Crisis-hit CCP steps up propaganda efforts; foreign investors send mixed signals on China

  1   Crisis-hit CCP steps up propaganda efforts

Feb. 7 to Feb. 15
State mouthpiece Xinhua published a series of 10 articles to promote “strong confidence” as the regime embarks on a “new journey” (強信心·開新局丨新征程上滿懷信心開新局展新貌系列). The articles talk up the Party’s leadership, “institutional advantages,” manufacturing foundation, “vast markets,” and “international optimism” about China.

The articles also emphasized having “confidence” in China’s economic development. For instance, the Chinese people must “vigorously boost [their] confidence” in “promoting the overall improvement of the economy.” Moreover, “confidence is power, and confidence is more important than gold.”

The titles of the 10 articles are:

1. “The ‘Two Establishes” Provide a Fundamental Guarantee for the Development of the Party and the Country’s Causes” (“兩個確立”為黨和國家事業發展提供根本保證)
2. “Xi Jinping’s Economic Thought Provides Scientific Guidance for High-quality Development” (習近平經濟思想為高質量發展提供科學指引)
3. “The Institutional Advantages that Ensure China’s Development is Stable and Far-reaching” (保障中國發展行穩致遠的製度優勢)
4. “The Decade of Great Change in the New Era Has Laid a Strong Foundation” (新時代十年偉大變革奠定堅實基礎)
5. “China’s Economic and Social Development Achieved Outstanding Results in the Past Three Years of Fighting the Pandemic” (抗疫三年我國經濟社會發展取得突出成績)
6. “Always Adhere to People-centeredness” (堅持以人民為中心始終如一)
7. “China’s Development Has a Long-term and Stable Environment” (我國發展具備長期穩定環境)
8. “More than 160 Million Market Entities Seized Opportunities to Show Their Vitality” (1.6億多戶市場主體搶抓機遇展現生機活力)
9. “Combine the Spiritual Power of Self-confidence and Self-improvement” (凝聚起自信自強的精神力量)
10. “China’s Development Benefits the World” (中國發展惠及世界)

Feb. 16
1. CCP Central Committee ideological journal Qiushi published part of Xi Jinping’s major speech on the “several major issues in the current economic work” (當前經濟工作的幾個重大問題) at the Central Economic Work Conference on Dec. 15, 2022.

In the speech, Xi said that the PRC has a “multitude of tasks” to accomplish with regard to economic work in 2023. He added that it is necessary for the regime to ‘start from the overall strategic situation” and “grasp the main contradictions.” Xi also said to start by “improving society’s psychological expectations and boosting confidence in development.”

Xi said that a prominent problem in the Chinese economy is “insufficient total demand.” Therefore, China’s economic development needs to “accelerate the construction of a modern industrial system,” implement the “two unwaverings,” expand “greater efforts to attract and use foreign capital,” and “effectively guard against and resolve major economic and financial risks.”

Xi further called for stabilizing food production, preventing a “large-scale return to poverty,” and planning a “new round of comprehensive deepening reform.” The PRC should also promote “Belt and Road” development, implement “major regional strategies” and “regional coordinated development strategies,” as well as promote the “green transformation” of economic and social development.

2. Xi Jinping presided over a meeting of the Politburo Standing Committee on COVID-19 prevention and control work, according to state media.

The meeting effusively praised the “extremely extraordinary” prevention and control work carried out by the CCP in the past three years. For example, the meeting claimed that “Party Central with Comrade Xi Jinping at the core” had effectively “protected” the people’s lives and their health through “zero-COVID.” Xi’s policy is also said to have “won precious time” for the regime to “beat” the virus, and the “continuous efforts to optimize COVID-19 prevention and control measures since November 2022” allowed a “smooth transition in a relatively short time.” This allowed “a major decisive victory in epidemic prevention and control” and “created a miracle in human history, in which a highly populous nation successfully pulled through a pandemic.”

The meeting also defended Beijing’s “zero-COVID” policy and the abrupt ending of that policy. The Party Central was said to have been “right in its major judgment of the pandemic situation, major response decisions, and major strategy adjustments.” The meeting added that Party Central’s measures have been “robust,” have “received approval from the people,” and have “shown great effect.”

In concluding, the meeting called for “cherishing the important achievements in the struggle against the pandemic” and urged people to “tell China’s story of this fight.”

