SinoInsight 1
The Xi leadership’s “rectification” of the political and legal affairs apparatus saw further developments recently. In particular, purges in the financial system hint that corruption had a role in accelerating China’s economic deterioration and ongoing troubles.
Political and legal affairs apparatus
Policy direction
On May 18, Wang Xiaohong, Ministry of Public Security Party secretary and deputy minister in charge of daily work, presided over an expanded study session of the MPS Party Committee on studying Xi Jinping’s “important discourses on political and legal affairs work.”
The meeting urged attendees to:
- Do their best to maintain the security and stability of the 20th Party Congress, focus on forging hardened public security teams according to the “four iron-likes” (“iron-like” ideals and beliefs, responsibility, excellent skills, and discipline style), effectively safeguard the overall situation of Party and country work, and victoriously welcome the 20th Party Congress with practical actions to maintain security and stability.
- Strengthen the high degree of consciousness of serving the overall situation of Party and country work. Improve political judgment and correctly understand the overall situation. Ensure that the spirit of General Secretary Xi Jinping’s important instructions and approvals, as well as Party Central’s decisions and deployments, are implemented without compromise, and that the “two safeguards” are effectively implemented into action.
- Make every effort to maintain national political security and overall social stability. Always prioritize guarding against political security risks. Strictly guard against and severely crack down on the infiltration, subversion, disruption, and sabotage activities of hostile forces at home and abroad.
- Continue purifying the political ecology, and resolutely and thoroughly eliminate the poisonous influence of Sun Lijun’s political gang.
Purges
May 9
Wan Kai (age 49), former deputy Party secretary and mayor of Ganzhou City in Jiangxi Province, was investigated.
Wan served as a police officer in Jiangxi’s Nanchang City in his formative years. From June 2010, he held various positions in the Jiangxi public security system and the Jiangxi government. From August 2019 to December 2019, Wan served as Party Committee member, deputy Party secretary, deputy director, and executive deputy director of the Jiangxi Provincial Public Security Bureau. From December 2021 to May 2022, Wan served as Ganzhou deputy Party secretary and mayor.
May 10
Liu Cheng (59, retired in October 2021), former deputy Party secretary and secretary-general of the Hainan Provincial Political and Legal Affairs Department, was investigated.
Liu spent the bulk of his career in the Hainan Provincial High Court and the Sanya City court and Party Committee. He previously served as deputy Party secretary of the Hainan High Court’s Party group (bureau level) and court vice president.
May 15
Yang Guangming (68, retired in February 2018), former deputy Party secretary and executive deputy director (bureau level) of the Tibet Autonomous Region Public Security Bureau, was investigated.
Yang was a career police officer in Tibet. Before retiring, he served as deputy director of the Social, Legal, and Foreign Affairs Committee in the Tibet Autonomous Region Political Consultative Conference (January 2013 to February 2018).
May 17
1. Li Chenghui (54), Party secretary of Hami City in the Xinjiang Uygur Autonomous Region, was investigated.
Before becoming Hami Party secretary, Li served as deputy Party secretary, deputy director, and political department director of the Xinjiang Uygur Autonomous Region Public Security Department (February 2017 to June 2018), as well as deputy Party secretary of the Kashgar Municipal Political and Legal Affairs Commission (June 2018 to November 2018).
2. Liu Leguo (65, left post in September 2018, retired in March 2019), member of the Liaoning Provincial Public Security Bureau Party Committee, was investigated.
Liu was a career public security official in Liaoning. He previously served as captain of the Liaoning Provincial Public Security Bureau Public Security Corps (October 2003 to September 2008), member of the Liaoning PSB Party Committee (September 2008 to September 2018) and Liaoning PSB deputy director (September 2008 to June 2013), and director of the Dalian Municipal Public Security Bureau (July 2013 to November 2017).
Financial system
May 8
1. Gao Haisheng, Party Committee member and vice president of the Bank of China’s Gansu Branch, was investigated.
2. Chen Yong (58), former deputy Party secretary, vice chairman, and president of China Continent Property & Casualty Insurance Co. Ltd., was investigated.
