Duowei News ceases all operations; Beijing turns to infrastructure investment, property policy easing to rescue the economy

     SinoInsight  1     

OUR TAKE
Duowei is known to carry messaging from various factions in the CCP elite. It is also widely regarded as being part of the Party’s “Great External Propaganda Plan” (大外宣) network.

Duowei frequently carried articles that are very critical of Xi Jinping and his policies. Notable examples that we previously documented include:

• December 2018: Duowei published a lead article titled, “Xi Jinping Should Take Responsibility for the Extreme Leftism That is Tearing Apart China.” The article came amid escalating Sino-U.S. tensions and the Trump administration’s trade war, as well as growing Party elite pressure on Xi.
• May 2021: Duowei published, “Dangerous Party History is Substituting One Kind of Meaninglessness for Another Kind of Meaninglessness,” attacking Xi’s “Four Histories” and Beijing’s propaganda and education initiative.
• October 2021: Duowei published, “Spring and Autumn Pen | The Inside Story of Qiao Guanhua’s Betrayal of Zhou Enlai and the Shifting of Allegiance to Jiang Qing.” The article appeared to cast Xi as a “counter-revolutionary” element like the “Gang of Four” and urge Party members not to seek refuge with the Xi camp in its dying days (like Qiao Guanhua aligning himself with the “Gang of Four” before its demise).
• Jan. 14, 2022: Duowei published, “Xi Jinping Intensively Emphasizes Historical Self-confidence; ‘Five Confidences’ Soon to Emerge.” The article appeared to warn Xi against issuing a “simple denial” of Jiang’s political legacy lest it lead to the disintegration of the regime.
• January 2022: Duowei issued a series of articles commemorating the 30th anniversary of Deng Xiaoping’s Southern Tour. The series pushed back against Xi and his “historical resolution” in several subtle ways, including arguing that Xi’s political legacy is a continuation of Deng’s, Deng should not be faulted for the ills of “reform and opening up,” and that Xi should be “dethroned” if he does not stick to Deng’s hallmark policy. The series also sought to “redeem” Xi’s chief factional rival Jiang Zemin.
• February 2022: Duowei published, “The Beijing Winter Olympics is Showing an Unexpected Side of China’s Circle of Friends.” The article obliquely mocked Beijing over its miserable diplomatic efforts during the Winter Olympics and the failure of Xi’s “great power diplomacy” (大國外交).
• April 7, 2022: Duowei published, “Will the Shanghai Epidemic Affect Li Qiang’s Career?” The article indirectly attacked Xi and his political ally Li Qiang over their disastrous handling of the Shanghai COVID-19 outbreak.
• April 12, 2022: Duowei published, “Shanghai Epidemic | Precision Epidemic Prevention Is Not Wrong.” The article faulted Xi’s “zero-COVID” policy for the fiasco in Shanghai, and defended Li Qiang’s “precise epidemic prevention” policy in what appeared to be an effort to drive a wedge between the two.

Part of the reason for Duowei’s recent closure could indeed be financial, as reported by United Daily News. Businesses in Hong Kong and the mainland have suffered immensely under the highly restrictive “zero-COVID” policies, and Nan Hai Corporation might be making a prudent and pragmatic effort to cut its losses by shutting down Duowei. It is also possible that the CCP regime has much less funds than before to support its “Great External Propaganda Plan” network, and needs to abandon some operations.

Factional struggle in the CCP elite is almost certainly another factor behind Duowei’s closure. Duowei’s ability to avoid being shut down in prior years despite having published so many articles attacking Xi Jinping and his leadership indicates that the media outlet likely has both political and financial backing of very influential anti-Xi factional elements in the Party elite. Otherwise, Duowei would not have survived nearly a decade in Beijing under Xi’s rule, and especially not when the CCP is generally intolerant of critical voices and “hostile foreign forces.” Duowei’s longevity further shows that Xi did not have much of an advantage over his factional rivals during his second term in office despite having seemingly consolidated power to a high degree at the 19th Party Congress. The recent closing of Duowei thus hints at the waning influence and wealth of anti-Xi factional elements supporting the media outlet.

