SinoInsight 1
Epidemic prevention policies
May 26
A “relevant person-in-charge” at the PRC National Healthcare Security Administration told reporters that the cost of normalized nucleic acid testing should be borne by local governments per official guidance, according to state mouthpiece Xinhua. Also, the medical insurance fund will only pay for nucleic acid testing incurred by the participating patients when they see a doctor.
The “relevant person-in-charge” also said that testing agencies cannot charge more than 3.5 yuan per person for multi-person mixed tests in the case of government-organized mass testing and “normalized” testing.
May 28
The local government of Langzhong City in Sichuan Province announced a normalized nucleic acid testing plan that requires all residents to “conscientiously pay their own [testing] expenses” and “get tested at least once a week at the cost of 3.50 yuan per person.”
The following day, the Langzhong local government issued supplementary instructions:
- The instruction to “complete the first round of mass normalized nucleic testing in 28 townships (streets) within 48 hours from May 30 to May 31” was adjusted to “voluntary testing in accordance with the principle of ‘test as much as you want voluntarily’ (願檢盡檢).”
- The instruction to “invite the general public to go for weekly routine nucleic acid testing after May 31, 2022” was adjusted to “it is proposed that the general public voluntarily go to nucleic acid testing points for sampling and testing after taking into account their actual situation and epidemic prevention and control requirements.”
When asked about the instruction adjustments by Party mouthpiece People’s Daily’s health client (人民日報健康客戶端), a Langzhong health commission staff said, “It goes without saying that testing fees are paid at [the residents’] own expense. The government cannot afford it, and it can’t be one-size-fits-all. We’re just following instructions.”
Mainland media also reported that many local governments have shifted away from mandatory mass testing to voluntary testing or self-funded testing.
May 29
Local state media Beijing Daily reported that Hepingli Street in Beijing’s Dongcheng District implemented normalized nucleic acid testing to allow residents to comply with the requirement of holding a 48-hour negative test certificate to enter public places. The report added that residents should engage in voluntary testing per their individual circumstances and are not required to get tested if it is not necessary.
May 30
1. The Shanghai municipal Party Committee and government held a teleconference on coordinating epidemic prevention and control work and economic and social development work. More than 1,100 officials from various government agencies, districts, streets and towns, and state-owned enterprises, enterprises and institutions attended the meeting.
Speaking at the teleconference, Shanghai Party secretary Li Qiang attributed the “major phased achievement of the “Greater Shanghai Defense Battle” to Party Central with Comrade Xi Jinping at the core, the strong support of neighboring provinces, autonomous regions, municipalities, the People’s Liberation Army, and the “continuous struggle throughout the city.” He added that Shanghai must unswervingly adhere to the general policy of “dynamic zero-COVID,” fully grasp normalized epidemic prevention and control, fully restore normal production and living order, “unite” all forces and “mobilize” all positive factors, and “strive to win the double victory of epidemic prevention and control, and economic and social development.”
Li Qiang added that epidemic prevention and control is shifting to the stage of “normalized prevention and control.” He urged officials to “prevent the epidemic, stabilize the economy, and secure development.” Li pointed out that “normalized epidemic prevention and control” calls for normalized and long-term allocation of forces, responsive monitoring and early-warning, rapid emergency responses, comprehensive and firm epidemic defensive lines, and even stronger support and guarantees (for supply chains and people’s livelihood). He also demanded that all levels of local government must take on the “four aspects of responsibility” (四方責任, or responsibility for territory, departments, units, and individuals) when implementing normalized prevention and control.
Li Qiang further noted the necessity of speeding up the resumption of work, production, and businesses without relaxing the normalizing of epidemic prevention and control. Businesses that can resume regular operations should be allowed to open up and proceed with regular operations (“應复盡复”, “應放盡放”) without being handicapped by layer upon layer of restrictions (不能層層加碼). Li also urged officials to fully implement the “package of policies” issued by the central government and the city, make every effort to accelerate economic recovery and revitalization, and “better stabilize market entities, strengthen (economic) driving forces, and benefit the people’s lives” (更好穩主體、強動力、惠民生).