May 9
Xu Jihong (57), vice president of Jiangxi Bank and secretary of the board of directors, was investigated. Previously on March 25, Jiangxi Bank’s former chairman Chen Xiaoming (56) was investigated.
May 11
1. Su Shude (60), former Party secretary and president of China Everbright Bank’s Nanning Branch, was investigated. Earlier in April 2016, Su was transferred away from his position as bank president to the sinecure post of inspector at China Everbright Bank.
2. Huang Xi (58, female, resigned in July 2018), former general manager of China Construction Bank’s Institutional Business Department, was investigated. Huang previously took a position in Tahoe Group after leaving China Construction Bank in July 2018.
May 13
1. A “relevant person-in-charge” at the China Banking and Insurance Regulatory Commission said in a press briefing on recent market operations:
- Financial anti-corruption work and risk disposal will be jointly promoted.
- The authorities will resolutely investigate and deal with the corruption behind risk and chaos, and severely punish all kinds of regulatory failures, illegal, and criminal acts.
- A strict atmosphere of “strong supervision and regulation” (強監督強監管) is taking shape with the significant intensification of financial anti-corruption and chaos control.
- A number of major cases that had a bad influence on the market were decisively investigated and dealt with. Also, a number of corrupt elements who colluded with officials and businesses, channeled interests, and carried out illegal appropriations were brought to justice. Some of the corrupt elements were the staff of financial management departments, who were guilty of “embezzlement” (監守自盜).
- Since 2021, 63 small- and medium-sized banks in Liaoning, a province hit hardest by financial risks, have either detained or taken criminal coercive measures against their leading cadres (一把手). Also, a total of 630 financial corruption cases have been filed within the CBIRC system since the 19th Party Congress, resulting in 83 persons being detained and 73 persons being handed over to judicial organs.
2. Mainland media 21st Century Business Herald found in compiling statistics that at least 24 cadres in the financial system have been investigated since the start of the year. Of the 24 cadres, two are from the CBIRC (including the former China Banking Regulatory Commission) and the rest are from large state-owned banks, joint-stock banks, city commercial banks, and non-banking institutions. The bulk of the cadres were investigated for issues related to the banking institutions where they previously served.
Since April this year, four of the 24 cadres were investigated over issues directly relating to China Construction Bank. The four are Wang Ye (former president of the China Construction Bank Shenzhen Branch), Zhang Xueqing (former vice president of the China Construction Bank Shenzhen Branch), Han Fenglin (former risk director of the China Construction Bank Shenzhen Branch), and Huang Xi (former general manager the China Construction Bank Institutional Business Department). 21st Century Business Herald noted that there is speculation in the industry that the investigation of the four cadres is connected to Tahoe Group chairman Huang Qisen, who was investigated on March 16.
Meanwhile, the two investigated CBIRC officials (or more precisely, China Banking Regulatory Commission officials as they were with the regulator before institutional reforms in 2018) were previously directors of the CBIRC’s Institutional Supervision Department of Small- and Medium-sized Rural Banks (or Institutional Supervision Department of Small- and Medium-sized Rural Financial Institutions before the 2018 institutional reforms). Jiang Liming, one of the CBRC officials, was investigated on April 2. Jiang left the CBRC in November 2016 and served as chairman of the board of supervisors at China Evergrande Group. She later became a vice president at Evergrande in December 2017 and resigned in December 2020. Guo Hong, Jiang’s successor at the CBIRC, voluntarily surrendered himself for investigation on March 30.
May 18
1. Sun Guofeng (50), former director of the People’s Bank of China’s monetary policy department, was investigated. The probe into Sun is centered on whether he shared macroeconomic indicators, such as those measuring inflation, with individual bond traders at select financial institutions in exchange for personal gains, according to The Wall Street Journal, citing people familiar with the matter. According to Caixin, Sun was notified that he had been dismissed and was placed under investigation when he arrived for work at the central bank on the morning of May 18.
Sun spent the bulk of his career in the PBoC’s monetary policy department. From August 1996 to October 2016, Sun progressed from being a minor cadre in the department to deputy director. From October 2016 to August 2018, he served as director of the PBoC’s financial research institute. In August 2018, he was promoted to director of PBoC’s monetary policy department.
