Xi camp resumes self-promotion and political mobilization; Chinese provinces abnormally project slower growth, declining revenue in 2022

     SinoInsight  1     

• Commentary 1: “Party, Government, Military, Civilian, Schools; East, West, South, North, Center; the Party Leads Everything” (述評一: “党政军民学，东西南北中，党是领导一切的”)
• Commentary 2: “The Path of Socialism With Chinese Characteristics is Getting Wider and Wider” (述評二: “中国特色社会主义道路越走越宽广”)
• Commentary 3: “The People’s Aspiration for a Better Life is Our Goal” (述評三: 人民对美好生活的向往，就是我们的奋斗目标”)
• Commentary 4: “Keep Writing This Great Article” (述評四: “继续把这篇大文章写下去”)
• Commentary 5: “Let Our System Be Matured and Enduring” (述評五: “让我们的制度成熟而持久”)
• Commentary 6: “The Rise of the Rule of Law is the Rise of the Country, the Strong Rule of Law Will Make the Country Strong” (“法治兴则国兴, 法治强则国强”)
• Commentary 7: “Breaking New Ground in Promoting High-quality Development” (述評七：“在推动高质量发展上闯出新路子”)
• Commentary 8: “Build a People’s Army That Obeys the Party’s Command and Wins Battles With Good Conduct” (述評八: “建设一支听党指挥能打胜仗作风优良的人民军队”)
• Commentary 9: “Firmly Grasp the Main Line of Serving National Rejuvenation and Promoting Human Progress” (述評九: “牢牢把握服务民族复兴、促进人类进步这条主线”)
• Commentary 10: “We Can Only Win Historical Initiative if We Are Courageous in Self-revolution” (述評十: “我们只有勇于自我革命才能赢得历史主动”)
• Summary: Let Contemporary Sinicized Marxism Radiate a More Brilliant Light of Truth (總述：让当代中国马克思主义放射出更加灿烂的真理光芒)

• The national discipline inspection and supervisory organs had “chats” with 943,000 personnel in various leadership teams and key positions. A total of 7,581 leading cadres (一把手) at the county and division level and above were punished.
• The CCDI and the National Supervisory Commission investigated 63 central-managed cadres (中管幹部).
• The national discipline inspection and supervisory organs filed 631,000 cases and punished 627,000 people, including 59,000 people in state-owned enterprises, 12,000 people in the financial system, 64,000 people in the political and legal affairs apparatus. Also, 5,006 people were detained for giving bribes, of which 4,806 people were punished and 2,822 people were transferred to procuratorial organs.
• Nationwide, 38,000 people voluntarily surrendered to discipline inspection and supervisory organs, while 104,000 people took the initiative to admit to having problems.
• The “Skynet 2021” operation recovered 1,273 fugitives, including 22 “red notice” fugitives and 318 monitored targets. The operation also recovered 16.74 billion yuan of stolen funds.
• National discipline inspection and supervisory organs investigated and dealt with 54,000 cases of hedonism and extravagance, while “criticizing, educating, helping, and handling” (批評教育幫助和處理) 73,000 people for the same charges. Of the 73,000 people, 53,000 were given Party disciplinary and administrative sanctions.
• National discipline inspection and supervisory organs interviewed and questioned 9,562 discipline inspection and supervisory cadres nationwide, subjected 9,685 people to organizational measures, punished 2,985 people, and transferred 111 people to procuratorial organs.
• Central inspection teams accepted 83,000 petitions and reports, and handed over a batch of problematic leads (問題線索) to the discipline inspection and supervisory organs. Party Committees in all provinces, autonomous regions, and municipalities completed the inspection of 2,284 Party organizations (coverage rate of 99 percent); 135,000 Party organization at the city and county levels were inspected (coverage rate of 100 percent); and the Party groups (Party Committees) of relevant central work units completed inspections of 2,943 Party organizations.
• National discipline inspection and supervisory organs received a total of 3.862 million petitions and reports, including 1.35 million reports and complaints. The four forms of discipline (四種形態) were implemented against 2.125 million people, of which 1.487 million (70 percent) were subjected to the first form (“chats,” inquiries, reminders, criticism), 494,000 (23.2 percent) were subjected to the second form (light discipline and organizational adjustments), 70,000 (3.3 percent) were subjected to the third form (serious discipline and job adjustments, and 74,000 (3.5 percent) were subjected to the fourth form (formal investigation due to serious violations of discipline, law, and criminal law). Of the 74,000 people subjected to the fourth form of discipline, 18,000 were transferred to the procuratorate and 56,000 were expelled from the Party and removed from public office.
• A total of 4,474 Party organizations, as well as 55,000 Party leading cadres and monitored targets, have been held accountable across the country.
• National discipline inspection and supervisory organs investigated and dealt with 125,000 cases of corruption and work performance issues in the field of people’s livelihood (civil affairs organs, poverty alleviation, etc.). 179,000 people were “criticized, educated, helped, and handled” by the authorities, of which 115,000 were given Party disciplinary and administrative sanctions.
• National discipline inspection and supervisory organs filed and investigated 9,931 cases involving triads, corruption, and “protective umbrellas. 9,569 people were given Party disciplinary and administrative sanctions, and 1,037 people were transferred to procuratorial organs.