2. The Shanghai epidemic prevention and control leading group office announced that except for medium- and high-risk epidemic areas, access (entry and exit) restrictions to residential areas will be lifted from June 1. The office added that the order was a “unified requirement” (i.e. mandatory for all levels of government to implement) in the city, and no work unit or individual may restrict residents from leaving or entering their communities to partake in work, production, or other reasons.
Testing fraud
May 29
The Beijing municipal government announced that Beijing Zhongtong Lanbo Medical Testing Laboratory (henceforth referred to as Zhongtong Lanbo) had violated standard testing procedures in speeding up their work and saving costs, including mixing multiple samples while testing and incompletely logging test results. The company was officially investigated on the charge of obstructing the prevention and treatment of infectious diseases. Zhongtong Lanbo’s legal representative (“a person surnamed Zhang”) and several others were also investigated.
Zhongtong Lanbo is a wholly-owned subsidiary of the Hong Kong-listed China Isotope & Radiation Corporation. According to publicly available information, Zhongtong Lanbo’s legal representative, manager, and executive director is Zhang Huobing. China Isotope & Radiation Corporation is China’s largest supplier of radiopharmaceuticals for diagnostic and therapeutic imaging, urea breath test kits and testers, and medical and industrial radioactive sources in China. The company is jointly funded by the China National Nuclear Corporation and other institutions.
Zhongtong Lanbo is the third nucleic acid testing lab found to have violated testing procedures since May 20. Two other companies, Beijing Pushi Medical Laboratory and Beijing Jinzhun Medical Testing Laboratory, were previously investigated or subjected to administrative punishment for mixed-sample testing breeches.
Economic policies
May 30
PRC finance minister Liu Kun presided over a video conference on national financial support work to stabilize the economy. The meeting was attended by the financial leading cadres and key regulatory officials of all provincies, autonomous regions, and cities of economic importance. The meeting called for implementing the spirit of the May 25 State Council teleconference on stabilizing the economy, as well as arranging and implementing relevant fiscal policies.
The meeting opened by noting that under the “strong leadership” of Party Central with Xi Jinping at the core, China “strongly coordinated epidemic prevention and control” and “many economic indicators were better than expected” in the first two months of the year. But the “combination of unexpected factors in the latest epidemic wave, the international situation, and other factors” beyond expectations brought “not insignificant impact” to the “good recovery momentum” of the Chinese economy in March and particularly in April. To stabilize the overall market situation, Party Central and the State Council “made scientific plans, responded calmly, made arrangements for stabilizing growth on many occasions, and introduced a series of highly-targeted, powerful, and effective interval control measures.”
The meeting noted that the State Council’s package of 33 policy items covering six areas to stabilize the economy “resolutely implemented” Party Central’s requirements to “prevent the epidemic, stabilize the economy, and secure development.” Twenty-four of the 33 policy items are directly related to the responsibilities of finance departments. Finance departments at all levels should put stable growth in a more prominent position, focus on safeguarding market entities to ensure employment and people’s livelihood, and strive to ensure that the economy achieves reasonable growth and the unemployment rate drops as soon as possible in the second quarter of the year.
The meeting listed eight key tasks:
- Further strengthen the value-added tax refund policy to help companies overcome difficulties.
- Accelerate the progress of fiscal spending and bring into play the benefits of funds and policies as soon as possible.
- Accelerate the issuance and use of local government special bonds and expand the scope of support, and strive to promote stable growth and investment. Provincial finance departments should quickly adjust their special bond issuance plan to ensure that the annual issuance of 3.45 trillion yuan is basically completed by the end of June; 1.85 trillion yuan worth of special bonds had already been issued as of May 27, more than the 1.36 trillion yuan issued over the same period in 2021. Additionally, bonds should be basically used by the end of August.
- Make every effort to stabilize market entities and support small, medium, and micro-sized enterprises in overcoming their difficulties and developing healthily.
- Effectively expand investment and consumption, and release the potential of domestic demand.
- Adhere to the mentality of preparing for danger in times of peace, and ensure food and energy security.
- Support supply chain stability to protect the industry chain and promote smooth economic circulation.
- Improve policy measures to effectively protect the people’s basic livelihood.