According to mainland media reports, Sun Guofeng is a protégé of current PBoC governor Yi Gang and was heavily involved for many years in reforming the central bank to keep it up to date with modern finance. Sun reportedly opposed the aggressive loosening of monetary policy when the CCP leadership had urged the implementation of more measures to support the weakening economy. People close to Sun told mainland media that he had previously believed that credit easing would only fuel speculative bubbles and could lead to excessive capital outflows during periods of sluggish economic growth.
May 19
Su Xinfa (56, resigned in March 2021), a former Party Committee member at PICC Investment Holding Co. Ltd., was investigated.
OUR TAKE
1. The May 18 expanded study session of the MPS Party Committee offers a glimpse of the Xi leadership’s present political priorities and concerns.
Xi Jinping is evidently preoccupied with “victoriously welcoming” the 20th Party Congress this year, or securing his political agenda items like extending his tenure as Party boss and getting favorable key personnel reshuffles. To that end, Xi has attached great importance to having the Party’s “knife handle” (刀把子; i.e. the political and legal affairs apparatus) be absolutely loyal to him, hence the need to ramp up indoctrination via the study session to go over his “important discourses on political and legal affairs work.” Concurrently, Xi is likely aware or suspects that his orders are still not leaving the gates of Zhongnanhai (政令不出中南海), and sought to remind political and legal affairs cadres to implement “without compromise” the spirit of his “important instructions and approvals,” as well as Party Central’s “decisions and deployments.”
The study session’s call to “resolutely and thoroughly eliminate the poisonous influence of Sun Lijun’s political gang” indicates that the work is not yet done despite Sun’s arrest and recent “rectification” efforts. Going forward, the Xi leadership will likely purge more political and legal affairs officials connected with Sun, the “610 Office,” and the Jiang Zemin faction. Supreme People’s Court president Zhou Qiang, Central Political and Legal Affairs Commission secretary Guo Shengkun, and former CPLAC secretary Meng Jianzhu are at risk of being investigated. Meanwhile, Sun and his former colleague Fu Zhenghua could be severely punished as Xi Jinping looks to intimidate those who seek to oppose him ahead of the 20th Party Congress.
The call to “prioritize guarding against political security risks” and “severely crack down” on internal and external “hostile forces” could have been issued with an eye on recent developments. The Xi leadership would have certainly noticed growing “anti-Xi, not anti-CCP” efforts at home and abroad (see here and here), as well as the spread of political rumors and speculation about Li Keqiang’s “rising profile,” Xi’s “shrinking statue,” or a “Xi-Li split.” Further, the Xi leadership would be worried about rising social instability resulting from the “zero-COVID” lockdowns and problems associated with China’s rapid economic deterioration. To prevent the aforementioned issues from undermining his leadership and the regime, Xi is looking to the political and legal affairs apparatus to step up “stability maintenance” work and eliminate political security risks. That Xi feels the need to demand that the political and legal affairs apparatus make the curbing of political risks a priority at this time also suggests that the political problems facing his leadership are not trivial.
2. The purge of the five political and legal affairs officials (including two that moved on to the government apparatus) listed above could be connected to the education and rectification campaign of the apparatus that was scheduled to have concluded in March.
It is possible that other political and legal affairs apparatus cadres had exposed the corruption of the five officials during the education and rectification campaign, resulting in their investigation. All five officials also happened to spend the bulk of their respective careers (one judge, four policemen) in the political and legal affairs apparatus during the Jiang faction’s era of dominance, which suggests that they could have been targeted for factional struggle or loyalty reasons.
3. The purge of financial sector cadres is in line with Xi Jinping’s 2017 campaign to prevent and defuse financial risks, including the crackdown on “disorderly expansion of capital” that began in 2021. If former PBoC monetary policy department director Sun Guofeng had indeed shared macroeconomic indicators for personal gain and to the benefit of financial institutions, then he was in direct breach of Party Central’s order to maintain the “six stabilities” (in particular, “stable financing,” “stable foreign trade,” “stable investment,” and stable expectations) while facilitating the spread of financial risks.