  Our take

The CCP’s latest propaganda drive appears to be an attempt to “spin tragedy into victory” (喪事當喜事報) and cover up the Xi leadership’s critical failures, including “zero-COVID” and the abrupt easing of pandemic prevention and control measures, “great power diplomacy”/“wolf warrior” approach, and various economic and social policies. Concurrently, the propaganda seeks to generate so-called “positive energy” (正能量) to inspire officials and the Chinese people to work hard and drag the regime out of its many crises. Like the promotion of “Chinese-style modernization,” the current propaganda push conjures new “pie in the sky” (畫大餅) goals for the people and the Party to cajole them into maintaining confidence in the CCP regime and Xi’s leadership.

Reading between the lines, however, the propaganda exposes the severity of the crises plaguing the regime and their impact on the CCP’s “quan wei” (authority and prestige). The Xi leadership is likely very aware that the Party has been struggling mightily to deliver on its Deng-era social compact (economic prosperity for political legitimacy), and is thus looking to convince the people through propaganda that “all’s well” (形勢一片大好). But propaganda phrases like “confidence is power” and “confidence is more important than gold” are an indirect admission by the CCP that the people’s confidence in the Party has been dealt a critical blow and is fast eroding. The oblique acknowledgment that political legitimacy had been lost would be music to the ears of “anti-Xi” forces at home and abroad, and could inspire them to accelerate efforts to oust him.

Meanwhile, the CCP has hinted at the depths of the PRC’s economic problems by noting the “insufficient total demand” in China, calling for the “two unwaverings,” (that is, to “unwaveringly” support private and public companies), and need for greater efforts to “attract and use foreign capital.” The propaganda is likely meant to signal “goodwill” to private enterprises and foreign investors in the hopes that they will take measures that aid economic recovery and allow the regime to survive its crises.

Propaganda, however, can only do so much to help Xi and the CCP stabilize and overcome their troubles. We are very pessimistic about Beijing’s chances of surmounting the systemic deficiencies of the CCP’s authoritarian dictatorship and surviving the “turbulent waves” of “great changes unseen in a century.” If anything, Xi will continue to struggle to get officials to properly implement his orders (政令不出中南海) and the CCP’s crises will only escalate further.

  2   CCP strengthens diplomatic efforts, stays coy on ‘countermeasures’ after balloon incident

The CCP has thus far opted to respond to United States actions after the PRC spy balloon was shot down with slightly sharper rhetoric. For instance, foreign ministry spokesman Wang Wenbin said in a regular press conference on Feb. 15 that the PRC “strongly opposed” U.S. sanctions of Chinese companies over the balloon incident, and said that “countermeasures” would be taken without offering details. “China reserves the right to further respond if necessary,” Wang said later in response to a reporter’s question. Wang also claimed earlier that the U.S. had illegally flown balloons more than 10 times in PRC airspace since May 2022.

The CCP also continued with its post-20th Party Congress efforts to rebuild the PRC’s diplomatic relations with other countries. Wang Yi, director of the Central Foreign Affairs Commission, headed to Europe on Feb. 15 for a week-long trip. On Feb. 16, foreign minister Qin Gang delivered a video speech at the inauguration ceremony of the Preparatory Office of the International Organization for Mediation in Hong Kong. Qin described the body as an “intergovernmental legal organization dedicated to resolving international disputes through mediation.” Signatories of the IOM include Indonesia, Pakistan, Laos, Cambodia, Serbia, Belarus, Sudan, Algeria, and Djibouti.

Meanwhile, President Joe Biden told NBC in an exclusive interview that he plans to speak with Xi Jinping, but declined to say when. “I think the last thing that Xi wants is to fundamentally rip the relationship with the United States and with me,” he said.

Biden added, “We’re not looking for a new Cold War, but I make no apologies. I make no apologies, and we will compete and we will responsibly manage that competition so that it doesn’t veer into conflict.”

  Our take

1. There are three likely reasons why the CCP is focusing on diplomacy and being minimally abrasive despite the spy balloon incident.

First, as we earlier indicated, Xi Jinping is looking to repair the PRC’s diplomatic relations with the world to relieve some of the growing geopolitical pressures on China and court much-needed foreign investments to prop up the rapidly deteriorating economy.

