SinoInsight 1
The CCP held the Fifth Plenary Session of the 19th Central Commission for Discipline Inspection from Jan. 22 to Jan. 24. The meeting was attended by all seven members of the Politburo Standing Committee.
Xi Jinping delivered a speech at the CCDI plenum, details of which were later reported by state mouthpiece Xinhua under the title, “Xi Jinping Again Makes Arrangements to Strictly Govern the Party in a Comprehensive Manner” (《全面從嚴治黨，習近平再作部署》).
According to the Xinhua report, Xi summarized the CCP’s efforts to “strictly govern the Party” (從嚴治黨) last year, and expressed satisfaction at “five major accomplishments” during an “extraordinary year.” The five “accomplishments” are:
- Efforts to control the coronavirus epidemic, build a “moderately prosperous society,” and poverty elimination were carried out with CCP support, demonstrating the Party’s “strong leadership” and Party Central’s “quan wei” (黨的堅強領導、黨中央的權威).
- Party Central’s policy of “strictly governing the Party” enhanced supervision and the implementation of “major policies.”
- “Formalism” and “bureaucratism” at the local and grassroots level of government were “eliminated.”
- Anti-corruption officials “profoundly grasped the new trend in the anti-corruption struggle,” focused on investigating cases involving political and economic issues, “disloyal, double-faced persons,” corruption in the political and legal affairs apparatus, as well as corruption in the areas of poverty alleviation work, “people’s livelihood,” and “protective umbrellas.”
- The anti-corruption apparatus strengthened Party-building, evaluated cadres on the job, and groomed “exceptional individuals” for admittance to the Party.
Xi Jinping also elaborated on “new arrangements” in “strictly governing the Party in a comprehensive manner,” stressing that “corruption and struggle” are long-term issues. He noted that “efforts will go down the drain if there is even a little let-up” in dealing with “corruption and struggle,” adding that the “corruption and struggle” issue remains “severe and complex.” Xi’s concerns regarding corruption in the regime are four pronged:
- Xi believes corruption is the CCP’s greatest risk, noting that “existing cases [of corruption] have not been cleared, yet [cases] still increase” (存量還未清底，增量仍有發生).
- Political problems and economic problems are intertwined, threatening the political security of the CCP regime.
- “Traditional” and “new” corruption cases are intertwined, and corrupt activity has become more obscured and complicated.
- Corruption and “unhealthy tendencies” (不正之風) are intertwined. Four of these “unhealthy tendencies” (formalism, bureaucratism, hedonism, and extravagance) have become “breeding grounds for corruption.”
In his speech, Xi called on officials to “continuously improve” their “political judgement, political understanding, and political implementation,” his third reminder in the span of a month. Xi first exhorted officials to improve their political sensitivity during a “democratic life meeting” from Dec. 24 to Dec. 25, and again during a seminar for leading provincial and ministerial-level officials on Jan. 11.
On Jan. 23, the South China Morning Post reported that PRC soldiers will get a 40 percent pay raise later this year as Party Central seeks to “attract and retain talent, while also encouraging promising young officers to have faith in the ongoing changes.” The Post, citing an unnamed Beijing-based colonel, noted that “commissioned and non-commissioned officers would benefit the most, with those stationed in border areas like Tibet, Xinjiang, as well as the East and South China seas, receiving a higher rate.” PLA veterans will also receive higher monthly pensions based on their service duration.
OUR TAKE
1. Xi Jinping’s speech at the CCDI’s Fifth Plenum and news of pay raises for PLA soldiers reveal Xi is still experiencing difficulties in consolidating and exercising power eight years into his reign.
The pay increase to soldiers is the more straightforward of the two developments to explain. Xi needs to ensure the military stays loyal to him and the Party as the regime faces a new wave of the coronavirus and other crises. Securing the military’s loyalty is also an essential part of Xi’s preparation to push for a norm-breaking third term as CCP leader at the 20th Party Congress in 2022; factional rivals will think twice before challenging a Party boss with a firm grip on the Party’s “gun.” Finally, Xi is incentivizing military service as a means of maintaining stability (rebellious, energetic youths are less of a threat if they are on the Party’s side during a crisis) and “rewarding” current soldiers for sticking through the military modernization process.