The Xi leadership’s persistence in “rectifying” the financial sector despite China’s poor economic performance in April and obvious signs of recession seems counterintuitive at first glance. However, because economic performance and financial risk in the PRC are closely linked to corruption and CCP politics, Xi is unable to relax efforts to purge the financial sector even if it generates greater financial and political risk for the regime.
The link between financial risk and politics can be glimpsed from official and mainland media reports.
A prominent recent example is the indictment of Sun Lijun this January. Aside from the usual string of corruption charges, state prosecutors in Changchun City also charged Sun with the “particularly serious” manipulation of the securities market and the illegal possession of firearms. While there was no further elaboration on the charges, the fact that they were made hints at deep collusion between business and financial interests and at least some high-ranking elements of the political and legal affairs apparatus. Political and legal affairs officials have much to offer business and financial interests, including tapping into “stability maintenance” surveillance networks and technology to help business and financial executives secure advantages over their rivals, or even threatening police action and detention to the competitors of the executives they are aligned with.
Another example is the anti-corruption agency’s “admission” in September 2021 that some leading cadres have been “captured” by interest groups. The Central Commission for Discipline Inspection noted in an article on its website that Xue Jining, the former Party secretary and director of the Inner Mongolia Banking Regulatory Bureau, was “surrounded and captured” by “lawbreaking financial groups and Baoshang Bank.” Xue had helped Baoshang Bank, which is linked to Tomorrow Group, set up branches in Shenzhen, Chengdu, and Beijing in violation of regulations. Tomorrow Group founder Xiao Jianhua is widely believed to be a “white glove” (bagman) of the Zeng Qinghong clan, the Jiang faction, and other Party elite.
The Xi leadership’s “rectification” of the financial sector has unearthed many problems with small- and medium-sized banks like Baoshang Bank. In mid-March, the China Banking and Insurance Regulatory Commission announced that its “three-year investigation and rectification action of shareholders’ equity in small- and medium-sized rural banks” found 19,900 problems. The bulk of the problems were reflected in unqualified shareholder qualifications, non-compliant sources of equity capital, evasion of “penetrating” supervision, and two other unstated issues.
On March 31, the CBIRC announced that it would “resolutely punish corruption behind major financial risks” and “focus on high-risk institutions and regions.” The regulator also said that it would “continue to investigate and deal with major risk events,” including the “transfer of interests behind financial casts, regulatory failures (especially the disruption of regulatory order), market order, and [that/those which] cause major losses of state-owned financial assets and even trigger risk events.” Perpetrators would be “severely punished.” The arrest of former CBIRC officials and small- and medium-sized rural financial institution directors Jiang Liming and Guo Hong in early April appears to be linked with the CBIRC’s announcement, and the hints at official-business corruption being a factor behind the problems with China’s small- and medium-sized banks.
Around late April, news emerged that four local banks in Henan Province had frozen all deposits on April 18 after telling their customers that they were upgrading internal systems. According to some mainland media reports, the frozen amount in three of the banks—Yu Zhou Xin Min Sheng Village Bank, Shangcai Huimin Country Bank and Zhecheng Huanghuai Community Bank—could total $1.5 billion. Mainland media reports on May 1 said that the CBIRC was investigating the matter. Meanwhile, mainland media also reported that Xinhuaihe Village Bank in Anhui’s Guzhen County has similar problems as the Henan banks. Reuters noted on May 18 that China’s smaller banks have “outsized significance because they lend to small and mid-sized firms so their activity can be an indicator of the health of the economy.”
Beijing’s effort at financial “rectification” is partly aimed at saving the economy, rooting out corruption, purging factional rivals, and weakening the ability of Party elites to influence and profit from the financial sector. The “rectification” effort will almost certainly result in pushback and resistance toward the Xi leadership given that the massive interests of influential Party and business elites are at stake. In striving to save the economy and rein in political and financial risks, Xi Jinping may instead be seriously endangering the CCP regime by creating the conditions to trigger those risks.
SinoInsight 2
Global food crisis
May 12
A United States Department of Agriculture (USDA) report on world agricultural supply and demand estimates projected global wheat production to fall 4.5 million tons to 774.8 million tons for the 2022-2023 marketing year, the first decline since the 2018-2019 marketing year.
