SinoInsight 1
On March 13, the CCP Central Commission for Discipline Inspection announced on its website that Peng Bo, the former deputy director of the Office of the Central Leading Group on Preventing and Dealing with Heretical Religions, was being investigated for “serious violations of discipline and the law.” Better known as the “610 Office,” the Office of the Central Leading Group on Preventing and Dealing with Heretical Religions was established to coordinate former Party boss Jiang Zemin’s persecution campaign against the Falun Gong spiritual discipline on June 10, 1999 (hence “610”).
About five hours later, the South China Morning Post reported the probe into Peng under the headline, “Chinese anti-cult official who targeted Falun Gong faces corruption investigation.”
OUR TAKE
1. Peng Bo, 64, was at the deputy ministerial-level official in his last job, and would have retired four years ago at 60 per CCP retirement norms. That means that the official investigation into Peng was launched a few years after his retirement, which suggests that he was bagged as the result of related probes into other officials, or is being taken in to facilitate the arrest of others.
Peng’s career trajectory, “patron-client” relations, and factional alignment indicate that the probe into him is related to the factional struggle.
2. Peng Bo’s career marks him as a member of the Jiang Zemin faction. Peng spent the early half of his career in the propaganda wing of the Communist Youth League, eventually working his way up to deputy director and deputy chief editor of the Communist Youth League’s publishing house, as well as editor-in-chief of the youth league’s network film and television center (December 2003 to May 2006).
When Peng was in the Communist Youth League, Zhou Qiang, the current Supreme People’s Court president and chief justice, was first secretary of the Communist Youth League’s central secretariat (June 1998 to November 2006). Meanwhile, Liu Yunshan was head of the Central Propaganda Department (October 2002 to November 2012), and would have overseen Peng Bo’s work in the youth league’s propaganda arm. Both Liu and Zhou are Jiang faction officials, and the CCP propaganda apparatus was highly valued by Jiang Zemin and controlled by the Jiang faction during its era of dominance (1997 to 2012).
During the Jiang and Hu eras, very few officials would be able to rise to senior positions in the CCP propaganda apparatus without the Jiang faction’s trust and approval. Peng Bo’s career showed that he had not just the Jiang faction’s endorsement, but was almost certainly a part of the faction. In May 2006, Peng was transferred to the Central Propaganda Department’s foreign propaganda department, and would eventually serve in leading positions in the foreign propaganda department’s Fifth Bureau (deputy director), Ninth Bureau (director), and Tenth Bureau (director). Peng would have undoubtedly worked on the CCP’s Great External Propaganda Plan (大外宣), which was then being launched, at the foreign propaganda department. The fact that he was entrusted with leadership positions in the department when an important external propaganda project was being rolled out removes question marks over Peng Bo’s factional alignment at the time.
Before the 18th Party Congress, Peng Bo was promoted to deputy director of the Cyberspace Administration of China (CAC), a position he held from September 2012 to August 2015. Meanwhile, Liu Yunshan would go on to secure a spot in the Politburo Standing Committee, where he would become the regime’s top overseer of propaganda work. Under Liu, the CCP propaganda apparatus would carry out “advanced blackening and low-level red” or “gao ji hei, di ji hong” (高級黑, 低級紅) operations against Xi Jinping, including promoting the “Xi Dada” moniker and the Central Propaganda Department (then helmed by Jiang faction member Liu Qibao) holding a “red songs” concert at the Great Hall of the People in May 2016. During the concert, 18 of 20 songs sung were from the Cultural Revolution, while the remaining two were in praise of Xi; according to overseas Chinese language media, Party princelings familiar with Xi’s thinking said that the latter was “furious” with the incident and ordered an investigation that led to the sacking of the Great Hall of the People’s managing director.
In April 2013, Lu Wei, another Jiang faction member, became Peng’s boss at the CAC. Lu eventually stepped down in June 2016, was officially investigated after the 19th Party Congress in November 2017, and was sentenced to 14 years in prison and fined 3 million yuan in March 2019.
