SinoInsight 1
May 6
The PRC Ministry of Ecology and Environment announced that a recent inspection of Changyao Mountain in Yunnan found “excessive development” taking place that “seriously affected the integrity of the Dianchi Lake ecosystem.” The ecological damage stemmed from the Dianchi International Healthcare Resort development project undertaken by Kunming North Star Enterprise (Group) (昆明諾仕達企業 [集團] 有限公司 ).
On the same day, Xinhua and other mainland media outlets also published reports on pollution problems at the Dianchi Lake Ecological Reserve. The reports note that the first round of ecological inspections by the authorities in July 2016 had already found that development projects connected with North Star Group were damaging the environment. However, the local government was guilty of inaction and procrastination (“bu zuo wei,” 不作爲), and was slow to formulate and promulgate an environmental protection plan in accordance with the requirements of the “Yunnan Province Dianchi Lake Protection Regulations.”
According to Xinhua and other mainland media, the central ecology and environment inspection team listed three problems with North Star Group’s development projects at the time:
1. The projects illegally occupied the Dianchi Lake Ecological Reserve. For instance, the Kunming Jinning District local government and North Star Group built an asphalt road in Dianchi’s first-level protection zone, destroying an ecological forest in the process. They also constructed real estate in restricted construction areas of Dianchi’s second-level protection zone.
2. The projects bent the rules in constructing real estate under the guise of health and elderly care developments. For example, North Star Group built 437 villas in Dianchi’s second-level protection zone where construction is restricted. The villas occupied 1,242 acres of land, with 400,000 square meters of total construction area.
3. Changyao Mountain’s ecological function was essentially “lost” and “exhausted” due to the projects. In addition to the villas stated in the previous point, North Star Group also built 209 villas, as well as 294 multi-storey and mid-to-high-rise property projects in Changyao Mountain’s third-level protection area, covering 1,891 acres and total construction area of 1.744 million square meters.
Mainland media also reported that a 703.64-acre golf course had been built on the east bank of Dianchi Lake, of which 456.68 acres cut into the first-class protection zone; it is not stated who was behind the development. Reports add that the Eighth Central Ecological and Environmental Protection Inspection Team, which was stationed in Yunnan in April 2021, found that the Kunming Dianchi National Tourism Resort Management Committee had carried out “false rectification” after being told off by earlier inspection teams. In one example, the Eight Inspection Team noted that fake trees had been “planted” in shallow topsoil at the golf course to disguise the fact that it was still a golf course and had not been undone as instructed.
May 7
A Xinhua commentary titled, “How the Great Dianchi Lake Was Destroyed in the Name of Profit” accused local government for ecological and environmental damage at Dianchi. “Functional departments do not perform their duties well, while some local governments and enterprises are driven by profit. They care only about the current account and not future finances. They are walking the path of green development backwards, and have caused serious damage to the ecology of Dianchi Lake.”
May 9
Li Xiaosan (age 58), the former director of the Yunnan Provincial Organization Department and a member of its Party Standing Committee, was promoted to deputy Party secretary of Yunnan.
Liu Hongjian (50), a member of the Yunnan Provincial Party Committee and Yunnan vice governor, was admitted to Yunnan Party Committee’s Standing Committee.
OUR TAKE
1. Aside from showing to the world that the PRC is concerned about environmental protection and other “green” causes, recent investigations into environmental and ecological issues at Dianchi Lake in Yunnan are almost certainly linked with CCP elite politics and Xi Jinping’s personal political risk levels.
Xi is currently “rectifying” the CCP officialdom ahead of the 20th Party Congress, where he will make the case for serving a norm-breaking third term in office. Part of the “rectification” process involves cleaning up corruption and entrenched factional networks opposed to his leadership in local governments (see point 2). Investigations into ecological and environmental issues at Yunnan’s Dianchi Lake, just like similar investigations into ecological issues at Shaanxi Qinling Mountains (see here and here), are partly aimed at rooting out Xi’s factional rivals in the locales. Such investigations also serve to “kill the chickens to scare the monkeys” and intimidate local officials in other areas into duly enacting Xi’s policies instead of ignoring them. In considering the issue from another angle, the fact that officials still “bu zuo wei” this late into Xi’s second term shows that his anti-corruption campaign is lacking. Moreover, Xi’s orders, like those of Hu Jintao and Wen Jiabao, continue not to “make it out of the gates of Zhongnanhai” (政令不出中南海) even after near a decade of power consolidation.
Another reason why Xi is tackling domestic environmental issues at this time is to “dissipate” some of the mounting international pressure on him over Xinjiang, Hong Kong, Taiwan, and other CCP malign behavior. Other reasons include adhering to his own policies on environmental protection/climate change, winning popularity with the Chinese people by taking on corrupt local officials and “avenging” their anger, as well as curbing wasteful and unnecessary real estate development as part of checks on the property sector.
