SinoInsight 1
April 15 – April 17
John Kerry, the U.S. Special Presidential Envoy, and PRC special envoy for climate change Xie Zhenhua met in Shanghai to discuss climate issues and cooperation. In an April 17 joint statement, both sides “look forward to the U.S.-hosted Leaders Summit on Climate on April 22/23”; on March 26, President Joe Biden invited 40 world leaders, including General Secretary Xi Jinping, to the virtual climate summit.
On April 16, PRC vice premier Han Zheng spoke with John Kerry via video conference. Han expressed the PRC’s willingness to “communicate and cooperate” on climate issues. On the same day, Xi said in a video conference with German Chancellor Angela Merkel and French president Emmanuel Macron that the PRC is willing to strengthen climate cooperation with both countries. “Responding to climate change is a common cause of all mankind and it should not become a geopolitical bargaining chip, a target for attacks on other countries or an excuse for trade barriers,” Xi said during the meeting, according to state mouthpiece Xinhua.
A Reuters photo dated April 14 (see picture in this VOA article) showed Kerry seated at the back of a chartered bus as he arrived at a state guest hotel in Shanghai during his Shanghai trip.
April 16
1. President Biden and Japanese prime minister Yoshihide Suga held a press conference at the White House.
Biden said that he and Suga are “committed to working together to take on the challenges from China and on issues like the East China Sea, the South China Sea, as well as North Korea, to ensure a future of a free and open Indo-Pacific.”
Suga said that they had “serious talks on China’s influence over the peace and prosperity of the Indo-Pacific and the world at large” and agreed to “oppose any attempts to change the status quo by force or coercion in the East and South China Seas, and intimidation of others in the region.”
In a joint statement released that day, both sides also “underscore[d] the importance of peace and stability across the Taiwan Strait and encourage[d] the peaceful resolution of cross-Strait issues,” as well as shared “serious concerns regarding the human rights situations in Hong Kong and the Xinjiang Uyghur Autonomous Region.” The U.S. and Japan also “acknowledged the need to work with China on areas of common interest.”
2. In an interview with Ken Teizo Moritsugu of the Associated Press, PRC vice minister of foreign affairs Le Yucheng said that Beijing “do[es] not quite agree” with the U.S. describing China a “the most serious competitor.” Le added, “For two big countries like China and the United States, competition might be inevitable. But competition must be healthy, and should not be allowed to become a vicious zero-sum game.”
When asked about John Kerry’s Shanghai trip and climate cooperation, Le criticized the Trump administration for leaving the Paris Agreement and “welcomed” America’s return under Biden. “We expect the United States to do more on climate change,” he said. When asked about the specifics of what the PRC would like to see from the U.S. on that front, Le said that Washington could “provide more technological and financial support to help upgrade the energy structure in developing countries. Lead by example, instead of blaming and scapegoating China.”
Le Yucheng also said that the PRC is “looking into” Biden’s invitation to Xi Jinping to participate in the Leaders Summit on Climate.
April 18
1. PRC state and Party propaganda outlets played up Sino-U.S. climate cooperation and relations. The Sino-U.S. joint statement on climate crisis was the second article featured in Xinhua’s important articles column, followed by a two-paragraph piece recapping Le Yucheng’s April 16 interview, where he called for the U.S. and the PRC to “bring order out of chaos” (撥亂反正) in the bilateral relationship. The one article about Japan in the important articles column rehashed the PRC Ministry of Ecology and Environment’s recent criticism of Tokyo’s plan to release treated Fukushima wastewater into the ocean.
2. When asked by a reporter to comment on the Biden-Suga press conference, an unnamed PRC foreign ministry spokesperson repeated the regime’s usual claims about Taiwan, Hong Kong, Xinjiang, and the Senkaku Islands, according to a Xinhua report. The spokesperson also accused America and Japan of “interfering in China’s internal affairs” and going against the trend of globalization by “forming small cliques.”
Xinhua published the above exchange in the international section of its website, and the report was not featured in its important articles column on its homepage.
OUR TAKE
1. Like many issues, climate change poses risks and opportunities for the CCP. On the one hand, the PRC is heavily reliant on fossil fuels for energy, and is hesitant to transition too rapidly to green energy and comply too quickly with international climate goals lest the Chinese economy is impacted substantially. On the other hand, the CCP sees opportunities to dominate the new energy market (electric vehicles, wind turbines, solar panels, etc.), as well as ease its reliance on coal and oil imports. Beijing is well aware that China can be cut off from Middle Eastern oil through the blockading of key straits in the Indo-Pacific region, and has been devising strategies to circumvent this weakness. Meanwhile, pollution in China has long been a problem, and Beijing has incentive to make “APEC blue” more permanent.