The report added that increased wheat production in Canada, Russia, and the U.S. only partly offsets reduced production in Ukraine, Australia, and Morocco. Wheat production in Ukraine for the 2022-2023 marketing year is forecasted at 21.5 million tons, down 11.5 million from last year. The USDA also forecasted wheat production in the European Union, India, Australia, and Argentina for the 2022-2023 marketing year at 136.50 million tons, 108.50 million tons, 30 million tons, and 20 million tons respectively, all lower than the previous marketing year’s level.
May 14
India, the world’s second-largest producer of wheat, announced a ban on wheat exports due to record high domestic prices and to ensure sufficient domestic food supply amid a heat wave.
The Indian government said that it would still permit exports backed by letters of credit that had already been issued, as well as to countries that require supplies to meet food security needs. New Delhi previously pledged to supply wheat to countries that depend on Ukraine’s exports. A senior government official told a press conference that the export ban was not permanent and could be revised.
India was looking to export large quantities of wheat before a heat wave from mid-March forced the government to cut production estimates to 105 million tones from 111 million tons in February. Previously, India exported a record 7.85 million tons of wheat in the fiscal year to March, an increase of 275 percent from a year ago. India was also contracted to export 4.5 million tons before the ban.
On May 16, global wheat prices rose 6 percent in light of India’s wheat export ban announcement. Wheat futures traded in the Chicago Board of Trade rose 5.9 percent to $12.47 a bushel, according to the Financial Times, a two-month high.
On May 17, US Ambassador to the United Nations Linda Thomas-Greenfield urged India to rethink its export ban. “We’re encouraging countries not to restrict exports because we think any restrictions on exports will exacerbate the food shortages … We hope that (India) can, as they hear the concerns being raised by other countries, that they would reconsider that position,” she said.
May 18
U.S. Secretary of State Antony Blinken chaired a UN ministerial meeting on global food security. During the meeting, Blinken pledged an additional $215 million in emergency food assistance to Ukraine.
China’s food and grain issues
May 8
The Henan Provincial Department of Agriculture and Rural Affairs issued an internal memo marked “extremely urgent” to agriculture and rural affairs departments at all levels in the province on the phenomenon of “destroying wheat and using wheat as silage.”
The memo said that the phenomenon exposed a “small number of local cadres and relevant stakeholders” who are not “well-positioned” to maintain national food security and have “low awareness” in protecting the interests of farmers. Agriculture and rural affairs departments at all levels must fully understand the seriousness of wheat being a main staple and that it cannot be used for silage. Those departments must consciously shoulder the heavy responsibility of food security from the perspective of politics, the overall situation, Party discipline, and people’s lives.
Background: Known as the “granary of the Central Plains,” Henan came in second only to Heilongjiang Province in the 2021 provincial grain production rankings. Public reports show that wheat output in Henan (over 70 billion kilograms) accounts for one-fourth of China’s total.
Silage is a type of fodder made from green crops.
May 10
1. The Ministry of Agriculture and Rural Affairs published a report on comprehensively investigating wheat destruction and the preservation of summer grain harvests (全面排查各類毀麥情況 確保夏糧顆粒歸倉).
In introducing the report, a “person-in-charge of the relevant department” in the Ministry told mainland media outlets that the Ministry attaches great importance to recent reports that wheat had been destroyed in some places and a short video on “cutting green wheat for fodder” that was circulating on the internet.
The person-in-charge said that the Ministry had notified all localities to conduct further comprehensive investigations and deal with those who violate laws and regulations. The person-in-charge added that wheat is due to be harvested in about 20 days, and work to convert some wheat fields into construction land should only begin after the harvest is done. The person-in-charge urged people to “cherish the fruits of more than 200 days of labor of our farmer friends” and noted that protecting China’s rice bowl is everyone’s work.
2. Mainland media jiemian.com reported that videos have recently been circulating on the internet showing farmers in some wheat-growing areas in the north harvesting wheat in advance for conversion into silage. The videos note that one mu worth of silage is being sold for 1,500 yuan or even more than 2,000 yuan, and also show trucks full of wheat silage lining up to enter a farm.