Boosting soldier salaries during an economic downturn when the regime’s revenue is reduced is indicative of Xi’s current insecurities and the seriousness of the challenges posed to his leadership. We expect Xi to continue strengthening his control over the PLA (promoting a “young guard” of senior officials, reshuffling command personnel, etc.) as he forges ahead with factional struggle-related purges in the political and legal affairs apparatus in 2021.
2. Xi’s anti-corruption campaign was always meant to simultaneously root out his factional rivals in the CCP elite, sieve out their supporters from the lower ranks, and address the very real, existential threat that corruption poses to the regime.
Given the context, Xi’s remarks at the CCDI’s Fifth Plenum indicate lackluster progress in resolving corruption and substantial factional resistance, despite continuous efforts for nearly a decade. The factional struggle problem is reflected in Xi’s reference to “corruption and struggle,” “disloyal, double-faced persons,” corruption in the political and legal affairs apparatus (long controlled by the Jiang Zemin faction), as well as his repeated calls for officials to “improve” their “political judgement, political understanding, and political implementation.” Meanwhile, Xi’s mention of the four “unhealthy tendencies” suggest that corruption remains rife at the lower echelons of the Party, posing a significant obstacle to proper implementation of Beijing’s directives.
Xi is also very specific in detailing how corruption/factional struggle will endanger the regime in his observation that “political problems and economic problems are intertwined” and its threat towards the regime’s “political security.” This could be an oblique reference to the phenomenon of monopolistic, “too big to fail” private Chinese companies like Alibaba and Ant Group engaging in risky financial activities with serious implications for regime security, and how these companies and their top executives have the backing of powerful CCP elites, some of whom are Xi’s bitter rivals and are willing to engage in “perish together” tactics to win the CCP factional struggle.
3. Xi Jinping is warning the Jiang faction and others in the “anti-Xi coalition” with his recent remarks to the CCDI—either Xi’s rivals follow Party Central’s (Xi’s) “quan wei,” or they will be purged as part of the anti-corruption campaign. Subsequent clean-up of the political and legal affairs apparatus could be vicious, particularly if Xi believes that Jiang faction hold-outs are plotting shenanigans before the 20th Party Congress to thwart his push for a third term.
SinoInsight 2
Jan. 12
The Trump administration declassified its strategic framework for the Indo-Pacific. One of the objectives in the framework calls for enabling Taiwan to develop an “effective asymmetric defense strategy and capabilities that will help ensure its security, freedom from coercion, resilience, and ability to engage China on its own terms.”
Jan. 20
Bi-khim Hsiao, Taiwan’s de facto ambassador to the United States, attended President Joe Biden’s inauguration at the behest of the Biden administration. In a video of herself in front of the U.S. Capitol building, Hsiao said, “democracy is our common language and freedom is our common objective.”
Jan. 23
1. Taiwan’s defense ministry reported that 12 PRC military aircraft entered the southwestern corner of the island’s air defense identification zone and Taiwan deployed missiles to “monitor” the incursion. The PRC aircraft include eight H-6K bombers and four J-16 fighter jets.
2. The U.S. State Department issued a statement on “PRC military pressure against Taiwan” that “notes with concern the pattern of ongoing PRC attempts to intimidate its neighbors, including Taiwan.” The statement urged Beijing to “cease its military, diplomatic, and economic pressure against Taiwan” and instead “engage in meaningful dialogue” with the latter.
The U.S. maintains “longstanding commitments as outlined in the Three Communiqués, the Taiwan Relations Act, and the Six Assurances,” according to the statement. “Our commitment to Taiwan is rock-solid and contributes to the maintenance of peace and stability across the Taiwan Strait and within the region.”
3. Beijing is pushing for a meeting between PRC top diplomat Yang Jiechi and a senior Biden administration official because Xi Jinping wants to “ensure a smooth ride for the coming two years as he prepares to assume an unprecedented third term,” according to The Wall Street Journal, citing Chinese officials. “A mishandling of the relationship with the U.S. could subject him to criticism within the Party,” the Journal wrote.
Jan. 24
1. A U.S. aircraft carrier group entered the South China Sea to promote “freedom of the seas.” The aircraft carrier USS Theodore Roosevelt was accompanied by the Ticonderoga-class guided-missile cruiser USS Bunker Hill, and the Arleigh Burke-class guided-missile destroyers USS Russell and USS John Finn.
