Analyzing the Party and state institutional reform plan; Xi visits Russia, may speak with Zelensky

  1   Analyzing the Party and state institutional reform plan

The CCP Central Committee and the State Council issued a plan to reform Party and state institutions on March 16. According to the plan, the central government is expected to complete the reform by the end of 2023 while local governments are to accomplish the task by the end of 2024.

The plan included the previously introduced State Council reforms, as well as reforms involving institutions of the Central Committee, the National People’s Congress, and the National Committee of the Chinese People’s Political Consultative Conference.

  Central Committee institutions

The plan listed the establishment of five new institutions:

1. Central Financial Commission

The Central Financial Commission is a decision-making and coordinating body of Party Central. The Commission will set up an office to run administrative matters. Meanwhile, the Financial Stability and Development Committee of the State Council and its office would be dissolved and its functions would be folded into the office of the Central Financial Commission.

The Central Financial Commission’s functions are:

• Strengthen the centralized and unified leadership of the Party Central over financial work.
• Top-level planning, coordination, overall advancement of financial stability and development, and supervising the implementation of the aforementioned work.
• Research and review major policies and matters in the financial sector, etc.

2. Central Financial Work Commission

The Central Financial Work Commission is a detached agency under the Party Central that is co-located with the office of the Central Financial Commission and is tasked with overseeing Party building matters in the financial sector.

The Central Financial Work Commission’s functions are:

• Unify and lead the work of the Party in the financial system.
• Guide the political, ideological, organizational, style, and discipline construction of the Party in the financial system.

3. Central Science and Technology Commission

The Central Science and Technology Commission is a decision-making and coordinating body of Party Central. The responsibilities of the Commission’s office will be assumed by the new Ministry of Science and Technology. With the Commission’s establishment, some central and State Council organizations working on science and technology matters will be adjusted or abolished, and provincial Party Committees will be reorganized to reflect the changes in Party Central.

The Central Science and Technology Commission functions are:

• Strengthen the centralized and unified leadership of Party Central over science and technology work.
• Coordinate and promote the construction of a national innovation system and structural scientific and technological reform.
• Study and review major strategies, plans, and policies for the country’s scientific and technological development.
• Coordinate efforts to resolve major issues of strategic, guiding, and overall significance in the science and technology sector.
• Research and determine the national strategic scientific and technological tasks and major scientific research projects.
• Coordinate and deploy strategic scientific and technological forces such as national laboratories.
• Coordinate military-civilian technological integration and development, etc.

4. Central Social Work Department

The Central Social Work Department is a functional department of Party Central responsible for leading the National Public Complaints and Proposals Administration and incorporating the social work functions of other central agencies and ministries of the State Council. Social work departments would be set up accordingly by Party Committees at the provincial, municipal, and county levels.

The Central Social Work Department functions are:

• Coordinate and guide the work in handling public complaints and soliciting the people’s opinions.
• Coordinate and promote Party building to lead grassroots governance and grassroots political power construction.
• Unify the work of the Party in leading national trade associations and chambers of commerce.
• Coordinate and promote the deepening of reform and transformation development of industry associations and chambers of commerce.
• Guide Party building work in mixed-ownership and non-public enterprises, new types of economic and social organizations, and groups in new forms of employment.
• Guide the construction of social work personnel and teams, etc.

5. Central Hong Kong and Macau Work Office

The Central Hong Kong and Macau Work Office operates as a working body of Party Central and will be formed on the basis of the existing Hong Kong and Macau Affairs Office of the State Council. The HKMAO name will be maintained.

The Central Hong Kong and Macau Work Office functions are:

• Undertake the investigation, research, overall coordination, and supervision of the implementation of the “one country, two systems” policy, the implementation of the central government’s overall governance, ruling Hong Kong and Macau in accordance with the law, safeguarding national security, protecting people’s livelihood, and supporting the integration of Hong Kong and Macau into the country’s overall development.

  State Council institutions

The plan lists the same items as the State Council reform plan announced during the Two Sessions (see the March 9 newsletter for details).