Li Guoxiang, a researcher at the Institute of Rural Development in the Chinese Academy of Social Sciences, told reporters that mature wheat is sold for about 1,300 yuan per mu, so farmers would undoubtedly find the higher sale price of wheat silage to be more attractive.
May 13
Mainland media reported that Wang Zongli, head of the PRC’s National Animal Husbandry Central Station, told representatives of 18 feed-producing Chinese companies that feed production declined in April due to high raw material prices, breeding losses, and epidemic prevention and control measures.
Data from the China Feed Industry Association showed that China’s total industrial feed output was 22.49 million tons in April, down 3.7 percent from March and 10.8 percent from last April. Of the total output, pig feed was 9.63 million tons, a month-on-month decline of 4.7 percent and a year-on-year decline of 15 percent. Soybean meal and corn are staple feeds for pigs and poultry in China.
In providing feedback, representatives of the 18 feed producing companies noted that epidemic prevention and control had led to obstructions in the transportation of feed, raw materials, and productions, rising freight costs, and longer cycle times. Epidemic measures also meant that products could not be delivered on time, raw material suppliers could not deliver their goods in a timely manner, and both suppliers and sellers were forced to delay transactions, resulting in a higher risk of default.
Mainland media also reported that the Ministry of Agriculture and Rural Affairs stated in a market warning forecast report in May that corn planting area in China would decrease 12 million mu to nearly 640 million mu during the 2022 to 2023 period. The Ministry noted that this is chiefly the result of China’s vigorous promotion of soybean and oil crop production, including expanding soybean planting area.
The market warning forecast report also estimated that soybean prices will remain high during the 2021 to 2022 period. The wholesale price of China-produced soybeans is expected to range from 6,000 yuan to 6,200 yuan (about $894 to $924) per ton, while the after-tax price range of imported soybeans is estimated at 4,500 yuan to 4,700 yuan (about $670 to $700).
May 14
Semi-official mainland media The Paper reported that many local governments are urgently investigating the harvesting of unripe wheat and expressing their position on the topic.
For instance, the Bengbu municipal government in Anhui Province announced on its official website on May 11 that the Bengbu Agriculture and Rural Affairs’ Water Conservancy Bureau, the Bengbu Commerce and Foreign Affairs Department, and several other work units had issued emergency notices demanding that wheat destruction be “resolutely stopped.” The notices stated, “The epidemic this year is severe, and food prices will inevitably skyrocket in the second half of this year and next year. A food crisis is inescapable!” The notices also requested that villages promptly report cases of unripe wheat harvesting.
Meanwhile, the Agriculture and Rural Affairs Department of Wei County in Hebei Province announced on May 12 that the majority of farming households or enterprises must recognize turning wheat directly into fodder creates a “struggle” between livestock and humans over food. This action endangers the food security overall situation, and farmers must take a clear-cut stance and put an end to it.
May 19
According to information released by the PRC National Food and Strategic Reserves Administration, the minimum purchase prices this year for wheat, early indica rice, mid-late indica rice, and japonica rice are 115 yuan, 124 yuan, 129 yuan, and 131 yuan per 50 kilograms respectively, or an increase of 2 yuan, 2 yuan, 1 yuan, and 1 yuan from a year ago.
Wheat comprises the bulk of summer grain, or about a quarter of annual production. About 130 billion catties (about 65 billion kilograms) of wheat are expected to be harvested, or roughly the same amount as 2021.
Analysis: Food prices have soared globally due to the Russia-Ukraine war, with wheat prices increasing by as much as 60 percent in Africa. However, the PRC authorities appear to be keeping the increase in food prices artificially low, including the purchase price of wheat going up by just 1.74 percent.
Cultivated land shrinkage
May 12
“China Comment” (Ban Yue Tan, 半月談), a publication under Xinhua, issued an article titled, “Cultivated Land Has Shrunk by 40 percent in 10 Years: What Happened to the ‘Granary of Tianfu’?” (10年耕地面積銳減40%: “天府糧倉”究竟怎麼了?).