The meeting also stressed that finance departments at all levels must secure the bottom line of the “three guarantees” (i.e. guaranteeing basic livelihood, wages, and operations).
May 31
1. The PRC State Council issued a document (紮實穩住經濟的一攬子政策措施) with further details of its 33-point stimulus package to stabilize the economy that was unveiled on May 23. The State Council requested that all regions and departments conscientiously implement the various economic measures.
2. The Ministry of Human Resources and Social Security and four other departments issued a notice on expanding the implementation of “phased deferment” on the payment of social issuance premiums and other issues (關於擴大階段性緩繳社會保險費政策實施範圍等問題的通知).
The notice said that “phased deferment” of pension, unemployment, and work injury insurance premium payments will be applied to 22 “special hardship industries,” including catering, retail, tourism, civil aviation, highway, waterway, and railroad transportation, automobile manufacturing, and general equipment manufacturing.
The notice also clarified that enterprises facing difficulties in the aforementioned industries can apply for a deferment in paying the work unit contribution portion of the three social insurance premiums.
OUR TAKE
1. The CCP’s intensive rollout of economic policies and propaganda focus on those policies indicate that the Chinese economy is in very bad shape and is endangering regime security. There are many internal and external factors accounting for China’s rapid economic decline, with the “zero-COVID” policy (particularly lockdowns in Shanghai) likely causing the most damage.
Notable recent indicators that the Chinese economy is in serious trouble include:
Li Keqiang’s jumbo ‘economy stability’ meeting
On May 25, Li Keqiang spoke with 100,000 officials from across the country during a State Council teleconference on stabilizing the economy.
According to a leaked transcript of Li’s speech, he noted that China’s economic growth is in danger of slipping out of a “reasonable range,” and that it would be difficult for a large economy to return growth to a “reasonable range” without paying a huge price and taking a lot of time. “We should take efforts to ensure positive economic growth for the second quarter. The target is not high, and it falls far short of the 5.5 percent growth target set out earlier this year,” Li said, per the transcript.
Li also indirectly told officials not to expect financial support from the central government. “If there is a catastrophic natural disaster, there is the premier’s reserve fund. But the rest of the money is dependent on you” the local governments, he said.
China’s PMI
China’s official manufacturing purchasing managers’ index (PMI) rose to 49.6 in May from 47.4 in April, according to data released by the National Bureau of Statistics and the China Federation of Logistics & Purchasing on May 31. Despite the improving numbers, China’s PMI remained below the 50-point mark separating contraction from growth for three consecutive months.
Growing fiscal deficit
In a recent report, Nomura’s chief China economist Ting Lu wrote, “The latest wave of Omicron and the widespread lockdowns in place since mid-March have resulted in a sharp contraction in government revenue, including land sales revenue.” Nomura analysts estimate that the PRC government has a funding gap of about 6 trillion yuan ($895.52 billion), or about 2.5 trillion yuan in reduced revenue due to tax refunds and weaker economic production, and an additional 3.5 trillion yuan of lost land sales revenue.
According to the PRC’s draft budget, the government’s general public budget revenue in 2022 is expected to be about 21.01 trillion yuan while expenditure is 26.71 trillion yuan, resulting in a deficit of 5.70 trillion yuan. Taking Nomura’s estimate of a 6 trillion yuan funding gap, the PRC government’s deficit in the first five months of 2022 already exceeds the 4.38 trillion yuan deficit for the whole of 2021.
We estimate that China’s fiscal deficit could be over 10 trillion yuan this year if the CCP is unable to significantly reverse the trend of sharp economic decline.
Stimulus woes
The CCP is looking to stimulate the economy through government investment in infrastructure construction and relaxing real estate restrictions. To that end, the authorities have called for speeding up the issuance and use of special bonds to promote infrastructure construction. As we previously analyzed, however, the impact of government investment in infrastructure in boosting the economy is limited. It is also difficult to stimulate consumption by easing property restrictions when the economy is bad and the “zero-COVID” policy is still on the books.
Some provinces and cities have taken to issuing coupons and vouchers to stimulate consumption. Guizhou Province announced on May 30 that it will issue up to 140 million yuan worth of consumer coupons to residents. Shanxi Province announced that it would issue another 420 million yuan worth of coupons on top of an initial 120 million yuan of coupons. Chengdu City in Sichuan also recently issued 240 million yuan worth of coupons.