  NPC institutions

Standing Committee of the National People’s Congress Delegates Working Commission

The Standing Committee of the National People’s Congress Delegates Working Commission is a working committee of the NPC Standing Committee. Its functions are:

• Oversee the quota distribution, qualification review, and liaison services of NPC deputies.
• Guide and coordinate NPC deputies in being focused on inspections, special research, and public liaisons for related work.
• Coordinate and manage the motion proposal work for NPC deputies.
• Oversee the supervision and management of NPC deputies in their duties.
• Coordinate the study and training of NPC deputies.
• Guide the work of provincial NPC Standing Committee delegates, etc.
• Undertake specific work of the NPC Standing Committee in reviewing the qualifications of deputies.

  CPPCC institutions

The plan called for “optimizing the makeup” of the CPPCC National Committee’s sectors, including:

• Adding an “environment and resources” sector.
• Integrate the Chinese Communist Youth League and the All-China Youth Federation into the “Chinese Communist Youth League and All-China Youth Federation” sector.
• Improving the composition of the “specially invited persons” sector.

  Staffing administration reforms

The plan called for “optimizing” the staffing resources for Party and state institutions, including:

• Central Party and state institutions will downsize their staff by five percent, with the bulk of the retrieved staff resources being used to strengthen key areas and major projects.
• Dispatched agencies and overseas agencies under the central government’s direction management will not see staff reductions.
• Staffing resource reductions at local Party and state institutions will be left to the discretion of provincial level (including autonomous regions and directly administered municipalities) Party Committees.
• County and township level governments do not have staff resource reduction requirements.

  Our take

1. The CCP’s Party and state institutional reforms are clearly intended to enhance the CCP’s control over government agencies and better allow Beijing to steer the regime through its many crises, at least in theory. The reforms also hint at the seriousness of the financial, economic, social, and technological crises facing the PRC.

The Party has always held paramount power and authority over the state in the PRC’s parallel government. However, Deng Xiaoping sought to draw clearer divisions between the Party and state system in the post-Mao era, partly to get the better of factional enemies in the Party apparatus and partly to professionalize the civil service. Deng’s reforms led to the state government gaining a degree of authority and “autonomy” from the Party to craft and implement policies.

The CCP’s reduced control over the government created problems for the regime. For instance, officials found more room for corruption, leading to increased business-official collusions and the “gangsterization” (黑社會化) of some grassroots organizations. Government also became less nimble and the Party struggled to get things done.

By firmly establishing the Party’s leadership over the state, Xi Jinping is seeking to address some of the governing problems that have jeopardized the regime. Xi is likely also using the Party and state institutional reforms to improve his governing capacity, mitigate the age-old problem of Beijing finding its “orders not leaving Zhongnanhai,” and eventually roll out systemic political and economic reforms like those announced at the Third Plenum of the 18th Central Committee in 2013.

2. The various Party and state reforms involving financial institutions and the creation of new institutions are aimed primarily at strengthening Party Central’s vertical management of financial work. By reclaiming all local financial decision-making to the central government and having the State Council firmly subordinated to the Central Committee, the Xi leadership will theoretically be better-positioned to coordinate financial work and regulation to tackle the “disorderly expansion of capital” that emerged when the state government was granted more leeway to carry out financial “innovations.”

The central government being more involved in local financial administration could also be intended to mitigate some of the problems resulting from extremely short-sighted policy-making and implementation by local officials. Officials are incentivized to take on debt and push through other financially risky measures to hit local GDP targets and accrue political capital to benefit their respective careers. They then leave the mess to their successors, who repeat the vicious cycle. To secure funding and finance projects to drive growth, local officials issue bonds approved by the NPC each year, municipal investment bonds (issued by local government financing vehicles), non-conventional bonds, and perpetual bonds. The national local debt balance increased by 15 percent to 35 trillion yuan in 2022 while the balance of municipal investment bonds that year was 65 trillion yuan, or 9 trillion yuan more than 2021 and the equivalent of the debt scale of 30 China Evergrandes. We previously looked at how some municipal investment companies are already in technical default.