Climate change opportunities, however, are middle- to long-term goals and strategies for Beijing. PRC state media’s emphasis on Sino-U.S. relations when talking about the Kerry-Xie Shanghai meeting indicates that Beijing’s immediate aim is lowering bilateral tensions and reverting the relationship back to how it was during the “engagement” era. Le Yucheng’s jibe at the Trump administration’s climate policy and use of the “bringing order out of chaos” metaphor also hint at Beijing’s desire for the Biden-Harris administration to quickly ditch Trump-era China policies. The PRC’s general lack of outcry over the Biden-Suga meeting, where strong statements about China and in support of Taiwan were made, also shows that Beijing is presently prioritizing an improvement in the Sino-U.S. relationship over confrontation.
The CCP prefers cooperating with America over confrontation at all times because friendly Sino-U.S. relations are beneficial to regime survival and allows it to advance its global domination agenda with less resistance. For Xi Jinping, improved Sino-U.S. relations, or even creating the impression that the bilateral relationship is improving through propaganda, will greatly help his political position ahead of the CCP centennial celebrations in July and his bid for a norm-breaking third term in office at the 20th Party Congress in 2022. Previously, Xi’s factional rivals used the drastically worsened Sino-U.S. relations during the Trump era, and particularly the draft trade deal, to heap pressure on Xi.
2. Judging from the CCP’s response to the Kerry-Xie climate meeting, it is very possible that Beijing may have gotten some non-climate benefits from Washington. The CCP likes to find non-traditional, “back avenue” channels to do deals, and Kerry’s three days in Shanghai provide ample time and opportunities for issues other than climate to be discussed and preliminary understandings to be reached. At the very least, Beijing would have been delighted to have received an opportunity via the climate meeting to sell the notion of improving Sino-U.S. relations. The CCP would also have been delighted to again embarrass U.S. officials on Chinese soil by making John Kerry board a chartered bus to his hotel instead of a car; in 2016, a “kerfuffle” over airplane stairs meant that President Barack Obama had to leave Air Force One from the plane’s little-used belly exit when he arrived in Hangzhou for the G20 summit.
From CCP propaganda, the Sino-U.S. joint statement on climate, and Le Yucheng’s comments to the AP, it seems likely that Xi Jinping will attend Biden’s climate summit this week even though he is playing “hard to get.” The current optics suit Xi and the CCP, with Xi’s meeting with Emmanuel Macron and Angela Merkel during John Kerry’s Shanghai trip creating the impression that the PRC is taking the initiative on climate issues, and not simply following America’s lead. Of course, Xi could still skip Biden’s climate meeting, but something would have to go horribly wrong in the Sino-U.S. relationship over the next several days for this to occur.
SinoInsight 2
April 15
1. In a speech to mark “National Security Education Day,” Hong Kong Chief Executive Carrie Lam said that the city’s government will “strengthen communication, guidance, supervision and regulation over matters concerning national security handled by schools, social organisations, the media and the Internet” in accordance with the Hong Kong National Security Law.
2. Speaking at the Hong Kong Police College, police commissioner Chris Tang warned that efforts will be made to “strengthen supervision over the media.” Tang did not single out any media organization for criticism, but Hong Kong observers widely believe that Tang was targeting the pro-democracy tabloid Apple Daily.
April 16
1. Nine Hong Kong pro-democracy activists were sentenced over their involvement in the 2019 anti-extradition bill protests. Prominent activists Martin Lee and Margaret Ng received suspended jail sentences, while Apple Daily boss Jimmy Lai received one year in prison.
2. Ta Kung Pao, a CCP-controlled Hong Kong newspaper, published an editorial calling for the “lawful” banning of Apple Daily to “close the national security loophole.” Ta Kung Pao accused Apple Daily of “colluding with foreign forces” and “inciting violence” before the Hong Kong National Security Law was passed, and claimed that Apple Daily continued being a “foreign anti-China propaganda platform” after the passage of national security legislation.
Apple Daily issued a rebuttal to Ta Kung Pao, writing, “let’s stand tall in fallen times.”