Second, Beijing does not want to escalate tensions with Washington at this time lest the PRC “sleepwalks” its way into premature conflict with the U.S. and its allies. While the CCP has noticeably softened its “wolf warrior” approach in recent months, it has retained the “edginess” in its rhetoric to stay in character and not give the impression that it is a pushover. The PRC’s effort to reduce friction with the U.S. is likely to be temporary as it “delays and waits for change” in America’s situation that it can exploit to further its quest for global hegemony.

Third, the CCP is still keen on advancing its domination agenda even if it means taking baby steps in the interim. Bodies like the International Organization for Mediation lay the groundwork for the CCP to expand its influence globally, promote so-called “Chinese-style modernization,” and inch its way towards creating a PRC-led “community with a shared future for mankind” to displace the U.S.-led rules-based international order.

2. Biden’s remarks to NBC about Xi, sustained pressure against the PRC by his administration, and continued attention to “Chinese spy balloons” from the U.S. and its allies could be part of Washington’s plan to establish some sort of floor in the Sino-U.S. relationship by deliberately overreacting to the balloon incident and demonstrating to the PRC the need for more forthcoming engagement. As National Security Council Coordinator for the Indo-Pacific Kurt Campbell said at a forum in January, “perhaps this is the time in 2023 to build some guardrails” in the U.S.-China relationship.

Xi and the CCP could eventually make some concessions and join the U.S. in establishing some “guardrails.” However, the intensity of Sino-U.S. competition is unlikely to lower much even after “guardrails” have been set up as both sides account for their respective national security interests and political agendas over the long term.

  3   George Soros sees writing on the wall for Xi

Prominent financier George Soros again targeted the CCP general secretary in remarks at the 2023 Munich Security Conference.

Noteworthy parts of Soros’ speech include:

• “Most of Xi Jinping’s problems are self-inflicted. He started mismanaging the economy right from the beginning of his rule when he went out of his way to undo Deng Xiaoping’s reformist achievements.”
• “Xi’s ‘zero-COVID’ policy was his biggest blunder. It imposed enormous hardship on the population and brought them to the verge of open rebellion.”
• “The chaotic way Xi Jinping exited ‘zero-COVID’ shook the Chinese people’s trust in the Communist Party under Xi’s leadership. The current situation fulfills all the preconditions for regime change or revolution. But this is only the beginning of an opaque process, whose repercussions will be felt over a longer period of time.”
• “In the short term Xi is likely to remain in power because he is in firm control of all the instruments of repression. But I am convinced that Xi will not remain in office for life, and while he is in office, China will not become the dominant military and political force that Xi is aiming for.”
• “Xi Jinping’s conversion to cooperation [with the U.S.] would have been only temporary and tactical. He would not be who he is if he could abandon his deeply felt beliefs so easily.”
• “The fact is, we are witnessing a historic process in China whose significance is not widely appreciated.”

  Background

George Soros has been publicly criticizing Xi Jinping in speeches and writings in recent years. We tracked and analyzed a number of Soros’ remarks here.

  Our take

The bulk of Soros’s assessment of Xi’s present political situation and the CCP regime’s plight is aligned with what we have written on multiple occasions. However, we are less optimistic that the “repercussions” of the Xi leadership’s policy failures will only be felt “over a longer period of time”; communist dictatorships throughout history tend to collapse quite suddenly and seemingly without any warning.

Soros’s latest criticism of Xi continues to be “anti-Xi, not anti-CCP,” a position that we previously analyzed and warned about. While Soros is clearly in the “anti-Xi” camp, it is unclear to what extent he is working with Xi’s enemies in China and abroad to effect regime change, if at all. Regardless, it cannot be assumed that Soros has no skin in the China game given his sustained and generous efforts to push for “open societies.”

Soros’s comment that Xi “would not be who he is if he could abandon his deeply felt beliefs so easily” assumes, like many Western China watchers, that the latter is a “true believer” in communism. Yet Xi’s factional enemies fear precisely the opposite. In analyzing “An Objective Evaluation of Xi Jinping,” an over 42,000 character-long article with a clear Jiang Zemin faction bias, we pointed out portions of the piece that indirectly accuse Xi of covertly laying the groundwork over the years to end the CCP and throw his factional rivals under the bus. The article also speculates that Xi “may have retained his father’s influence,” betraying concerns among Xi’s enemies that he is “a person who is subverting the regime.”