The purpose of the revived Central Financial Work Commission is likely to enhance Party Central’s supervision of the financial system, target collusion between officials and business elites, and prevent the emergence of “financial crocodiles” like Tomorrow Group.

3. The arrangement of having the Ministry of Science and Technology serve as the administrative body of the Central Science and Technology Commission is the clearest example of the state government being subjugated to the Party apparatus. Party Central likely absorbed lessons from the failed semiconductor “great leap forward” (see here and here) and decided that it needed to have direct oversight of the regime’s scientific and technological development to avoid wasting time and money while producing no breakthroughs. Beijing is also likely looking to better coordinate scientific and technological efforts in a “whole-of-society” effort to produce results that would allow the regime to escape the technological “chokehold” placed on China by the U.S. and its allies.

4. The establishment of the Central Social Work Department instead of the rumored Internal Affairs Commission suggests that the Xi leadership is looking at subtler means to maintain domestic stability as social tensions rise.

Some observers have noted that the Central Social Work Department (中央社會工作部) is named similarly to the Central Social Affairs Department (中央社會部), a forerunner organization to the Ministry of State Security. Thus, the observers have expressed concerns that Xi Jinping could potentially be reviving another secret police and intelligence apparatus.

However, the functions of the Central Social Work Department indicate that it will operate more like a hybrid of the Organization Department and the United Work Front Department. That is, the Department appears to be a non-violent stability maintenance organization that strengthens Party Central’s grip over society through the control of CCP and social organizations. By having a say in whether the people in various economic and social organizations survive and thrive, the CCP is essentially “guiding” the Chinese people to not challenge the regime and safeguard their interests. On paper, such “soft” stability maintenance tactics could be more effective, cheaper, and invite less pushback than hard suppression measures involving domestic security forces.

We see five possible reasons why the Xi leadership opted for subtler and less provocative means to strengthen the CCP’s control over society:

1. Relying on Soviet or Ming-style secret police and intelligence operations to keep society in check could be prohibitively costly and ineffective in the internet and social media era.
2. Establishing a supra-authority internal security organization and delegating daily operations to a chief of the organization who is not the paramount leader creates another potential threat to the latter’s authority and position.
3. Resorting to domestic security forces all the time to keep society in check will lead to greater social anger and conflicts.
4. The establishment of a powerful secret police and intelligence organization and its use in brutal suppressions will give the international community more reasons to call out the CCP’s tyranny, sanction senior officials, and exert even more pressure on the PRC.
5. The Xi leadership can avoid dealing with issues stemming from Jiang Zemin’s political legacy by not restructuring the domestic security and intelligence apparatuses.

5. The NPC reforms appear to be aimed at strengthening the NPC Standing Committee’s control over NPC deputies to ensure that they do a good job of rubber stamping Party Central’s policies and decisions, as well as refining the so-called “democratic system with Chinese characteristics.”

As for the CPPCC National Committee reforms and the establishment of the Central Hong Kong and Macau Work Office, we have nothing further to add to our earlier analyses in the Jan. 31 (CPPCC) and the March 6 (HKMAO) newsletters.

6. At the time of writing, the CCP has not announced personnel arrangements for the five new Party institutions.

We see the following possible arrangements:

• Xi Jinping could personally head the Central Financial Commission and the Central Science and Technology Commission, with Li Qiang serving as deputy director.
• He Lifeng could head the office of the Central Financial Commission. The director of the Central Financial Work Commission could also be He or an official at the ministerial level or higher who has experience in organization, united front, or Party group work.
• Zhang Guoqing could serve as director of the office of the Central Science and Technology Commission.
• There are several potential candidates for the head of the Central Social Work Department:
  • Li Ganjie, a secretary of the Central Secretariat with no other portfolio, could be tasked to head the Central Social Work Department. If so, then Chen Xi, the current head of the Central Organization Department, could remain in his position; this would break reshuffle norms because Chen is not a Politburo member, a Central Committee member, or a member of the Central Secretariat.
  • Wang Xiaohong, the public security minister, could head the Central Social Work Department and oversee both the “hard” and “soft” levers of stability maintenance in the regime. If this is the case, then it is unclear who will become CCP General Office director; Xi could end up breaking political norms again and leave Ding Xuexiang serving jointly as first-rank vice premier and General Office director.
  • A ministerial-level official who is ranked lower than both Li Ganjie and Wang Xiaohong could be tasked to head the Central Social Work Department.

