SinoInsight 1
On Sept. 15, the CCP General Office issued an “Opinion on Strengthening United Front Work in the Private Economy in the New Era” (關於加強新時代民營經濟統戰工作的意見) to government departments and local governments with instructions to put the “Opinion” into practice.
On Sept. 16, CCP Politburo Standing Committee member Wang Yang chaired the National Private Economy United Front Work Conference and passed on Xi Jinping’s “important instructions” to “unite private entrepreneurs around the Party.”
OUR TAKE
1. The “Opinion” is the CCP’s latest effort to tighten its control over society, particularly the capitalist class. However, the fact that Beijing feels a need to introduce the “Opinion” indicates its recognition of unprecedented and increasingly severe economic, social, and ideological threats to the regime.
We look at five key messages in the “Opinion” and what they reveal about the CCP’s crisis strategy.
a) The “Opinion” is blunt about the strategic importance of strengthening united front work in the private economy, describing it as an “important method” for the CCP to “lead the private economy.” The “Opinion” also describes private entrepreneurs as “one of us” (自己人) and an important force that the CCP must “unite and rely on” (團結和依靠).
Analysis
The phrase “one of us” in Chinese has roughly the same connotation as “we’re family,” and is normally used to signal group acceptance. Xi Jinping previously used the phrase “one of us” during a symposium in Beijing on Nov. 1, 2018 to assuage private entrepreneurs concerned about their position in the regime; after the Sino-U.S. trade war officially kicked off in June 2018, CCP propaganda outlets appeared to signal that the regime was looking to abolish “private ownership” and establish a so-called “public-private partnership.” By choosing to refer to private entrepreneurs as “one of us” in the “Opinion,” the CCP is again looking to reassure China’s capitalist class that they and their interests are safe despite the regime’s fundamentalist shift under Xi.
Anyone with a modicum of insight into Party culture and communist ideology, however, will sense insincerity in the CCP’s coddling gestures toward the capitalists. While the Party appears to be looking to appease the entrepreneurial class, it does so in preparation to tighten its control over the private sector and drain private firms of their finances to defuse economic and regime crises.
b) The “Opinion” calls for the CCP to “educate and guide” private entrepreneurs to “obey and follow the Party.” Private entrepreneurs must be “encouraged and supported with one hand, and educated and guided with the other” to “tread the path of socialism with Chinese characteristics under the leadership of the Party.”
Analysis
The CCP coddles one moment and carries out naked intimidation the next. Private entrepreneurs may be “one of us” to the Party, but they must also be obedient and not challenge its authority to thrive in the regime. Otherwise, private entrepreneurs will simply be “educated and guided,” or subjected to Xinjiang-style “re-education” (brainwashing and persecution).
c) The “education and guidance” of private entrepreneurs involves the “arming of [their] brains” with “Xi Jinping Thought,” with the goal of producing “politically clear people” who “maintain a high degree of consistency” with the CCP Central Committee.
The “Opinion” also calls for the strengthening of Party building work in private enterprises and tasks United Front Work Departments at all levels with carrying out ideological work in the private sector. The goal is to strengthen private entrepreneurs’ political, ideological, and emotional identification with the CCP and socialism with Chinese characteristics, as well as guide them in cultivating “love for the country” and to “repay the country through industry.”
Analysis
This is communist redistribution repackaged for the twenty-first century. The CCP plans to use ideological indoctrination to instill “patriotism” in private entrepreneurs and get them to accept the communist ideology. And when the Party eventually comes calling, private entrepreneurs are expected to do their “patriotic duty” and “repay” the regime by handing over their assets and funds.
For instance, the CCP could vigorously promote so-called “mixed-ownership reform” and “allow” private enterprises to invest in state-owned enterprises that are on the verge of bankruptcy. The private enterprises may hold shares but will likely not be granted management rights, and will be “tasked” with serving as a sort of financial “life support” for failing SOEs. The CCP could also take up stakes in large private companies like Alibaba and Tencent and force them to practice “profit-sharing” or even direct those companies to engage in business and investment strategies that benefit the CCP.
d) The “Opinion” targets “all private enterprises and entrepreneurs” for united front work and identifies certain groups as key targets:
- Principal investors and actual controllers.
- Major shareholders.
- Individual major shareholders.
- Principal officers-in-charge of social organization in industrial and commercial fields.
- Principal officers of relevant social service agencies.