As for Peng Bo, no official information about his career and whereabouts were released after he stepped down from his position at CAC in 2015. His transfer to the 610 Office was only made public recently in the CCDI’s statement of their investigation into him. Given Peng’s propaganda background, it is very likely that he was put in charge of anti-Falun Gong propaganda work while serving as deputy director of the 610 Office. Peng would have retired sometime in 2017 per CCP retirement norms. In March 2018, the 610 Office was dissolved as part of Party and state institutional reforms.
3. Given the anti-corruption tactics of the Xi era, it is likely that Peng Bo was investigated as a result of the probe into Lu Wei, or is being questioned as part of a larger “hunting tigers” (打虎) move up the food chain to his previous bosses, or for both of the aforementioned reasons.
A “hunting tigers” anti-corruption expedition endangers the Jiang faction at large, and Zhou Qiang and Liu Yunshan in particular. Xi’s net appears to be tightening around Liu, particularly with “20 years of retroactive investigations” currently underway in Inner Mongolia, Liu Yunshan’s home base (see here and here). Meanwhile, the arrest of Peng Bo and other officials with possible connections to Zhou Qiang could hand Xi Jinping enough “ammunition” (evidence of corruption) to “persuade” (intimidate) the Jiang faction member to toe the line before the 20th Party Congress if he wants to keep his current job or possibly replace Guo Shengkun as head of the Central Political and Legal Affairs Commission (very difficult at present). If the Jiang faction lacks power or Xi resolves to stamp them out, then Zhou Qiang could even be shunted to a sinecure position in the National People’s Congress or sidelined entirely at the 20th Party Congress, and Liu Yunshan could be officially investigated before the important political conclave in 2022.
4. We previously explained the concept of political legacies of Party bosses and the central role they play in factional struggles. It is likely no coincidence that Xi Jinping is attacking Jiang Zemin and his faction’s negative political legacy (Falun Gong) at the same time that Xi’s negative political legacy (Xinjiang and Hong Kong) is coming under intense scrutiny by the West (Western establishment elites are closer to the Jiang faction by virtue of nearly 20 years of collaborations before Xi took office).
Xi is almost certainly putting the Jiang faction on notice with the investigation of retired CCP official Peng Bo and the disbanding of the anti-Falun Gong Hong Kong Youth Care Association in January. Meanwhile, it is worth noting that the Alibaba-owned South China Morning Post issued a prompt report on the Peng Bo probe; Alibaba founder Jack Ma has connections with the Jiang faction, and news of the escalating Xi-Jiang factional struggle might be of value to Western establishment elites behind an “anti-Xi, not anti-CCP” American China strategy.
SinoInsight 1
March 11
The Wall Street Journal published the latest in a series of articles exposing Beijing’s plans to rein in maverick Chinese technopreneur Jack Ma and his companies.
Highlights of the Journal’s piece include:
- “Officials familiar with Beijing’s thinking said regulators don’t want to crush a technology powerhouse popular with both Chinese households and global investors—as long as it disassociates itself from its flashy and outspoken founder and aligns itself more closely with the Communist Party.”
- “Antitrust regulators are considering levying a record fine against Alibaba exceeding the $975 million that Qualcomm Inc. paid in 2015 over anticompetitive practices, so far the largest in China’s corporate history, according to people with knowledge of the matter.”
- “Those people said Alibaba also will be required to end a practice that has been dubbed ‘er xuan yi’—literally, ‘choose one out of two’—under which, regulators believe, the tech giant punished certain merchants who sold goods both on Alibaba and its rival platforms, including JD.com. The precise remedies Alibaba will have to take likely will be hammered out only after a decision is announced, according to one of the people.”
- PRC regulators are “weighing whether to require Alibaba to divest itself of some assets unrelated to its main online-retailing business.”
- “Officials who have long been in Alibaba’s corner are telling the company it can no longer count on them, according to people close to Alibaba. One government meeting after another has been devoted to how to incorporate the new marching orders for preventing big tech firms from monopolizing credit and other resources.”
- “One early inkling that Mr. Ma was falling out of favor in Beijing came in late 2018, when Mr. Xi invited some 50 entrepreneurs to rebut criticism that his policies were hurting the private sector … Mr. Ma wasn’t invited, according to officials with knowledge of the arrangement … Excluded from the public readout of the gathering, the officials said, was a blunt message Mr. Xi directed at the tech chieftains: Commercial success is secondary to the mission of beefing up the country’s technological security.”