We earlier noted that some Chinese economists are in favor of boosting consumption by having the government issue money directly to the people. Such measures, however, are prone to be undermined by those with ill intent; the PRC commerce ministry noted in 2020 that so-called “econnoisseur” (羊毛黨) had snapped up the bulk of over 19 billion yuan worth of government vouchers issued to residents to help them during the pandemic and converted them into cash by colluding with merchants.
‘Three guarantees’
The May 30 Ministry of Finance meeting on stabilizing the economy stressed that finance departments at all levels must secure the bottom line of the “three guarantees.” This emphasis suggests that the sharp reduction in local government revenue is endangering grassroot-level operations, and the CCP is concerned that long-standing public grievances will erupt if it cannot “guarantee” the people’s basic livelihood, wages, and government operations.
2. We previously wrote on April 18 that the Shanghai government and Beijing “could even gradually move towards declaring ‘victory’ over the virus and the success of ‘zero-COVID’ in propaganda and official numbers even if it does not reflect the situation on the ground” because Xi Jinping and the CCP are “concerned about the impact of prolonged lockdowns without reprieve on social stability and the Party’s political legitimacy.” The recent dismal economic numbers and indicators would have further convinced Beijing that changes have to be made to preserve the CCP’s political legitimacy, which is largely connected with economic performance since the Deng era.
Xi cannot and has not abandoned the “zero-COVID” policy because it is a part of his political legacy. Instead, the Xi leadership and Xi’s allies (Li Qiang in Shanghai) are “spinning tragedy into victory” by declaring that “zero-COVID” has secured a “major phased achievement” for Shanghai and elsewhere. To move away from lockdowns and overly draconian epidemic control measures, as well as push local officials to implement measures to rescue the economy, Beijing is advocating so-called “normalized epidemic prevention and control” (including “normalized nucleic acid testing”) with the goal of securing “double victory of epidemic prevention and control, and economic and social development.”
While the function of “zero-COVID” has been adjusted, the policy remains on books for all intents and purposes, thus preserving Xi’s political legacy and “victory.” Official propaganda also credits Xi for having “strongly coordinated epidemic prevention and control” and achieving “better than expected” economic indicators earlier in the year, while blaming “unexpected factors” for the economic problems that largely stemmed from the “zero-COVID” policy. Propaganda further credits Party Central with Xi at the core for the recent “astute” measures to save the economy, a move that affixes Xi’s stamp of approval on the State Council’s economic policies with the likely aim of convincing local officials that implementing the central government’s economic rescue plan is just as, if not more, important as “zero-COVID” (hence helping officials overcome their political “paralysis”; see the May 30 newsletter).
3. Beijing’s push for normalized nucleic acid testing is part of its plan to “prevent the epidemic, stabilize the economy, and secure development.” Yet Beijing is wary that government and business interest groups that have been profiting off “zero-COVID” and the epidemic will strive to exploit “normalized nucleic acid testing” to deepen their pockets at the expense of the central government and at the cost of social stability. To guard against such behavior, the Xi leadership has taken to investigating wayward testing labs and requiring that local governments bear the cost of testing.
However, a common saying in the PRC is that “the top has policies, but the bottom has countermeasures” (上有政策, 下有對策). The central government’s efforts to prevent interest groups from profiting off normalized nucleic acid testing will unlikely deter the latter from doing so.
Local officials will also find ways to “meet” the economic targets set by the central government while persisting in “zero-COVID,” a move that impacts regular work, production, and consumption. For instance, local governments are getting residents to pay for their own nucleic testing after the central government made it clear that local governments are responsible for testing fees. This will disincentivize residents from leaving their homes and visiting public places (including shopping malls, tourist sites, buying property, etc.) unless necessary because they will want to avoid the hassle of getting tested and save on testing costs. Over time, the way local governments are approaching normalized nucleic acid testing will incentivize more people to “lay flat” (躺平) and worsen the “we are the last generation” (我們是最後一代) mentality, resulting in rising social instability, lower consumption, and sharper economic deterioration.