- Principal partners of private intermediaries.
- Hong Kong and Macau businessmen with investments on the mainland.
- Prominent sole proprietors.
The “Opinion” also calls for the establishment of a “private entrepreneur and talent” database to “standardize and regularize” the “education and guidance” system. Select private entrepreneurs will be groomed to become Party members.
Analysis
The CCP is planning to recruit wealthy, influential, and prominent capitalists, including those in Hong Kong and Macau, as Party members. Once these private entrepreneurs are inducted into the CCP, they will be answerable to the Party and become easier to control. Also, recruited capitalists will have a stake in defending the regime and will be more inclined to give up their assets and funds for the cause, at least in theory.
e) The “Opinion” proposes pilot schemes to allow private entrepreneurs recruited by the Party to serve as chairmen of provincial-level branches of the All-China Federation of Industry and Commerce. “Outstanding” entrepreneurs will also be allowed to serve as “special inspectors and special monitors” of the National People’s Congress and Chinese People’s Political Consultative Conference at all levels.
Analysis
The various official positions above are the equivalent of full bureau-level (正廳級) offices (or the rank of Party Secretaries in prefecture-level cities or divisions). In other words, Party Central is hoping to ease the worries of private entrepreneurs and keep them in line by rewarding the obedient and faithful with medium-ranking, but sinecure political positions. The CCP is also hoping that private entrepreneurs will be less suspicious and dissatisfied with the regime when they have the prospect of being appointed to an official position.
Given the pernicious nature of the CCP regime, entrepreneurs may later find that they have to make quiet but generous financial “donations” to the Party or local government before they are given any official position. Some individuals may find the price of the “donations” to be worth it if it means securing an office and increased personal security, given mounting political and business risks in China. More savvy individuals with the means might simply opt to “vote with their feet” and leave the mainland altogether before they fall victim to communist “wealth redistribution” and “re-education.”
What the CCP is doing with handing out official posts is uncannily similar to the phenomenon of governments in dynastic China selling official titles, often those with no real power, for cash to wealthy gentry and businessmen. Historically, this phenomenon emerges when the imperial government is in financial trouble near the end of a dynasty. We believe that the CCP’s “Opinion” is an indicator that history is in the process of repeating itself.
2. The CCP’s all-out united front effort against private entrepreneurs could be paving the way for the Party to introduce “schizophrenic” economic policies at the Fifth Plenum that is currently scheduled for October. On the one hand, Beijing’s next five-year plan could feature policies to facilitate “greater opening up” of China’s financial sector as it scrambles to attract more capital and investments. On the other hand, the CCP could introduce policies aimed at tightening up its control over society on the whole and move towards a partial closing-up of China (半閉關鎖國).
SinoInsight 2
In late July, the CCP Politburo announced that the 19th Central Committee will hold its fifth plenary session in October. October, however, is just around the corner, but the CCP still has not fixed a date for the plenum—an unusual development because dates are usually unveiled months in advance.
Meanwhile, Xi Jinping’s problems continue to compound this week with Europe toughening its stance towards the PRC, further strengthening of U.S.-Taiwan ties, and CCP factional struggle pressures:
Sept. 14
- In a China-EU video summit, European leaders told Xi to open up China’s markets and end human rights abuses in Xinjiang and Hong Kong. At a press conference after the summit, European Council President Charles Michel said “Europe is a player, not a playing field.” European Commission President Ursula von der Leyen said, “We are really serious about having access to the Chinese market and tearing down the barriers … Overall, cooperation with China must be based on certain principles – reciprocity, fair competition. We are different social systems, but while we are committed to multilateralism, it must be rules-based.” Meanwhile, CCP propaganda outlets largely glossed over the EU’s criticisms and framed the meeting as an improvement of PRC-EU bilateral ties.
Sept. 15
- Chinese virologist Li-meng Yan appeared on Fox News’s “Tucker Carlson Tonight,” one of the highest-rated primetime cable news shows in the U.S., to talk about a research paper on the Wuhan coronavirus that she recently published. Yan claimed that the CCP intentionally created and released SARS-CoV-2 to “spread to the world to make such damage.”
Sept. 16
- In a State of the Union address, European Commission President Ursula von der Leyen said “China is a negotiating partner, an economic competitor and a systemic rival” and noted that there is still “hard work to do on fair market access for European companies, reciprocity and overcapacity.” She also announced a proposal for a European Magnitsky Act to deal with human rights issues, “be it on Hong Kong or with the Uyghurs.”