  2   CCP promotes ‘supremacy of the people’ as youth engage in self-mockery

March 15 to March 18
State mouthpiece Xinhua published back-to-back commentaries about “studying and implementing President Xi Jinping’s important speech at the first session of the 14th National People’s Congress. The commentaries are titled:

• “Unswervingly Promote High-quality Development” (堅定不移推動高質量發展)
• “Always Uphold the Supremacy of the People” (始終堅持人民至上)
• “Better Coordinate Development and Security” (更好統籌發展和安全)
• “Firmly Advance the Great Causes of ‘One Country, Two Systems’ and the Reunification of the Motherland” (紮實推進「一國兩制」實踐和祖國統一大業)
• “Strive to Promote the Building of a Community With a Shared Future For Mankind” (努力推動構建人類命運共同體)

The second commentary went over the things Xi had done since coming to power and claimed that everything Xi and the CCP under his leadership had done was “for the people.” The commentary added that “the people’s yearning for a better life” is the Party’s “struggle goal” and the “ultimate goal of promoting high-quality development” is for “the people’s happiness and well-being.”

The second commentary also called on the “sons and daughters of the Chinese nation” to come together in a “grand unity,” and more closely “unite” around “Party Central with Comrade Xi Jinping at the core.”

March 16
State broadcaster CCTV published an article titled, “Facing the Anxiety Behind ‘Kong Yiji Literature’” (正視“孔乙己文學”背後的焦慮).

The article referenced a viral internet video by a “frustrated scholar” that many young Chinese had empathized with. The “frustrated scholar” said, “Education is not just a stepping stone, but is also a high platform that I cannot climb down from, and is the scholar’s long gown that Kong Yiji cannot take off.” CCTV observed that the posting and its popularity among the youth reflected their distress and depression at being unable to get the jobs they want after leaving university.

In concluding, the article said that “temporary difficulties do not make a lifetime of failure … The era of Kong Yiji is gone forever and contemporary youths will not be trapped in long gowns.”

March 17
The Communist Youth League’s official Weibo account posted an article titled, “A Long Gown That Can’t Be Taken Off? Why I Don’t Like ‘Kong Yiji Literature’” (脫不掉的長衫? 我為什麼不喜歡“孔乙己文學”) that criticized the “theory of useless studying” that people making self-deprecating references to Kong Yiji (“Kong Yiji literature”) have been espousing. Netizens strongly criticized the piece and the Communist Youth League Weibo eventually shut down the article’s comment section.

  Kong Yiji and Lu Xun

Kong Yiji is a character from a Lu Xun short story of the same title written in 1918 and published in April 1919. In the story, Kong is a poor scholar in his 50s who failed to pass the imperial examinations. Despite that, Kong continues to wear a dirty and tattered scholar’s long gown, and uses turgid literary jargon in his speech. Kong is also frequently mocked by customers at the tavern that he frequents.

Lu Xun meant for Kong Yiji to be a social commentary about how the imperial examination system produced many scholars who were only good at studying the Chinese classics but had no practical skills and struggled to make a living.

Mao Zedong came to regard Lu Xun’s essays, which often contain social criticism, as “daggers” and “javelins.” The CCP later hailed Lu Xun in its propaganda and made the study of his works compulsory for students.

  ‘Kong Yiji literature’

“Kong Yiji literature,” or engaging in self-mockery by making drawing comparisons between oneself and the plight of the character from Lu Xun’s work, became a phenomenon as young people in China struggle with being well-educated but unable to find employment.