Normalized nucleic acid testing is currently being applied quite strictly in a number of places. Beijing, Shanghai, Shenzhen, Hangzhou, Shandong, Shanxi, Jiangxi, and Hubei require residents to take a nucleic acid test once every two or three days as part of their local normalized nucleic acid testing protocols. In Tianjin, Wuhan, Dalian, and some other cities, local residents will see their health code turn “gray” when they fail to follow the prescribed frequency of testing, following which they will be prohibited from boarding public transportation, as well as entering and exiting communities, office buildings, shopping malls, restaurants, and other public places.
4. At the time of writing, CCP propaganda is more heavily promoting economic rescue measures than the “zero-COVID” policy. This is likely due to the Xi leadership recognizing the severity of China’s economic problems and quietly adjusting policy priorities to deal with the more immediate crisis.
Beijing’s shift in policy focus could inspire some China watchers, the “anti-Xi, not anti-CCP” crowd, and Xi’s factional rivals to speculate and spread rumors about how “Xi Jinping is in decline, Li Keqiang is on the rise,” or how Xi is perhaps losing power. However, we have not seen any evidence from publicly available information that Xi is less powerful than before, is being challenged by Li, or is being marginalized.
SinoInsight 2
Political and legal affairs
Personnel reshuffles
May 6
Zheng Yi (age 55), former Party secretary of Xishuangbanna Prefecture in Yunnan Province, was appointed vice governor and provincial Public Security Bureau director of Liaoning Province.
May 7
Liu Kai (53), former director of the Hebei Provincial Public Security Bureau, was appointed vice governor of Jilin Province and will head the Jilin Provincial Public Security Bureau.
May 13
Xu Xianhui (53), former vice governor and provincial Public Security Bureau director of Hunan Province, was appointed vice chairman of the Guangxi Autonomous Region and will head the Guangxi Public Security Bureau.
May 25
Dong Jialu (50), former deputy mayor of Tianjin and director of the Tianjin Municipal Public Security Bureau, was appointed vice governor of Guizhou Province and will head the Guizhou Provincial Public Security Bureau.
May 26
1. Li Jianzhong (57), former vice governor and provincial Public Security Bureau director of Anhui Province, was appointed vice governor of Hunan Province.
2. Wang Yiou (55), vice governor of Hunan Province, was appointed director of the Hunan Provincial Public Security Bureau.
May 27
1. Liu Yang (55), former vice governor and provincial Public Security Bureau director of Jiangsu Province, was appointed vice governor of Shanxi Province and will serve as director of the Shanxi Provincial Public Security Department.
2. Liu Wenxi, former deputy head of the disciplinary inspection and supervision group of the Ministry of Public Security, was appointed deputy governor and provincial Public Security Bureau director of Hebei Province.
3. Qian Sanxiong (55), former Party secretary of Xingtai Municipality in Hebei Province, was appointed vice governor and provincial Public Security Bureau director of Anhui Province.
4. Qi Yanjun (58), director of the Beijing Municipal Public Security Bureau, was promoted to deputy minister of public security. Qi is still serving concurrently as Beijing municipal public security chief.
Purged
May 28
Cheng Jiandong (62), Jiangsu provincial government counselor and former provincial Public Security Bureau deputy director, was investigated.
Cheng was a career public security official in Jiangsu Province who mostly held stability maintenance positions. He formerly served as director of the Jiangsu Provincial Public Security Bureau command center (Sept. 2010 to Dec. 2014), deputy director of the Jiangsu provincial stability maintenance office (Oct. 2012 to May 2014; deputy bureau rank), member of the Jiangsu Public Security Bureau Party Committee (May 2014 to Oct. 2018), deputy director of the Jiangsu Public Security Bureau (Dec. 2014 to Oct. 2018, and the bureau’s first-level inspector (Oct. 2018 to Aug. 2020).
Several of Cheng Jiandong’s former bosses and colleagues who were part of a so-called “judicial mafia” (司法黑幫) in Jiangsu were purged in recent years:
- Luo Wenjin, former captain of the criminal police corps of the Jiangsu Provincial Public Security Bureau, was officially investigated on July 31, 2020.