3. Hong Kong Secretary for Security John Lee said during a Hong Kong legislature meeting that “some saboteurs and ‘Hong Kong independence’ elements continue to spread propaganda through the media. He added, “Some media outlets deliberately portray criminals as heroes, a very corrupt mentality. When we see crooked truths, no matter what means we use, we must confidently say that’s wrong, speak out loudly, and use our voices to overwhelm the other side.”
4. In responding to a Hong Kong lawmaker’s question about combating misinformation, Chris Tang cited an Apple Daily article that quoted netizens expressing concerns about how schoolchildren playing with toy guns on a train could be imitating the Hong Kong police in their suppression of protesters. Tang added that “fake news” is directly related to national security, and repeated a CCP talking point about how “some foreign forces” are using “fake news” to “incite hatred, divide society, create conflicts, and intimidate people who tell the truth.” Tang also noted that the Hong Kong police will “conduct a full investigation” into “fake news” and “arrest and prosecute” people “as soon as evidence becomes available.”
OUR TAKE
1. Historically, when the CCP goes after dissidents, it usually first discredits them in the public discourse, then go after dissidents in the name of “avenging” the people and satisfying “popular anger.” In reading the public statements of government officials and pro-CCP publications, we are seeing a similar tactic playing out in Hong Kong.
With the arrest of Apple Daily founder Jimmy Lai, it is only a matter of time before the Hong Kong authorities find some excuse to target and even ban the tabloid.
As we wrote in our China 2021 Outlook: “The CCP will keep using the Hong Kong National Security Law to suppress freedom of speech in the city. Media outlets who dare to speak out will be targeted to intimidate the rest. The CCP’s intention is to go after media outlets associated with Falun Gong when few Hong Kong media are willing to speak truth to power, but it may not succeed in bringing its plans to fruition depending on how 2021 unfolds.”
2. Barring other factors, the CCP would eventually clamp down on Apple Daily, The Epoch Times, and other Hong Kong media outlets that dare expose Communist China. But as we explained in the previous newsletter, escalating factional struggle between the Xi Jinping camp and the Jiang Zemin faction is compelling Xi to keep the “Falun Gong” card in play in the event he must use it to target Jiang’s negative political legacy and possibly secure his personal survival.
The factional struggle factor becomes clearer in light of the Hong Kong government and Ta Kung Pao’s attack on Apple Daily. Apple Daily may be pro-democracy and critical of the CCP, but the tabloid still trails The Epoch Times in being “anti-CCP”: The Epoch Times published “Nine Commentaries on the Communist Party” (九評共產黨) in 2004 and continues to run the “anti-CCP” treatise as a regular column in its newspapers; reported on the first whistleblower allegations of forced organ harvesting in China in 2006; covered major Hong Kong pro-democracy demonstrations since 2012 without the pro-Beijing spin found in pro-CCP local newspapers; and was founded and ran by Falun Gong practitioners. In Hong Kong, Falun Gong practitioners prominently display “Heaven will destroy the CCP” (天滅中共) banners at their information booths and practice sites. Given the CCP’s persecution of Falun Gong on the mainland and original motivation for wanting Hong Kong to pass national security legislation, it would be natural to expect the Hong Kong authorities to first go after The Epoch Times and other Falun Gong-affiliated media outlets in the city with the passage of the Hong Kong National Security Law. After all, unlike the Hong Kong-based Apple Daily, The Epoch Times is a “hostile foreign force” headquartered in the United States, and is an over-qualified “foreign anti-China propaganda platform” given the faith of its founders and the content it produces. Further, the CCP is not facing international pressure over its persecution of Falun Gong on par with what it is currently seeing over Xinjiang, and technically should have no qualms with squashing more “minor” opposition.
We see two likely reasons for “the dog that didn’t bark.” First, as we wrote in our China 2021 Outlook, the CCP prefers to make steady inroads when suppressing the media and opposition groups in Hong Kong, chiefly due to the need to maintain social stability. The National Security Law was passed precisely to put a swift end to chaos and prevent Hong Kong from transforming into a “counter-revolutionary” and “anti-Xi” base. To avoid a huge outcry in Hong Kong and around the world over the export of a brutal mainland persecution campaign to Hong Kong, the CCP has to go after less “reactionary” elements like Apple Daily first so that there will be no one to speak up for Falun Gong/The Epoch Times when the hammer falls.
Second, the CCP factional struggle is forcing Beijing to remain ambivalent over the status of Falun Gong in Hong Kong. Beijing’s general lack of direction on Falun Gong and seemingly trivial but politically significant incidents like the official disbanding of the Hong Kong Youth Care Association means that the city’s pro-Beijing establishment (HKSAR government, pro-CCP newspapers, etc.) dares not openly attack Falun Gong/The Epoch Times, at least for the moment.
