing property;
- Financial institutions should control the flow of funds into real estate through channels such as bank financing and entrusted loans;
- Financial institutions should strengthen the supervision of property enterprises with high leverage and issue risk warnings;
- Financial institutions should control the debt scale and asset-liability ratio of property enterprises.
On July 30, a CCP Politburo meeting again raised the issue of “not using the property market as a means of stimulating the economy in the short-term.” On the same day, the local government in Liaoning’s Dalian City issued a “notice on price limits” which required property projects in a “designated area” to declare the pre-sale price of housing and instructed developers that housing prices can only be lowered (but not below 5 percent), not raised.
OUR TAKE
We have expressed pessimism about China’s property sector in recent editions of this newsletter (see here and here). The property bubble is at risk of bursting as a result of increased financial and banking problems in China.
China Banking and Insurance Regulatory Commission head Guo Shuqing gave the clearest warning of property risks at the 11th Lujiazui Forum in Shanghai on June 13. Guo warned that “history has proven that there is a price to pay for over-dependence on property.” He also noted that the leverage ratio of households in some cities has risen sharply and has reached an unsustainable level. Further, Guo noted that half of new social savings are invested in the property sector while some property companies are taking out far too much credit.
In other words, despite the CCP’s financial control measures, between one-third to half of the funds released by the central bank are flowing into real estate and inflating the property bubble. The central government faces a dilemma—on the one hand, it has to limit financial channels for property companies and homebuyers, but on the other hand, it cannot allow property prices to fall sharply and impact the financial system.