- Wang Like (pronounced “lee kuh”), former secretary of the Jiangsu Provincial Political and Legal Commission and former Jiangsu Public Security Bureau director, officially investigated on Oct. 24, 2020.
- Wang Yongsheng, former Jiangsu Public Security Police Corps and second-level inspector at the Jiangsu Provincial Public Security Bureau, was officially investigated on April 30, 2021.
- Chen Yizhong, former deputy Party secretary and deputy director of the Jiangsu Provincial Public Security Department, and former director of the Jiangsu Provincial “610 Office,” was officially investigated in October 2021.
- Zuo Suofen, former deputy Party secretary of the Jiangsu Provincial Public Security Bureau and former director of the bureau’s Political Department, was officially investigated on April 8, 2022.
June 1
Zhang Bencai (55), chief prosecutor of the Shanghai People’s Procuratorate, was investigated.
Zhang spent his formative years in the Supreme People’s Procuratorate’s (SPP) propaganda apparatus. He previously served as head of the propaganda department of the SPP’s Political Department (April 1999 to Feb. 2004), editor-in-chief of the Procuratorate Daily (Feb. 2004 to Sept. 2011), executive deputy director and director of the SPP’s Film and Television Center (Feb. 2004 to Sept. 2011), president and secretary of the Procuratorate Daily’s Party Committee (March 2005 to Sept. 2011), director of the SPP’s Planning, Finance, and Equipment Bureau (Sept. 2011 to Jan. 2013), and director of the SPP’s General Office and Information Office (Jan. 2013 to Jan. 2016).
Hong Kong and Macau
Personnel reshuffles
May 30
Zheng Xincong (59), deputy director of the Macau Liaison Office, was promoted to Macau Liaison Office director and national security advisor to the Macau National Security Commission.
Zheng spent the bulk of his career in the Fujian local government. Before being transferred to the Macau Liaison Office in July 2021, he served as a Standing Committee member of the Fujian Provincial Party Committee, vice governor, and secretary of the work committee of organs directly under the Fujian Party Committee.
May 31
According to Hong Kong public broadcaster Radio Television Hong Kong (RTHK), Hong Kong and Macau Affairs Office (HKMAO) deputy director Zhang Xiaoming (59) was transferred to the National Committee of the Chinese People’s Political Consultative Conference to serve as deputy secretary-general. However, the information in the leadership section of the official HKMAO website remains unchanged.
If RTHK’s information is accurate, then Zhang has been gradually shifted from being a leading official to becoming a deputy, and a deputy to sinecure position over the course of two years. Zhang Xiaoming and former Hong Kong chief executive Carrie Lam are among the 11 Hong Kong and mainland officials who were sanctioned by the United States for undermining Hong Kong’s autonomy on Aug. 7, 2020.
Other investigations
Purged
May 31
Zhang Jinghua (60), an alternate member of the 19th Central Committee and former deputy secretary of the Jiangsu provincial Party Committee, was expelled from the Party and public office. The Central Commission for Discipline Inspection’s official report on his expulsion listed as one of the charges against Zhang that he had “deviated views in political achievements” and “falsified economic figures for personal promotion and meddled in market activities in violation of relevant rules.”
Zhang Jinghua former served as vice governor of Jiangsu Province (March 2016 to July 2017), Standing Committee member of the Jiangsu provincial Party Committee and Nanjing Party secretary (July 2017 to Feb. 2021), Jiangsu deputy Party secretary (Feb. 2021 to Nov. 2021), and deputy secretary of the Jiangsu provincial CPPCC Party group (Nov. 2021 to Dec. 2021). Zhang was officially investigated in December 2021.
June 1
Chen Rugui (60), former mayor of Shenzhen City, was investigated.
Chen formerly served as Guangzhou deputy Party secretary and secretary of the Guangzhou Municipal Political and Legal Affairs Commission (Sept. 2015 to Sept. 2016), and deputy Party secretary and mayor of Shenzhen (Aug. 2017 to April 2021). After retiring, he served in the Guangdong Provincial People’s Congress for more than a year before being investigated.
Chen Rugui is the second Shenzhen mayor to be purged after Xu Zongheng. Xu, who first became Shenzhen mayor in 2005, was investigated and sacked in 2009, and sentenced to death with a two-year reprieve in 2011.