The notion that Xi Jinping is not a die-hard communist received further affirmation with the release of Shinzo Abe’s memoirs in early February. According to news reports, the late Japanese prime minister recalled that Xi had told him that he likely would not have joined the CCP had he been born in the U.S., but would have been either a Democrat or a Republican. “In other words, he didn’t see any point in a party that doesn’t wield political power,” Abe is quoted as writing.

If Abe’s anecdote of Xi and the fears of Xi’s factional rivals are reliable, then there is a very real possibility that Xi could abandon the CCP and its ideology when forced by ever-worsening circumstances to choose between preserving the regime and saving himself. In the words of George Soros, the world could indeed be “witnessing a historic process in China whose significance is not widely appreciated” the more Xi Jinping is pushed to the brink.

  4   Foreign investors send mixed signals on China

Foreign investors have been allocating funds to Chinese equities in recent weeks, while top executives of multinational companies are preparing to visit China.

Meanwhile, Warren Buffett’s Berkshire Hathaway has been selling shares in both Chinese and Taiwanese firms.

Feb. 9
Berkshire Hathaway sold 4.235 million Hong Kong-listed shares of the Chinese electric vehicle maker BYD for HK$1.09 billion ($139 million) on Feb. 3, according to a stock exchange filing. The sale lowered Berkshire’s holdings in BYD from 19.92 percent on Aug. 24, 2022 to 11.87 percent.

According to public information, BYD sold 151,300 vehicles in January 2023, an increase of 58.6 percent from a year ago.

Feb. 12
Apple’s Tim Cook, Pfizer’s Albert Bourla, and Mercedes-Benz Group AG’s Källenius are expected to visit China in March, according to The Wall Street Journal. Volkswagen AG CEO Oliver Blume traveled to China from late January to early February.

Feb. 14
1. Berkshire Hathaway reduced its position in Taiwan Semiconductor Manufacturing by 86.2 percent to 8.29 million sponsored American depositary shares, according to a regulatory filing. Three months earlier, Berkshire purchased $4.1 billion worth of TSMC stock.

Concurrently, Berkshire bought another 20.8 million Apple shares, raising its stake to 5.8 percent.

2. The February Bank of America Global Fund Manager Survey found that 21 percent of respondents believe the bullish position on Chinese stocks is presently the most crowded trade, according to The Wall Street Journal.

Also, investors have added more than $2 billion on a net basis in 2023 to U.S.-based mutual and exchange-traded funds that buy Chinese equities, according to data from Refinitiv Lipper. This showed five consecutive weeks of inflows and marked a reversal from the second half of 2022 when global investors pulled nearly $1 billion. Around the same time, investors have pulled a net $31 billion from U.S. equity mutual funds and exchange-traded funds in the past six weeks, according to Refinitiv Lipper data.

Meanwhile, the MSCI China Index went up about 45 percent from its trough in October, but was still down about 45 percent from early 2021. Fitch Ratings also revised its 2023 China growth focus to 5 percent, up from 4.1 percent.

Feb. 15
1. Several investment firms were among the top sellers of TSMC stock in the fourth quarter of 2022, Reuters reported.

Tiger, an equity long-short hedge fund, sold its 1.3 million shares in TSMC. The firm previously bought those shares in the third quarter of 2022.

GQG Partners cut its position in TSMC by 63 percent, with 6.7 million shares remaining.

Capital Group sold 9.5 million shares in TSMC. Meanwhile, JPMorgan and BlackRock sold about 4 million shares in TSMC each.

2. Charlie Munger, Warren Buffett’s longtime business partner at Berkshire Hathaway, said at the annual meeting of Daily Journal Corp that China is still a top opportunity for investors despite geopolitical risks.

“The Chinese leader is a very smart, practical person,” Munger said. “Russia went into Ukraine as it looked like a cakewalk. I don’t think Taiwan looks like such a cakewalk any more.” This, he believes, helps investors’ prospects in China, because “you can buy better, stronger companies at cheaper valuations in China than you can in the United States.”

Munger also said that TSMC is the “strongest semiconductor company on earth.”

3. The balance surplus of Chinese banks in January 2023 was $2.5 billion according to data by the PRC State Administration of Foreign Exchange, reflecting two consecutive months of surplus.

Meanwhile, the net purchase of $27.7 billion worth of Chinese stocks by foreign investors in January was a record-high for a single month.

4. Troy Rohrbaugh, JPMorgan’s head of global markets told investors at a conference that “China is by far the biggest opportunity for us. We continue to invest as we did previously, obviously cautiously. We’re ready to adjust if necessary.”