• The meeting praised Party Central “with Comrade Xi Jinping at the core” for its political achievements in the past year, which was “full of landmark significance” and saw “complex and severe domestic and international situations, and many risks and challenges.”
• The meeting again emphasized the need to “welcome” the “victorious opening” of the 20th Party Congress later this year.
• The meeting noted that government work in 2022 must adhere to being “stable, steady, and progressive” (穩字當頭, 穩中求進), prevent and defuse financial risks, and maintain the bottom line of no systemic risks.
• The meeting affirmed the “remarkable results” of the 19th Central Committee’s eighth round of central inspections. Also, the central government had strengthened its centralized and unified leadership over financial work, deepened financial reform, severely punished corruption in the financial sector, and effectively resolved major financial risks since the 19th Party Congress in 2017. However, financial work units still have many outstanding problems in implementing the Party’s overall leadership, strengthening Party building, and comprehensively and strictly governing the Party.
• The meeting stressed the need for strengthening the prevention and control of financial risks, and resolutely safeguarding the overall financial stability situation. The central government will simultaneously advance the punishment of corruption in the financial sector and the disposal of financial risks, seriously pursue accountability and the recovery of stolen assets at the same time, and simultaneously advance the establishment and strengthening of financial management systems.
• The meeting fully affirmed the work of the Central Inspection Leading Group in 2021 and approved of its work arrangements for 2022. The Central Inspection Leading Group also pledged to consolidate and deepen political inspections, as well as highlight the political and people-oriented nature of inspections, on the premise of upholding Xi Jinping’s “Two Establishes” (兩個確立) and other political slogans.

OUR TAKE
1. Xi Jinping’s top priority for 2022 is convening the 20th Party Congress without a hitch and securing a norm-breaking third term in office. The Xi camp is currently working towards that goal by rolling out propaganda piece after propaganda piece extolling Xi, his political thought, and his political “achievements.” Concurrently, the Xi camp is weeding out and chilling opposition to Xi’s third term bid through the anti-corruption campaign and the push for “self-revolution,” with a focus on the political and legal affairs apparatus, the financial sector, and officials associated with the Jiang Zemin faction.

Xi has no choice but to resort to political purges, increased draconian control over society, mind-numbing propaganda, and political mobilization to secure his political objectives. With his “quan wei” (authority and prestige) still lacking and his political “achievements” tanking one by one, strongman measures are the only tools that Xi can rely on at the moment.

Strongman measures are also necessary from Xi’s vantage to deal with the “complex and severe domestic and international situations” facing the CCP regime and its “many risks and challenges.” At home, Xi has to cope with escalating factional struggle in the CCP elite, a rapidly deteriorating economy and its impact on society, the property sector debt crisis and financial contagion, growing public anger and eroding confidence in the regime over societal flashpoints (“Xuzhou chained woman” incident, humanitarian crises pertaining to natural disasters and the COVID-19 pandemic, etc.), and more.

Abroad, Xi has to navigate an increasingly fraught geopolitical climate following Russia’s invasion of Ukraine, mounting pressure to secure “reunification” with Taiwan given the aforementioned conflict in eastern Europe, and growing negative attitudes and wariness towards China in the international community.

2. Xi Jinping has to oversee certain technical procedures between now and the 20th Party Congress if he is determined to stay in power for another term.