2. According to a report in The Wall Street Journal, the Biden administration believes negotiators should not “focus on opening markets for financial-service firms, pharmaceutical companies and other companies whose investments abroad don’t directly boost exports or jobs at home.” The Journal cited National Security Advisor Jake Sullivan as saying, “Why, for example, should it be a U.S. negotiating priority to open China’s financial system for Goldman Sachs?” The Journal also noted that Clinton Treasury Secretary Lawrence Summers argued “against prioritizing gains for Hollywood, investment banks and inventors who want intellectual-property protection.”
OUR TAKE
1. The CCP is probing the Biden administration’s “redlines” on Taiwan and overall stance on the “China challenge” with the recent incursion of military aircraft into Taiwan’s airspace. Meanwhile, the new administration’s diplomatic and military responses are roughly on par with what can be expected from the Trump administration in the same scenario, which suggests strong bipartisan support for Taiwan.
Beijing could continue to act aggressively towards Taiwan in the year ahead, including displaying sizable shows of force, but will unlikely escalate tensions to crisis levels due to domestic woes. The Xi leadership is faced with a resurgence of the coronavirus and other infectious diseases (swine flu, etc.), as well as a slew of pressing domestic issues (financial derisking, debt crisis, food shortages, etc.). Beijing also has an interest to be less aggressive abroad to facilitate “stability maintenance” at home during critical periods this calendar year, such as around critical political conclaves like the Two Sessions (March) and the Sixth Plenum (Q4), and the celebration of the CCP’s 100th anniversary (July). The CCP will likely exercise even greater restraint in international affairs next year, as it seeks to preserve “face” during the Winter Olympics scheduled for early 2022. Xi will also strive to avoid “mishandling” the Sino-U.S. relationship ahead of the 20th Party Congress in the fourth quarter to secure a third term in office.
Note that while Beijing is less likely to be overly provocative overseas, the PRC will unlikely shy away from “wolf warrior” diplomacy, military maneuvers in the South China Sea or the Sino-Indian border, and international adventurism in general. The CCP’s ultimate goal is world domination, and it will not pass up a good opportunity to advance its agenda if it has sufficient bandwidth to do so. Domestic troubles also will not prevent the CCP from pursuing seemingly counterintuitive moves like “mask” and “vaccine” diplomacy; the Party has no qualms about sacrificing the welfare of the Chinese people if the regime’s interests and position can be strengthened.
2. We previously analyzed that the Biden administration “will likely retain many of the Trump administration’s tough China policies and measures at the onset to use as leverage against the Xi leadership,” but will gradually carry out “engagement” with the PRC, particularly a China without Xi Jinping at the helm. We anticipate this “anti-Xi, not anti-CCP” stance to become more obvious with the passage of time and in examining the sum total of the Biden team’s “competition without confrontation” approach to China.
The Biden administration can be expected to be tough on the PRC in areas like Taiwan, Hong Kong, Xinjiang, and possibly even the probe into the origins of the coronavirus, or critical areas of geopolitical or geostrategic concern for the United States. It is unclear whether the Biden administration will take a leaf out of the Trump administration’s playbook and directly hold Xi Jinping accountable for causing those concerns, but strong U.S. objections and actions to counter CCP actions in those areas will give Xi’s opponents ammunition to use against him. Concurrently, the Biden administration will likely look to work with Beijing in areas like climate change, healthcare, pandemic control, supply chains, and market access, but could exercise greater caution on financial issues and the export of U.S. technology to China.
3. Xi Jinping believes “time and momentum” are on his and the CCP’s side with Joe Biden and his team in office. However, Xi faces similar or greater levels of political risk from the U.S. unless he reinstates “engagement” era policies in the regime and liberalizes the Chinese economy to an even greater degree. This is a nonstarter for Xi, since he set the PRC on its current path precisely to deal with the ill effects of “engagement” and avoid regime collapse.
The current trajectory of Sino-U.S. relations paves the way for political Black Swans to emerge in China. Businesses, investors, and governments are unwise to presume a return to “predictable” geopolitics makes the rise of China “inevitable” under Xi.