2. Yunnan has long been under the Jiang Zemin faction’s sphere of influence, and Xi Jinping has struggled to bring the province under his control despite numerous personnel reshuffles and anti-corruption work. Since Xi took office in 2012, seven Yunnan Party Committee members have been investigated or punished, including two provincial Party secretaries and two provincial deputy Party secretaries. Xi has also gone through four Yunnan Party secretaries, and usually picked the provincial governor to replace the outgoing provincial boss. Xi’s method of replacing Party secretaries in Yunnan and the fact that he needed to make numerous changes at the top level shows that the Xi camp lacks personnel (Xi Jinping did not belong to or have a faction before coming to power) and the Jiang faction’s continued hold over the province. It is possible that Xi has been coping with the Yunnan situation by selecting officials with less obvious Jiang faction alignment to run the show before swapping them out every so often to prevent them from consolidating local interest networks.
Barring future anti-corruption investigations, incumbent Yunnan Party secretary Ruan Chengfa (age 64) and executive vice governor Zong Guoying (58) will likely either retire or take up sinecure positions in the provincial People’s Congress or Chinese People’s Political Consultative Conference within a year or less. Current Yunnan governor Wang Yubo (58) should replace Ruan Chengfa, Yunnan Organization Department director Li Xiaosan should become governor, and Yunnan vice governor Liu Hongjian should replace Zong Guoying as executive vice governor. It is also possible that Wang Yubo is transferred to other provinces to serve as governor or provincial Party secretary, while Xi “parachutes” in a trusted official to serve as Yunnan Party boss.
3. Yunnan’s Dianchi Lake, like Shaanxi’s Qinling Mountains, is a famous scenic spot in China. It is thus an ideal location for senior Party officials to retire, which in turn creates a market for villas and golf courses. Local Yunnan officials and North Star Group no doubt sought to capitalize on the situation with their illegal constructions in the Dianchi Lake Ecological Reserve area.
Kunming North Star Group was founded in the early 1990s as an industrial and export company. Later, North Star Group diversified its operations to include catering, shopping malls, and tourism. By September 2004, the company was selling jadeite, Yunnan delicacies, and pu’er tea in Beijing. In 2005, North Star Group moved into the real estate and jewelry businesses, and owned an entire pu’er tea supply chain in 2006. In 2012, North Star Group was involved in the local government’s tourism project (“Colorful Yunnan: Ancient Yunnan Culture and Famous Cities Tourism”), and in 2017, it started on the Dianchi International Healthcare Resort development project.
Under CCP rule, virtually all successful businesses and businesspeople are backed by political forces of some sort. North Star Group is no exception, and likely worked hand in glove with the Yunnan officialdom to win political connections in Beijing. In particular, North Star Group sells goods coveted by CCP officials (jadeite, Yunnan delicacies, pu’er tea, jewelry, property, etc.), and it becomes easy for the company and the Yunnan officialdom to literally buy political protection and other benefits from corrupt Beijing officials.
Given that larger political forces are at play, it is no wonder that multiple earlier environmental and ecological investigations into Yunnan failed to make much headway in addressing environmental protection issues. For one, local officials are very likely themselves colluding with well-connected companies like North Star Group, and have no incentive to harm their own interests. Even if local officials were not colluding with North Star, they would know enough not to antagonize the company and the powerful political forces behind it. Finally, factional interests in Yunnan are aligned with Xi Jinping’s rivals, and would be inclined to resist Beijing in the hopes that their operations would be unscathed should they outlast Xi’s rule. That Xi has not been able to make significant inroads into the Yunnan problem all these years is also a sign of his lack of “quan wei” and political strength.
SinoInsight 2
On May 5, the Haikou Municipal Public Security Bureau announced an investigation into He Xin, the controlling shareholder of Phoenix Zhixin Information Technology (Haikou), for allegedly “illegally accepting deposits from the public.” He, who is also the son-in-law of Phoenix Media Investment Holdings Limited’s founder Liu Changle, is currently being detained by the police. Phoenix Media, also known as Phoenix Satellite Television, is a Hong Kong media outlet with headquarters in the semi-autonomous city and on the mainland.
Phoenix Zhixin’s official website states that it is the operating arm of Phoenix Financial, a peer-to-peer (P2P) lending platform that ran afoul of the authorities in recent months over allegations that it saddled its over 70,000 users with approximately 9.8 billion yuan in losses. In September 2020, Phoenix Financial suddenly suspended its online lending products, resulting in stagnating payments on outstanding loans and overdue projects. Two months later, the Haikou authorities ordered the company to exit the online loans business.
On Feb. 26, Liu Changle announced that he would be stepping down as CEO of Phoenix Media, but would remain as chairman of the board and an executive director. Xu Wei, a former Shanghai Municipal government spokesperson and director of the Shanghai Municipal government’s Information Office, replaced Liu as CEO. A day earlier, mainland media outlet Caixin reported that Sun Yusheng, formerly a deputy editor-in-chief and deputy director at state broadcaster China Central Television, had been appointed executive vice president at Phoenix Media.
On April 17, Phoenix Media announced that Liu Changle, a major company shareholder, sold 37.93 percent of his Phoenix Media shares on April 16 and April 17. Twenty-one percent of Liu’s shares (worth HK$640 million) went to Bauhinia Culture Holdings while the remaining 16.93 percent (worth HK$516 million) were sold to Shun Tak Group under the pro-Beijing businesswoman Pansy Ho Chiu-king. Hong Kong media report that Liu Changle cleared out almost all his Phoenix Media shares with the aforementioned sales.