- According to a Reuters report, the U.S. “plans to sell as many as seven major weapons systems, including mines, cruise missiles and drones to Taiwan.” Taiwan is also looking to purchase the Lockheed Martin-made High Mobility Artillery Rocket System and “sophisticated anti-tank missiles.”
- New Japanese prime minister Yoshihide Suga picked Nobuo Kishi, who has strong ties with Taiwan, as his defense minister.
Sept. 17
- Kelly Craft, U.S. Ambassador to the United Nations, met with James Lee, director of the Taipei Economic and Cultural Office in New York, for a lunch meeting at his invitation. Craft described the meeting as “historic” and said that they “discussed different ways that we can best help Taiwan become more engaged within the U.N.” Also, given Taiwan’s recognition of the human transmissibility of COVID-19, “obviously we really are pushing for them to be back into the U.N., or have a role in the U.N. health assembly,” Craft said. Meanwhile, Lee said that “Taiwan and the U.S. share the values of democracy, human rights, and the rule of law” and “could make great partners.”
- In an interview with France24, Taiwanese foreign minister Joseph Wu called for an international coalition against rising PRC aggression. Taiwan, he said, is “on the front line defending democracies from being taken over by communist China.” Wu added, “We feel that like-minded countries or fellow democracies need to pay more attention to this area and come to each other’s help so that China’s expansionist motivation can be deterred.”
- U.S. Under Secretary of State Keith Krach arrived in Taiwan for a three-day trip. He is scheduled to attend the memorial service for former ROC President Lee Teng-hui on Sept. 19. Under Secretary Krach is the second high-level U.S. official to visit Taiwan in the past two months.
- According to overseas Chinese language news reports, an open letter by Leng Jiefu, the former head of Renmin University’s political science department, has been making the rounds on the internet. The letter, addressed to Politburo Standing Committee member and Chinese People’s Political Consultative Conference chairman Wang Yang, calls on Wang to convene a session of the CPPCC to advise Xi Jinping to step down and propose a framework for a “United States of China” based on federalism.
OUR TAKE
1. Because their survival and interests are at stake, the “anti-Xi coalition” and Xi’s factional rivals have strong incentive to attack him ahead of the Fifth Plenum and press for an advantage in the lead up to the 20th Party Congress in 2022. Observers should not be surprised at calls to “democratize” or “federalize” China from the “anti-Xi coalition” as personal interests will supersede Party interests at crunch time. However, as we analyzed last October, there is a risk of China merely transitioning into a Russian-style authoritarian regime if certain CCP factional elements are the ones behind the push to oust Xi Jinping and dissolve the Party.
Leng Jiefu’s open letter to Wang Yang and Li-meng Yan’s coronavirus claims appear to be public signs of growing resistance against Xi. Leng’s letter is self-explanatory but Yan’s case requires some explaining. First, the timing of the release of her coronavirus research report is somewhat suspect because it comes near the month in which the Fifth Plenum is supposed to commence. Second, Yan and her co-authors are affiliated with fugitive Chinese billionaire Guo Wengui’s Rule of Law Society and Rule of Law Foundation, and Guo’s previous remarks and actions indicate that he is deeply involved in the CCP factional struggle. Third, while it is virtually impossible to verify the bombshell nature of her claims, they are extremely damning for Xi Jinping and come at a crucial time for him (weeks before a key political conclave).
2. Xi arguably faces even more severe problems now as compared to before the Fourth Plenum last year. We believe that Xi is currently finding it immensely difficult at the moment to attain the intra-Party consensus necessary to convene the Fifth Plenum without incident, especially with a particularly sensitive topic on the agenda. Xi’s fourteenth five-year-plan could result in a partial closing-up of China, a development that grievously hurts the interests of the Party elite.
To press ahead with the Fifth Plenum, Xi needs to bring the CCP elite to a consensus either by compulsion or compromise. Compromise is virtually out of the question for Xi because his rivals will make demands that he cannot acquiesce to, such as naming a successor, “reverting” to a “collective leadership” arrangement, or agreeing to serve only two terms. Xi will more likely resort to compulsion, including the arrest of high-level cadres; the holding of large-scale domestic military exercises or temporary suspension of flights in China could serve as a prelude to a purge (see our China 2020 Outlook). Political Black Swans look likely to emerge in September and October.