OUR TAKE
The various personnel changes and purges above appear to be part of Xi Jinping’s effort to secure a third term at the 20th Party Congress, as well as allow the central government to resolve long-term regime shortcomings and crises.
1. The recent round of public security bureau director personnel changes involved 10 officials from 10 provinces or municipalities directly under the central government. Of the 10 officials, eight were transferred from other areas, two were promoted in their area (Qi Yanjun in Beijing and Wang Yiou in Hunan), and one was “parachuted” into the provinces from the central government (Liu Wenxi).
Three of the 10 new public security bureau directors (Zheng Yi, Qian Sanxiong, Wang Yiou) had no prior experience working in the political and legal affairs apparatus. All three are 55 years old and were local officials with inconspicuous careers.
Some of the eight public security bureau directors that were transferred to their new position from other areas previously served in one area for many years. It is possible that some of them were moved from their longtime bases of operations (調虎離山) so that the Xi leadership can better investigate them in the future.
For example, new Shanxi Provincial Public Security Bureau director Liu Yang served for many years in the Ministry of State Security Foreign Affairs Bureau during the Jiang Zemin faction’s era of dominance. During Xi’s first term, when the Jiang faction still retained significant influence over the political and legal affairs apparatus, Liu was appointed director of the Jiangsu State Security Department (July 2014 to Jan. 2018) and later director of the Jiangsu Public Security Bureau (Jan. 2018 to May 2022). Meanwhile, Liu’s predecessor Wang Like was moved to Jiangsu from Liaoning (former public security deputy director) in March 2013, and was purged with several other Jiangsu officials in the so-called “judicial mafia” after the political and legal affairs education and rectification campaign was launched in July 2020.
Another example is the new Hunan vice governor Li Jianzhong. Li was a career public security official, spending the bulk of his career in the Henan Provincial Public Security Department (July 1984 to July 2013) and climbing the ranks steadily during the Jiang faction’s era of dominance until he reached the position of executive deputy director. Li was then transferred to the Anhui Provincial Public Security Bureau where he served as director for over nine years (Aug. 2013 to May 2022). Li Jianzhong’s recent move to Hunan disconnects him from his base of operations in Anhui and any power networks he might have established, and leaves him vulnerable to investigation.
It is possible that some of the incoming directors that were either “parachuted” in or were not formerly from the political and legal affairs apparatus are being tasked to investigate their predecessor and clean up the local public security bureau. An example of a “parachuted” official is new Hebei public security head Liu Wenxi, who is formerly from the Ministry of Public Security. New Liaoning public security chief Zheng Yi is an example of an official with no political and legal affairs background who has been sent to a former Jiang faction stronghold where four previous public security bosses (Li Feng, Li Wenxi, Xue Heng, Wang Dawei) have been investigated.
Xi Jinping will likely next reshuffle the public security heads in Jiangxi, Yunnan, Ningxia, Shandong, Gansu, Sichuan, Tibet, Hainan, Shanghai, and Henan.
2. The recent personnel changes and rumored reshuffling of Hong Kong and Macau officials indicate that Xi Jinping is close to fully consolidating his control over leadership ranks of the Jiang faction-swayed (via Zeng Qinghong) Hong Kong and Macau apparatus after nearly a decade of effort.
It is unclear if HKMAO deputy director Zhang Xiaoming has really moved to the CPPCC National Committee. If the information is accurate, however, then it shows just how difficult it was for Xi to get rid of Jiang faction members from the Hong Kong and Macau apparatus and Jiang faction influence in general. Zhang previously served as Hong Kong Liaison Office director (Dec. 2012 to Sept. 2017) and HKMAO director (Sept. 2017 to Feb. 2020). Under his watch, pro-Jiang faction Hong Kong leaders Leung Chun-ying and Carrie Lam pushed policies that widened social divisions and oversaw police action that worsened mass social demonstrations (Umbrella Movement, anti-extradition bill protest, etc.). The result was turmoil in Hong Kong, a city in decline, erosion of Hong Kong’s autonomy, and severe criticism of Xi Jinping over what Hong Kong had become during his tenure.