For instance, youths would imitate Kong’s sayings while updating them for the modern context, such as “If I didn’t go to college, then I would be at ease (working at the factory) driving screws, but there is no ‘I didn’t,’” or “If I didn’t study, I could have found another job, but then I have studied.” Young Chinese are also making observations like “graduating from college means unemployment” (畢業就失業); “working jobs meant for those with junior high qualifications after completing university”; “disconnect between college specialization and actual work,” etc. A popular internet posting saw a netizen observe that he thought that the poor and pedantic Kong Yiji was hilarious when reading the short story as a child, but as an adult he realized that “I’m the person in the story,” that is, he was educated but poor and likely without a job like Kong.

The employment situation for young people in China now is bleak. Early this year, a video on the Bilibili video-sharing website featuring two women who were graduates from Central China Normal University titled “Me: Graduate of Five Years, 5,000 Yuan in Deposits; Her: Master’s Degree in Chinese Communications, Cleaning Hotpots in a Restaurant” (我: 畢業5年, 存款5000 她: 中傳碩士, 火鍋店保洁) went viral with over 5 million views. The first woman said she had changed jobs twelve times within five years after graduating and had only 5,000 yuan left in her bank account. The other woman also struggled to find employment and worked as a cleaner at a hotpot restaurant at her last job.

There are also many videos circulating on the Chinese internet showing migrant workers sleeping in the streets after being unable to find jobs in economically developed coastal cities. A video uploaded on March 8 showed a young man who was out of a job in Dongguan, a major manufacturing city in Guangdong Province, having starved to death in the streets. Another video showed people on a subway in Guangdong giving food to a man who was struggling to find work and was fainting from hunger.

Meanwhile, the CCP authorities expanded recruiting for national and provincial level governments by around 15 percent to 20 percent this year to ease unemployment. Still, over 7.7 million people took the civil service examination in the 2023 application round to vie for around 200,000 positions, breaking the previous record. The typical recruitment rate is around 2.6 percent of all applicants.

  Our take

The “Kong Yiji literature” phenomenon, like “lying flatism” (躺平) and “involution” (內捲), reflects the serious economic, social, and unemployment problems that the CCP currently faces.

The CCP is likely well aware that having many young people feeling distressed and depressed over an inability to secure good jobs will eventually result in soaring public grievances and social instability. Hence, the Xi leadership is promoting concepts like “the supremacy of the people” and using propaganda outlets to remind the youth that “temporary difficulties do not make a lifetime of failure.” The effectiveness of such propaganda, however, is likely to be extremely limited because it does nothing tangible to resolve the livelihood concerns of many young Chinese who are struggling with a tough job market.

The CCP’s attempt to publicly address the “Kong Yiji literature” phenomenon indicates that it is widespread and a potential threat to regime security. The CCP is no doubt aware that Lu Xun’s works were aimed at exposing social problems at the time like poverty, backwardness, and various injustices. Put another way, the young people espousing “Kong Yiji literature” are just one or two steps away from comparing life under CCP rule with that of the Qing Dynasty before its collapse. The “daggers” and “pistols” that Mao praised Lu Xun for using to expose and criticize Chinese society a century ago are now close to being turned against the CCP regime.

Despite the dangers of allowing “Kong Yiji literature” to proliferate in society, the CCP cannot outright censor it to stop such sentiments from spreading. After all, the youth are currently mocking themselves by using “Kong Yiji literature” and have not directly targeted the Party. That being said, most Chinese with some familiarity with Lu Xun’s works will understand what is obliquely being implied through the popularity of “Kong Yiji literature,” much like how the significance of the blank sheets of paper that demonstrators were holding up to protest “zero-COVID” in late 2022 was clear to observers.

All in all, there is a certain sense of irony in the popularity of “Kong Yiji literature” in China today. The CCP criticized social injustices in dynastic and republican China, called for breaking the old system, and embraced Lu Xun as it seized power. Then over the course of seven decades, the CCP ended up perpetuating and exacerbating the very same social injustices and “evil old society” that it had once slammed. Now the CCP has to be wary of being the target of the propaganda and ideology that it promotes, and guard against being overthrown by class struggle.