Duowei’s closure also signals Xi Jinping’s growing determination to eradicate dissent and opposition to his rule from factional enemies. Xi has clearly been stepping up factional struggle efforts around the Sixth Plenum of the 19th Central Committee period in October 2021 (see here, here, here, and here), and his rivals have done likewise (see here, here, and here). With the 20th Party Congress on the horizon and his political “achievements” evaporating one after the other, Xi appears to be steeling himself to take the anti-corruption campaign into “deep water territory” and engage in “perish together” struggle with his foes, even if it means sharply elevating his personal political risk levels. On top of that, Xi seems to be prepared to more deeply alienate the Party elite on the whole in shutting down a rare channel that they have been using to publicly vent their frustrations (albeit through the CCP habit of speaking in code and allusions) and conduct political mobilization against the Xi leadership. Xi’s apparent willingness to take on more political risks could be due to mounting “anti-Xi, not anti-CCP” efforts in recent months and what looks like a coming spike in pressure from Washington. Hence, Xi would find it imperative to at least get the domestic front in order by eliminating a prominent Beijing-based “anti-Xi” media, curbing hostile political mobilization against him, and tightening control over public discourse in general.

Going forward, more signs could emerge in the lead up to the Beidaihe meeting in the fall that Xi Jinping is preparing to purge factional rivals, including several “big tigers.” There are already some signs that Xi is laying the groundwork to do something big, including news that the Central Commission for Discipline Inspection is one of the agencies examining links between Jack Ma’s Ant Group and PRC state-owned companies, as well as the Xi leadership reportedly acquiring a list containing bank account information of the Party elite from the Swiss authorities.

Xi could also look to “rectify” pro-CCP Hong Kong media outlets with suspected factional leanings. This includes HK01 (under the same ownership as Duowei) and the South China Morning Post (owned by Alibaba Group; Jack Ma appears to have Jiang faction connections). Such outlets could announce closure like Duowei did, find themselves under new (i.e. Xi camp) leadership, or shift editorial direction to be more in line with Xi leadership messaging or at least be less adversarial (something that could result from factional compromises).

     SinoInsight  2     

• China’s infrastructure is not yet compatible with national development and security needs. It is thus of great significance to comprehensively strengthen infrastructure development to guarantee national security, smoothen domestic circulation, promote domestic and international dual circulation, expand domestic demand, and promote high-quality development.
• There is a need to strengthen the construction of network-type infrastructure such as transportation, energy, water conservancy, etc. Construction should focus on networks, supplementing networks, and strengthening network chains to improve network efficiency.
• There is a need to increase financial investment in infrastructure construction, promote government and social capital cooperation, and guide social capital to participate in the investment and operation of municipal facilities.
• There is a need to coordinate the two major issues of development and safety, firmly establish bottomline thinking, effectively strengthen the ability to predict and warn of major risks, and have practical and effective response plans and specific actionable measures.

OUR TAKE
1. Beijing’s “zero-COVID” approach to dealing with the Shanghai outbreak has proven to be more destructive than effective.

A Shanghai epidemic prevention and control press conference on April 26 disclosed that the city’s cumulative Omicron infections had exceeded 500,000 cases as of April 24. The press conference also noted that an infected person can transmit the virus to 9.5 people on average, and Shanghai’s asymptomatic rate is about 90 percent. The over 500,000 cases represents a significant increase from the 43,000 cases at the start of the city-wide lockdown on April 1, and Omicron’s high transmissibility suggests that cases will likely soar beyond 500,000 going forward. In other words, “zero-COVID” is failing to control the virus.

Worse, “zero-COVID” is resulting in unnecessary losses and infuriating tragedies. The Shanghai population is suffering from the policy’s collateral damage, including people dying from suicides, starvation (despite sufficient supplies in the city), and being unable to access medical treatment for illnesses other than COVID-19. The local economy is also taking a hit with business and manufacturing suspensions. More broadly, work suspensions will impact property sales and worsen the real estate sector debt crisis, as well as lead to rising unemployment. The lockdown of agricultural regions like Jilin is affecting the spring harvest and food production.

Beijing’s continued adherence to “zero-COVID” will prolong the “political epidemic” in China. Unless the policy is reversed soon, the resulting damages and political consequences could be akin to a mini-“Great Leap Forward.”

2. Beijing is almost certainly aware that its epidemic prevention policy and economic policy contradict each other, and officials will have trouble implementing both policies satisfactorily. With Xi Jinping needing to preserve his political legacy in a Party Congress year, however, the central government has little choice but to proceed with the current course of action.