The article noted that the plains in Chengdu City of Sichuan Province, dubbed the “granary of Tianfu” (a “heavenly land of plenty”) due to its superior agricultural conditions, saw a two-fifths decrease in its arable land area over a decade. A “China Comment” reporter found that large swathes of arable land in Chengdu’s countryside were being used to grow flowers and citruses. Although the government forced farmers to reconvert the land for grain cultivation, many complained about being unable to sustain the cost because government subsidies for reconversion and grain prices were too low.
“China Comment’s” investigation also found that it is difficult for the local government to supervise and enforce its grain planting requirements at the grassroots level, as well as stop the destruction of cultivated land through the mining of sand. The authorities also struggle to resolve the longstanding problem of reusing large areas of arable land that were previously acquired for construction but eventually abandoned and left in poor condition.
Food apparatus corruption
May 16
The Central Commission for Discipline Inspection announced on its website five typical cases of discipline and legal violations that were reported by the Hubei Provincial Commission for Discipline Inspection involving grain purchase and sales.
May 21
A Legal Daily reporter who combed through the CCDI website found 59 typical cases of corruption involving grain purchases and sales over the past six months. The anti-corruption authorities also identified a group of corruption officials that it dubbed “granary big rats.”
OUR TAKE
Pandemic control measures over the past two years, the Russia-Ukraine war, and rising energy costs are creating a global food crisis. The food crisis has been exacerbated recently with India and other countries banning food exports on various foodstuffs, resulting in a 30-percent rise in global food prices according to the United Nations Food and Agriculture Organization. Pressures exerted by the global food crisis have in turn exposed China’s food crisis, agricultural issues, and the deficiencies of the CCP system.
CCP officials’ “prefer left rather than right,” “one-size-fits-all,” and “campaign-style” approaches to policy implementation have exacerbated the impact of natural disasters and helped transform the COVID-19 epidemic in China into a “political epidemic.” With regard to food and the recent coronavirus outbreaks, many farmers in Jilin Province were forced to leave their fields fallow during the spring plowing period because local officials adhered too rigidly to Beijing’s “zero-COVID” policy. The “zero-COVID” situation forced some farmers to sneak out into their fields to work in the dead of the night, an incident caught on video and widely circulated. The impact of “zero-COVID” on farming, logistics, and supply chains will inevitably cut into China’s grain production in 2022.
The CCP’s unwillingness to privatize land disincentivizes land contractors from investing in arable land and maintaining soil fertility while promoting excessive cultivation. The result, as seen in the case of Chengdu, is rapid soil degradation and huge losses in arable land, as well as a shift away from grain cultivation to the planting of cash crops.
The CCP’s suppression of domestic food prices is almost certainly geared towards maintaining social stability at home as the economy deteriorates and “zero-COVID” affects production and employment. However, keeping prices artificially low sacrifices the interests of Chinese farmers, who are struggling to make ends meet during very tough times. With the increase in demand for animal feed and the low price of grain, farmers naturally took to converting their wheat harvest into more profitable silage, a move that boosts the income of farmers but threatens the regime’s food security. The authorities may have taken steps to address the “wheat destruction” issue, but the damage has been done and China’s food crisis has been aggravated.
Meanwhile, the Xi leadership’s continued investigation into corruption in the food apparatus hints at the seriousness of the CCP’s food crisis. The arrest of only lower-level officials thus far suggests that fraud and corruption in the food apparatus is deep-rooted and that problems are severe. The central government may also be wary of moving against senior officials at the moment lest the scale of the food crisis is inadvertently exposed and lead to societal panic.
As we noted in an earlier newsletter, the CCP appears to have prepared for the worst last year with regard to food problems and had stockpiled a tremendous amount of grain. But if Beijing cannot overcome the various problems associated with its food policy (insufficient subsidies, insufficient incentives for farmers to grow grain, etc.), the “zero-COVID” policy, and persistent problems associated with the officialdom and Party political culture, then China’s food and economic crises will worsen significantly.
When regime crisis intensifies and social tensions boil over, Xi Jinping could double down on “zero-COVID” measures to “maintain stability.” Beijing could also conceivably roll out a covert rationing system through the All-China Federation of Supply and Marketing Cooperatives to tide the regime through a food crisis when the situation becomes dire.