We previously analyzed how Jiang faction meddling in the 2019 anti-extradition bill protests led Xi to tighten his control over the city by extending the mainland’s national security regime to Hong Kong. Xi also sought to “rectify” and reshuffle the Hong Kong and Macau apparatus to bring it more tightly into his grasp (see here, here, here, here, here, here, and here). Notably, Xia Baolong replaced Zhang Xiaoming as HKMAO director in February 2020 while the latter was demoted to deputy director with responsibilities over daily operations. Also in February 2020, Party Central upgraded the Central Coordination Group for Hong Kong and Macau Affairs to the Central Leading Group on Hong Kong and Macau Affairs, and reduced the group’s five deputy leaders (Zhao Kezhi, Yang Jiechi, You Quan, Wang Yi, Zhang Xiaoming) to just two (Zhao Kezhi, Xia Baolong) while downgrading the rest to group members.
Xi Jinping will still need time to thoroughly “rectify” the Hong Kong and Macau apparatus even if Zhang Xiaoming has indeed been transferred out. While the leadership ranks of the apparatus are more or less free of Jiang faction influence, lingering in the rank-and-file are those who remain loyal to Xi’s chief rival. Those officials will eventually exit the apparatus when regular regime operations take effect (retirements and transfers), but until then, things in Hong Kong and Macau may not always go the way Xi wants.
Xi’s current degree of control over Hong Kong and the recent appointment of John Lee as Hong Kong leader have created conditions for Xi to make counter factional struggle moves in Hong Kong, including playing the “Falun Gong” card, in the event of fierce attacks from the Jiang faction and other “anti-Xi” groups.
3. We have frequently noted the Xi leadership’s problem with getting officials to properly implement orders (“orders not leaving the gates of Zhongnanhai”) and not sacrifice regime interests while in the process of securing personal interests. The charge against former Jiangsu deputy Party secretary Zhang Jinghua of having “deviated views in political achievements” and having “falsified economic figures for personal promotion and meddled in market activities in violation of relevant rules” is likely Beijing’s latest attempt at “killing chickens to scare the monkey” (殺鷄儆猴) to ensure that officials properly carry out the central government’s recent economic rescue policies and help the CCP regime avert serious crisis.
Beijing has made several attempts in recent months to call out official fraud, punish those guilty of engaging in the action, and step up supervision of local governments to make sure that they are actually hitting work targets and not inflating or falsifying their performance.
In March, the Central Commission for Discipline Inspection (CCDI) published on its website an article criticizing some areas for “using data to create an illusion of development.” Those areas are said to have engaged in “human intervention” of statistics, including using covert and indirect methods to get statistics personnel to fake figures. The CCDI added that those areas broadened the scope of data fraud, including manipulating data tracking the ratio of investment in R&D, energy consumption per unit of GDP, and carbon emissions per unit of GDP.
On May 25, Li Keqiang said in a national teleconference on stabilizing the economy that the State Council will send inspection teams on May 26 to 12 provinces to carry out special inspections on the implementation of policies and supplemental measure rollout. He added that the National Bureau of Statistics (NBS) will publish the main economic indicators for the second quarter of the year by province “in accordance with the law, and in seeking truth from facts.” Also, all regions and departments should insist on seeking truth and being pragmatic, and will be assessed on the delivery of actual results.
And on May 27, the NBS reported that 126 people were subjected to Party discipline or administrative punishments over falsifying data in the provinces of Hebei, Henan, and Guizhou. Also, 116 companies were given administrative punishments for providing false statistical data.
The central government is no doubt aware that the fraud problem has to be fixed if it is going to reverse the Chinese economy’s sharp deterioration and bring it “back on a normal track,” in the words of Li Keqiang. Relying on propaganda alone will not be enough when reality strikes. As regime propagandist Hu Xijin noted, “Confidence is not something that can be driven up and maintained by slogans and headline articles. It must be continuously inspired and supported by the things actually and constantly improving.” Further, “When we repeatedly use [economic] fundamentals to demonstrate that the current problems are short-term, we’re eroding the fundamentals [of the CCP’s propaganda about the economy]. Excessive erosion will continually weaken [the fundamentals’ ability to] support the people’s confidence.”