- “Both company employees and government officials point to a key moment in May 2020, when they felt a major shift in the government’s view on Alibaba. That was when China’s chief internet watchdog, the Cyberspace Administration of China, in a report to the leadership, said Alibaba had used ‘capital to manipulate public opinion,’ according to officials who saw the report … Speculation that an Alibaba executive was having an affair had sparked a torrent of posts, but in less than an hour some users started complaining their posts were being deleted—a practice common for politically sensitive posts but unusual for celebrity gossip … The internet watchdog said Alibaba had directed the actions of Weibo, in which Alibaba holds about 30% stake, and that it had been told to stop influencing the media, according to the people who saw the report … The incident further riled authorities and rivals who believe Alibaba is using its stakes in social-media and media firms and its public-relations department to lobby against government policies that affect its business.”
March 12
The State Administration for Market Regulation fined 12 businesses, including Tencent Holdings, Baidu, Didi Chuxing, JD.com, Intime Retail (an e-commerce subsidiary of Alibaba), and Beijing Quantum Jump Technology (a company backed by Bytedance), 500,000 yuan each for breaching the PRC’s anti-monopoly law.
OUR TAKE
1. The information above confirms our analysis of the Jack Ma-Ant IPO saga (see here for a breakdown). In a nutshell, the CCP fears the monopolistic power and financial clout of “too-big-to-fail” private Chinese companies like Alibaba and Tencent threatening the Party’s political authority, and is looking to stop those companies from passing on immense financial and political risks to the regime.
2. From the Wall Street Journal piece, Alibaba and Jack Ma clearly broke political taboo by censoring information that is detrimental to the company but not the Party in May 2020. The fact that Ma was not invited to a 2018 meeting of 50 entrepreneurs with Xi Jinping also indicates that the relationship between Alibaba’s founder and Beijing was on the rocks.
Xi’s wariness of Jack Ma likely grew after the 2015 stock market turbulence. Chinese observers say that the Jiang faction and other CCP interest groups took advantage of the chaos to launch a “financial coup” against the Xi leadership. A clue that powerful Party factional interests may have been involved in the financial turbulence is found in misuse at the time of the HOMs cloud-based brokerage access system, which was built by the Alibaba-controlled Hundsun Technologies Inc. The HOMs system allows retail investors and small businesses to purchase shares on China’s markets using borrowed funds. Investors were able to evade regulators by opening and closing sub-accounts under a fake identity.
On June 13, 2015, or two days after the Chinese stock market began to plummet, the China Securities Regulatory Commission forbade securities companies from trading with institutions or individuals through online securities trading platforms, an order that led brokerages to cut off their connection with the HOMs system. On June 29, CSRC spokesperson Zhang Xiaojun said that the HOMs system funneled 440 billion yuan into China’s stock markets, gave retail investors access to triple-leveraged equities on average, and had a peak of 370,000 sub-accounts on May 24. Meanwhile, mainland media criticized the HOMs system for powering a highly leveraged bull run and sparking the stock market tank.
3. Xi Jinping looks to be preparing to “rectify” the financial sector and Chinese tech companies to shore up regime security and deny his factional rivals any opportunities to undermine his reign. Like Xi’s military reforms back in 2015, Chinese tech giants could see personnel changes at the top and even restructuring.
Alibaba could be forced to undergo restructuring like HNA Group. Regulators would want to look into Alibaba’s assets, liabilities, and transactions, as well as map out the company’s management structure and shareholder relations to sieve out the Party elite groups with a stake in Alibaba. Alibaba would want the restructuring to be carried out quickly to avoid business disruption, but Xi could instruct regulators to take as long as they need if he needs the time to get a grip on factional struggle issues.
Jack Ma should be able to avoid additional trouble if he does not challenge Beijing while restructuring is underway. However, the “anti-Xi coalition” could be compelled into action by Xi’s rectification of the financial sector, resulting in further escalation of factional struggle in the CCP elite.