  Backdrop

The investor activities listed above came amid Beijing ending the “zero-COVID” policy in December 2022 and opening up China’s borders in early February. Also, Sino-U.S. engagement appeared to be returning to normalcy before the PRC spy balloon incident and a tightening of U.S. technology restrictions on China.

  Our take

Global investors appear to be pouring funds into Chinese equities after assessing that consumption and travel will pick up in China following the end of “zero-COVID.” It likely also helped that valuations for Chinese companies fell to bargain-bin levels due to pessimism over the lockdowns and the state of the economy. Further, the apparent easing of regulatory pressure on China’s tech firms and the CCP authorities signaling after the 20th Party Congress that it welcomes foreign capital and investments could have been factors driving inflows to the PRC.

Data for the first five weeks of the year, however, is unlikely to have captured market sentiment after the PRC spy balloon incident and worsening Sino-U.S. tensions. Rather, the recent sale of TSMC stock by investment firms like JPMorgan and BlackRock, as well as Berkshire Hathaway’s repeated cutting of BYD shares, suggest that foreign investors are beginning to account for China’s rising geopolitical risks.

Inflows to China could trickle off in the coming months as geopolitical risks become more obvious. In particular, the U.S. and its allies could show even greater support for Taiwan this year and provoke responses from the PRC authorities that could drive invasion fears (we currently assess that the CCP is in no shape to launch an invasion this year and is still prioritizing “peaceful reunification” over the short to medium-term). Investors could also become less optimistic about China if various data points later show that consumption and travel are not picking up as expected or as official data indicates; we believe that this will likely be the case due to higher than reported death tolls from COVID-19 and reduced desire by the Chinese people to spend or travel relative to the pre-COVID years given the poor economic conditions, job insecurities, and reduced incomes.

  Get smart

We wrote in our 2023 China Outlook that “signs of a quick recovery will likely be illusory as the Chinese economy continues to deteriorate and people lose confidence in China’s economic prospects.”

Businesses and investors should weigh the PRC’s overall situation and consider unofficial economic indicators (including the CCP’s own propaganda; see item 1), instead of relying on official data and taking CCP propaganda at face value, before putting more money into China.

  5   Health insurance protests in China spread

Feb. 15
Over ten thousand retirees in Wuhan gathered outside Zhongshan Park near the municipal government’s offices and demanded that the local authorities immediately abolish new health insurance policy changes. The authorities deployed large numbers of police on scene to “maintain stability,” and there were small skirmishes between the police and the protesters.

Videos circulating online showed the retirees refusing to back off after being pushed back by the police. Some of them sang songs like “The Internationale” and yelled, “down with the reactionary government!”; such expressions showed that the protesters believed that the CCP was straying from its ideological roots.

According to information circulating online, the Wuhan authorities also ordered school teachers in the city to call up parents and threaten them to stop their own parents (that is, the grandparents of school children) from participating in the protest lest their actions “affect the future of their children.”

The protest was sparked after the Wuhan local government appeared to renege on its promise to the protesters on Feb. 8 that it would suspend the implementation of a reformed health insurance policy. However, the local government did not mention anything about suspending the policy in an explainer issued the next day. The retirees took the explainer as a sign that the local authorities were backing down on their word, and proceeded to launch their protest.

On the same day as the Wuhan protest, large numbers of retirees in the cities of Dalian and Anshan in Liaoning Province gathered in front of their respective local government buildings to protest the cutting of their benefits under the reformed health insurance policy. Videos circulating online suggested that more than ten thousand people had gathered in the square in front of government buildings in Dalian. Like in Wuhan, some in the crowd sang “The Internationale.”

Some Chinese commentators dubbed this round of health insurance protests by mostly older people as the “white-haired revolution” (白髮革命).

Feb. 17
A notice circulating on the Chinese internet urged the people of Shenzhen to protest the health insurance reform. The notice read, “For the sake of just health insurance, see you at 10:00, Feb. 18 at the center of Shenzhen!”

The notice added, “If we do not stand up to protect our rights and interests, we will face higher medical expenses and fewer benefits. Let us march in the streets of this city, and let our voices sound throughout Shenzhen!”

However, there was no news about the protest or if there were new developments at the time of writing.