For one, the drafting of the 20th Party Congress report should have started either near the end of 2021 or in January 2022 at the latest. Xi would have to assume the role of leader of the report drafting group if he is set on taking a third term.

Xi also has to navigate a successful Two Sessions in March to build momentum for the 20th Party Congress. Depending on the state of intra-Party factional struggle and Xi’s political strength, the latter could take the opportunity of the Two Sessions and the conclusion of the political and legal affairs apparatus “education and rectification” campaign in March to conduct more political mobilization and even purge “big tigers” from rival factions.

Xi’s factional enemies will look to undermine him and carry out political mobilization of their own around the Two Sessions period and near “sensitive” dates for the regime. Political mobilization could include the publication of more material that continues the theme of the “Objective Evaluation of Xi Jinping.” We also do not rule out economic and financial mischief from the “anti-Xi coalition” as they engage in “perish together” faction struggle.

     SinoInsight  2     

OUR TAKE
1. The slower fiscal growth and revenue declines reflected in the budget reports (more accurately, draft reports) released by 30 provincial governments shows their pessimistic outlook towards the Chinese economy this year.

Given the close relations between economic performance and career advancement, PRC officials have long reflected healthy-looking fiscal growth and strong revenue in their budget reports. The admission of lean times across the board in the 2022 budget reports indicates that the economy is doing very poorly, and officials are unwilling to report false growth lest they invite trouble upon themselves. Local officials are likely also looking to make a case to the central government for more handouts this year.

Provincial governments are not being overly bleak in their economic projections for the year. Two years of “Zero-COVID” and draconian lockdowns have indeed placed a great strain on many local economies. For instance, mainland media reported that Henan Healthcare Security made a pre-payment of 7.6 billion yuan for coronavirus vaccines and settled 8.777 billion yuan in vaccine and vaccination costs in 2021, an overrun of 15.4 percent. Meanwhile, interest groups in the pharmaceutical business ended up benefiting immensely from the pandemic at the expense of local governments. In a leaked audio recording, former Harvard–Yenching Institute scholar Huang Wansheng gave the example of how certain companies doing nucleic acid testing made 670 billion yuan during the pandemic as local governments ordered compulsory mass testing with the emergence of one or two positive cases in an area.

2. The CCP’s effort to roll out a national pension system is another sign of the regime’s poor financial state.

A pension actuarial report by the Chinese Academy of Social Sciences (中國養老金精算報告 2019-2050) noted that the current balance of pension funds for employees of urban enterprises across the country will begin to dive at an accelerated rate after barely maintaining a positive number for a few years between 2019 to 2050, with the deficit growing increasingly larger. Further, the current balance was already negative in 2019 (minus central financial subsidies), and is set to decline even faster by 2050 to negative 16.73 trillion yuan.

3. The CCP’s focus on payment codes and anti-money laundering policies are likely connected with Xi Jinping’s crackdown on capital and the PRC government’s effort to boost fiscal revenue. The recent moves to slow down the implementation of tough policies and measures, however, suggest that Beijing is either running into resistance or is wary of those policies and measures ending up having a counterproductive effect given present economic conditions and the regime’s political culture.

On the one hand, Xi needs to rein in the “disorderly expansion of capital,” the financial sector, and the entertainment industry to curb capital outflows and gain decisive advantage in intra-Party factional struggle. On the other hand, Xi’s “anti-capital” (including the “common prosperity” policy) measures are causing a degree of panic in the populace and chilling the business environment, to the detriment of the economy.

The Xi leadership is also plagued by the “prefer left rather than right” and “one-size-fits-all” approaches to policy implementation by local officials. Those approaches sometimes benefit local officials and may work in the short-term; local governments may see spikes in tax revenue after they find ways to make the new “personal business codes” mandatory, for example. However, those approaches invariably hurt regime interests in the long run by curbing economic activity, weakening local government revenue base, creating greater societal chaos, and eroding confidence in the Party and the government.

4. Xi Jinping’s “quan wei” (authority and prestige) will steadily weaken as China’s economy deteriorates, officials “lie flat” or embrace self-destructive approaches to policy implementation, and the government flip-flops on policy. This will end up benefiting Xi’s factional rivals and strengthen their “anti-Xi” political mobilization.