SinoInsight 3
According to an April 17 Reuters exclusive, Beijing is having meetings and discussions with Jack Ma in recent months to get the latter to divest his stake in Ant Group and give up control.
Highlights of the report include:
- A source with ties to Ant said that Ma’s stake, which is worth billions, “could be sold to existing investors in Ant or its e-commerce affiliate Alibaba Group Holding Ltd without involving any external entity.”
- Another source with Ant connections said PRC regulators forbade Ma to “sell his stake to any entity or individual close to him, and would instead have to exit completely.” Another option is transferring Ma’s stake to a state-affiliated Chinese investor.
- Reuters sources say that “Ma’s exit could help clear the way for Ant to revive plans to go public.”
- A source with Ant ties said “there’s ‘a big chance’ Ma would sell his equity interest in [Hangzhou] Yunbo to exit from Ant, ultimately paving the way for the fintech major to move closer to completing its revamp and reviving its listing.” While Jack Ma has 10 percent of Ant in his name, he can exercise control over Ant through Yunbo and other entities, which own a combined 50.5 percent of Ant Group.
OUR TAKE
1. The Reuters report, if accurate, affirms our previous analysis: Beijing is targeting Jack Ma and his companies to ensure Party dominance over Chinese society and deal with factional struggle issues.
To briefly recap, the CCP is concerned that Alibaba, Ant, and other “too big to fail” Chinese internet companies could “cannibalize” the Party’s rule over society through technology (“Big Data,” payment transaction history, personal credit loans, etc.) while saddling the regime with financial risks through their business practices. Xi Jinping also has long-standing concerns with Jack Ma’s maverick behavior and the fact that Jiang Zemin faction members are his political patrons; a Feb. 16 Wall Street Journal report noted that Jiang faction members stood to gain the most from Ant Group’s scrapped $37 billion IPO, which would have valued the company at over $300 billion.
2. Jack Ma is already divesting from his companies. In July 2020, Ma cut his stake in Alibaba from 6.2 percent to 4.8 percent; it is unclear if the move is of his own volition or if Beijing had quietly forced him to do so. The April 17 Reuters report makes it clear that Beijing is now compelling him to divest entirely from Ant.
From the perspective of factional struggle, it makes perfect sense why Xi Jinping would not want Jack Ma to simply offload his shares to Alibaba or entities and individuals who are close to him. After all, one of the reasons why Ant’s record IPO was cancelled in the first place was because the Jiang faction would end up as major beneficiaries; Xi would not want to see Ma hand off his shares to, say, Jiang Zhicheng, the grandson of Jiang Zemin who helped Ma with his Alibaba listing. Rather, Xi would want to minimize political risks to himself by seeing that Jack Ma’s Ant stake goes to a state-affiliated investor that he trusts so that the Xi camp and the Party in general, and not rival factional interests, ultimately control Ant.
For Jack Ma, letting go of his Ant shares and further divestment in his companies entails sky-high levels of personal political risk. Beijing has not done its worst against Ant because the company is “too big to fail” and Ma happens to own a large stake in it. But once Ma loses control over Ant and his other companies, he no longer has a bargaining chip with Beijing and immediately faces the prospect of serious political persecution. Ma’s political patrons and other CCP interest groups may also conclude after he divests that continued association with a politically incorrect billionaire entrepreneur with no more political leverage is not worth it, and decide to “sacrifice” or break off ties with Jack Ma to save themselves.
Jack Ma faces two possible futures should he relinquish the shares he owns in Ant and Alibaba. If Ma keeps a low profile, stays out of current affairs, cuts off his factional connections, and remains loyal to the Party, Xi Jinping could allow him to stay extremely wealthy (from selling off his stakes) and peacefully retired. But if Xi deems Ma a threat for any reason, the latter is liable to be investigated and made an example of to deter other Chinese entrepreneurs and subdue Xi’s factional rivals (a probe into Ma can lead to spin-off investigations that will endanger associates, like members of the Jiang faction). Moreover, purging Ma and confiscating his immense wealth will immediately bolster the CCP’s coffers. Capitalists, after all, are heathen in a communist regime.
The Reuters report indicates that Beijing is serious about divestment, and Jack Ma can only play for time. But if Ant and Ma take too long to finalize divestment options or do other things that wear Xi Jinping’s patience, Ma could find himself in big trouble sooner than expected.