  Why it matters

The health insurance protests, along with the earlier “blank paper revolution,” indicate that the Chinese people are losing all patience with the CCP authorities and believe that only by “daring to struggle” and being “good at struggle” (to use Xi Jinping’s own words) can they safeguard their interests.

Meanwhile, the local authorities are caught in a quandary. On the one hand, they cannot let the protesters have their way without being guilty of failing to implement Beijing’s orders, which would impact the career prospects of local officials. On the other hand, they cannot carry out large-scale, brutal suppressions without angering society further and worsening the “stability maintenance” situation.

  Our take

1. More retirees are now protesting the reformed health insurance policy in more parts of China as they believe that the CCP authorities have broken a social compact with them.

As we wrote previously, the Wuhan protesters are unhappy that active civil servants and staff in public institutions did not appear to be affected by the reform. Meanwhile, the retirees are being denied more generous health care benefits and are expected to dig into their own pockets (which are unlikely to be very deep as they are no longer working and many were previously on low salaries) to foot their own medical bills.

There is also some concern among the retirees that the cash-strapped local authorities were taking advantage of the health insurance policy reform to ensure that active civil servants and retired cadres can continue to enjoy subsidized healthcare benefits at their expense.

Further, some suspect that the reform was an attempt by the CCP authorities to address health insurance fund shortages. Reuters reported on Feb. 15 that Chinese provinces spent at least 352 billion yuan ($51.6 billion) in fighting the pandemic in 2022 alone. Three years of mass testing, vaccinations, and various subsidies would have seen local governments rack up huge expenses, of which a large portion would have been paid off using their respective health insurance funds. Notably, Wuhan, the epicenter of the pandemic, is where the most vigorous retiree protests have occurred thus far.

2. We wrote in the Feb. 13 newsletter that two million retirees in Wuhan who were on the employee health insurance scheme were affected by the reform. At the time, some retirees found that they could only access 83 yuan per month in medical benefits from the integrated account, or much less than the 286 yuan pre-reform.

Since then, more details have emerged that allow for some estimates to be made:

• Before the reform, Wuhan retirees could access an estimated 3,432 yuan annually (assuming the 286 yuan per month figure for most people) from their personal accounts when seeking treatment for minor illnesses. After the reform, the retirees were only able to access 996 yuan a year, a sharp drop of 2,436 yuan.
• The reform increased the annual outpatient reimbursement amount to 4,000 yuan. However, those on the policy had to pay out of their own pockets for outpatient services under 500 yuan. Meanwhile, outpatient clinics often claim that they were out of stock of commonly used medication, forcing people to purchase those medications elsewhere at their own expense. This obliquely increased healthcare costs for some groups, including those who did not fall ill often.
• With 2 million retirees in Wuhan and the details mentioned above, the local government would have deposited an estimated 4.872 billion yuan (2,436 yuan times 2 million) that previously went to personal accounts into the integrated account as part of the health insurance reform. With 93.24 million retirees in the whole of China on the employee health insurance scheme, this means that local governments could end up deducting more than 200 billion yuan in insurance money that would have gone to personal accounts under the earlier policy.
• The boosting of the integrated account technically allocates more resources to primary hospitals and benefits those with major illnesses who require hospitalization. However, the trade-off is people who do not need expensive treatments and frequent hospital visits have much less access to insurance funds that they contributed to and see their medical expenses for minor illnesses increase by a lot.

3. The Wuhan authorities’ attempt to intimidate protesters by threatening their children through their grandchildren’s teachers did not appear to have much impact on the demonstration turnout. This is likely because the younger generation is aware that the retirees are indirectly fighting for their future as well in protesting the government. The Wuhan government’s intimidation tactics are likely to backfire and enrage even more people in the city and elsewhere once the news makes the rounds.

  What’s next

To resolve the protests and prevent them from escalating out of hand, local governments will likely refrain from outright suppression, but could come to compromises with the protesters and settle scores later (秋後算賬). The protests in Wuhan, Dalian, and elsewhere could also inspire copycat demonstrations in other parts of China.

In the face of a possible wave of protests nationwide, the central government could tweak the health insurance policy around the Two Sessions in March in a bid to reduce social tensions. However, the CCP authorities do not have much room to maneuver in making adjustments given fiscal shortfalls. New reforms could end up being superficial or merely pay lip service in addressing the concerns of retirees. If so, the authorities would have bought a bit more time at the risk of having the crisis worsen down the road.