Bauhinia Culture Holdings, the new majority shareholder of Phoenix Media, is a “key state-owned enterprise” (deputy ministerial-level department equivalent) under the PRC’s Ministry of Finance. The company has billions of Hong Kong dollars worth of assets, and owns key media, new media, printing, film and television, theatrical, and other cultural institutions in Hong Kong. For example, the pro-Beijing Bauhinia Magazine, Sino United Publishing (largest Hong Kong integrated publishing group; controls Hong Kong’s three major publishing houses), and Sil-Metropole Organization (film production and distribution company; many Hong Kong film companies work with Sil-Metropole to gain entry to and break into the mainland market) are all controlled by Bauhinia Culture Holdings. Mao Chaofeng, a former Standing Committee member of the Hainan Party Committee and executive vice governor of Hainan Province, is the current chairman and Party secretary of Bauhinia Culture Holdings, while Wen Hongwu, the former Hong Kong Liaison Office secretary-general, serves as the company’s general manager.
Bauhinia Cultural Holdings was incorporated in Hong Kong in March 2019, the outbreak of the anti-extradition movement in the city forced it to suspend operations until February 2020. Today, Bauhinia Cultural Holdings, alongside China Travel Service, China Merchants Group, and China Resources are the four biggest PRC central SOEs in Hong Kong.
OUR TAKE
1. Since the 2019 Hong Kong anti-extradition bill protests, Xi Jinping has stepped up efforts to bring the territory under his control and marginalize the Jiang faction’s influence over Hong Kong. With the crucial 20th Party Congress coming up in 2022, Xi cannot allow the “anti-Xi coalition” to turn Hong Kong into a “counter-revolutionary” and “anti-Xi base” from which to undermine his rule.
The arrest of He Xin appears to be part of Xi’s broader initiative to further consolidate his grip over Hong Kong via Phoenix Media and put pressure on Liu Changle.
2. Phoenix Media was always regarded as a pro-Beijing media operation in Hong Kong. CCP propaganda and viewpoints would often get “laundered” in Phoenix Media’s television programs and online news articles, and the outlet would contribute to the Party’s successful external propaganda and influence operations (the “Great External Propaganda Plan,” 大外宣) as just another “Hong Kong media.”
The CCP, however, no longer needs to obscure Phoenix Media’s true allegiances with the passage of the Hong Kong National Security Law in June 2020. That is why Beijing is comfortable with allowing the central SOE Bauhinia Cultural Holdings to become Phoenix Media’s majority shareholder.
3. The Hong Kong Liaison Office used to covertly control and influence public discourse in the city during the Jiang faction’s era of dominance (1997 to 2012) and until very recently. Meanwhile, Hong Kong’s cultural industry was swayed by Zeng Qinghuai, a former commissioner of the PRC Ministry of Culture in Hong Kong. Zeng Qinghuai is the younger brother of Zeng Qinghong, the political enabler of Jiang Zemin and the Jiang faction’s number two.
Now there is a case to be made that Xi Jinping has wrestled control and influence over public discourse into his grasp. The Hong Kong National Security Law already has a silencing effect in the city, while Xi recently carried out extensive personnel reshuffles in the Hong Kong Liaison Office. Xi’s effort to rope in the pro-Beijing, pro-Hong Kong establishment Phoenix Media via Bauhinia Cultural Holdings shows that he does not trust the Hong Kong establishment to loyally do his bidding; the Hong Kong establishment’s mainland ties are almost certainly with the Jiang faction given the latter’s over two-decades-long dominance over the city.
Xi has been training his sights on the Zeng brothers since taking office. In 2015, the Wang Qishan-helmed Central Commission for Discipline Inspection issued a commentary attacking “naked officials” who behave like the notoriously corrupt Manchu official Prince Qing (慶親王). People’s Daily also published a frontpage commentary piece about how “there are no ‘iron-cap princes’ [鐵帽子王] in corruption,” another allusion to Prince Qing. Xi would mention “iron-cap princes” in a 2015 speech to key provincial officials. China watchers widely believe that the references to Prince Qing and the “iron-cap prince” are coded warnings to Zeng Qinghong, and is Xi’s attempt at obliquely attacking the Jiang faction’s second-in-charge.
On May 13, 2016, the PRC Ministry of Civil Affairs included the China Culture Promotion Association where Zeng Qinghuai was vice chairman in its list of “offshore associations” and “shan zhai associations” (“counterfeit association,” 山寨社團). This meant that Zeng Qinghuai’s cultural association is not officially recognized by Beijing. And in August 2020, China Cultural City Co., Ltd, a Hong Kong cultural company founded by Zeng Qinghuai and a front organization for the PRC Ministry of Culture, announced that it was undergoing liquidation. As late as 2016, China Cultural City was still organizing large-scale pro-Beijing evening parties, including the 17th “Xiangjiang [Hong Kong] Moon Evening Festival” (香江明月夜會).