Beijing is looking to preserve its “great, glorious, correct” image by relying on experts to “explain” how “zero-COVID should be correctly carried out (“dynamic zero-COVID,” not “absolute zero-COVID,” etc.). In doing so, Beijing is looking to distance itself from the disastrous consequences of its epidemic prevention policy and shift the blame to local governments who did not properly “understand” and implement “zero-COVID” in the “intended” manner.

Meanwhile, local officials continue to prioritize self-interests over regime interests. This has led to “prefer left rather than right,” “one-size-fits-all,” and “campaign-style” implementation of “zero-COVID,” to the detriment of local residents. Residents have also exposed local officials and businessmen colluding with each other to profit off the lockdowns. Information circulating on Chinese social media noted how unscrupulous officials and businessmen hoarded supplies and resold them through local government organizations at high prices to residents. For example, a district leading cadre in Shanghai demanded that a lunch box provider pay a rebate of 20 yuan per box when it delivered 40,000 lunch boxes each day to quarantine points. With a daily rebate of 80,000 yuan, local cadres would make at least 24 million yuan after a month of lockdowns just by facilitating the provision of box lunches to residents; more sums could be made from similar schemes for other supplies. Residents further noted that the officials and businessmen were willing to let food go to waste rather than hand them out for free. This resulted in cases where people starved even though there was abundant food and supplies in some areas.

Senior officials also stand to benefit from extending the epidemic situation. An April 24 FT article noted that top PRC epidemiologist Zhong Nanshan has promoted COVID-19 treatments without disclosing his ties with the manufacturers. And in February, Xi camp adviser Huang Wansheng said that “massive interest groups” in the pharmaceutical business and government were taking the opportunity of the pandemic to rake in billions.

With officials finding ways to profit off the pandemic, they would be more motivated to maintain “absolute zero-COVID” than go with Beijing’s “dynamic” and “scientific” approach. This would in turn impede Beijing’s economic policy, stymie economic development, and torpedo the Xi leadership’s efforts to rescue the economy. Party culture will doom Xi’s bid to ensure that China’s economic growth exceeds the U.S.’s this year, and will instead highlight the serious deficiencies of the CCP’s totalitarian dictatorship. Of course, officials could attempt to meet economic targets through fraudulent data, but signs of China’s economic deterioration could become too obvious for the numbers to bear scrutiny.

When regime crisis becomes more severe, local officials will claim that they were “just following orders” and pass the buck to the central government. Ultimately, Xi Jinping and the central government will have to take responsibility for endangering regime security through the current policies.

3. The FT report about Liu He and others meeting with opposition to their economic policies from Han Zheng and Hu Chunhua indicates growing internal contradictions at the top. Han and Hu could be sticking to a more rigid interpretation of property policy due to “political correctness” and being risk-averse in a Party Congress year. Both officials face elevated political risk levels this year; Han Zheng has long been associated with the Shanghai Gang and the Jiang Zemin faction, and Hu Chunhua, while being an ally of Hu Jintao (no relation), represents a threat to Xi because he has frequently been tipped as potential leadership successor. There is also a possibility that “anti-Xi” forces are working to interpret Xi’s policies in the most extreme fashion in the hopes that he falls on his own sword and has to hand over some power like Mao Zedong after the “Great Leap Forward.”

Liu He’s efforts at easing real estate policy and avoiding rate cuts are in line with the Xi camp’s attempts over the past decade to defuse financial risks while still keeping up economic growth. The CCP system’s inefficiencies, officialdom’s political proclivities (“prefer left rather than right,” “one-size-fits-all,” etc.), and factional struggle maneuvers mean that Beijing is often forced to vacillate between deleveraging and loosening economic policy. As long as the CCP system is in place, Xi Jinping will not be able to turn around the economy regardless of what he does, but will instead make matters worse and hasten the regime towards a “Berlin Wall moment.”

The Xi leadership’s focus on infrastructure construction and investment to save the economy is likely to be ineffective, as we explained in the previous newsletter. Internal contradictions at the top and factional struggle will further hamper economic rescue efforts.

4. As Beijing struggles to get its policies working and as factional struggle intensifies, Xi Jinping will have greater incentive to crack down hard on wayward officials and political enemies through the anti-corruption campaign. Xi’s purges are likely to inspire even greater pushback (including “laying flatism” and “passive resistance”), worsening the economic situation and further endangering the regime.