  3   Xi plays the statesman with Russia visit, possible meeting with Zelensky

March 13
The Wall Street Journal reported that Xi Jinping plans to speak virtually with Ukraine president Volodymyr Zelensky after he visits Moscow to meet with Russian leader Vladimir Putin. The meetings signal Beijing’s effort to take on a more active role in negotiating an end to the conflict in Ukraine, some people told the Journal.

March 17
1. PRC foreign ministry spokeswoman Hua Chunying said that Xi will travel to Russia from March 20 to March 22 “at the invitation of president Putin.”

2. The Biden administration expressed concern about a potential call by Beijing for a cease-fire in the Russia-Ukraine conflict. “A cease-fire now is again effectively the ratification of Russian conquest,” said National Security Council spokesman John Kirby at a press briefing. “The reason why the rest of the world is not calling for that right now is because, as I said, it would effectively ratify Russia’s geographic gains inside Ukraine, and it would put Mr. Zelinsky at a distinct disadvantage.”

  Backdrop

Xi’s outreach to Moscow and Kyiv follows the rollout of his new initiatives to promote “world peace and development,” Beijing’s announcement of a “12-point peace plan” to end the Russia-Ukraine conflict, and the PRC taking on the role of peacemaker by brokering a deal in early March that saw Saudi Arabia and Iran restore diplomatic relations.

Xi’s diplomatic push also comes after the United States and its allies stepped up efforts to counter China and warn the PRC over providing “lethal assistance” to Russia. Tensions between the U.S., Russia, and the PRC continue to simmer with developments like a Russian warplane colliding with an American MQ-9 Reaper drone over the Black Sea on March 14, as well as a Politico report on March 16 about Chinese companies sending Russian entities 1,000 assault rifles and other equipment with military uses, including body armor and drone parts.

Meanwhile, a banking crisis is developing in the U.S. and Europe following the collapse of Silicon Valley Bank and Signature Bank, as well as trouble at Credit Suisse.

  Our take

1. Xi Jinping’s trip to Russia and possible meeting with Ukraine’s Zelensky appear to be part of the CCP’s attempt to create favorable conditions for the PRC to survive its current crises and gradually advance its domination agenda.

Despite rebuking the United States and baring “wolf warrior” fangs at the Two Sessions, the Xi leadership is clearly still looking to build on its post-“zero-COVID” and 20th Party Congress effort to engage in “great power diplomacy.” In the CCP’s ideal scenario, Xi Jinping would lay the groundwork for brokering a cease-fire or peace agreement between Russia and Ukraine in speaking with Zelensky and Putin. Success on that front would see Xi emerge with a newfound reputation as a “peacemaker” and “statesman” abroad, and with his flagging “quan wei” receiving a much-needed boost at home. The CCP would also take another step forward in challenging U.S. hegemony and the U.S.-led world order, while bolstering its vision of a “multi-polar” world order with the PRC as the new hegemon.

Xi and the CCP are unlikely to get their ideal outcome given the current geopolitical situation. The U.S. and its allies have expressed deep skepticism about the PRC’s “peace plan” and are already pre-emptively criticizing a cease-fire proposal by Beijing. Also, the international community is becoming increasingly wary of the CCP threat and its “revisionist” stances on Taiwan and the Russia-Ukraine conflict.

Nevertheless, Xi will at least try to get a propaganda “win” by meeting with Putin and Zelensky. Xi could try to convince Putin to stay in the fight because the banking crisis in the U.S and Europe offers Russia some hope of outlasting the West. Xi could also continue showing support for Russia publicly even though the PRC’s international standing will keep suffering; the CCP can accept some reputational loss if it ultimately benefits when prolonged fighting in Ukraine exhausts both sides (including the U.S. and its allies). Meanwhile, a Xi-Zelensky meeting could generate goodwill that the PRC can later tap into when the time comes for the rebuilding of Ukraine.

2. Washington could step up efforts to confront Beijing as domestic problems mount and there is a need to shift public and political attention away from troubling issues and scandals. The Biden administration could later cite Xi’s latest diplomatic moves as a reason to double down on taking action against China, including spotlighting and sanctioning the PRC over human rights issues and tightening tech restrictions.