1 China’s lackluster recovery turns investors pessimistic
Gloomy economic data
May 27
The PRC National Bureau of Statistics announced that the total profits of industrial enterprises about designated size in the country was 2.0328 trillion yuan from January to April 2023, down 20.6 percent year-on-year (calculated on a comparable basis).
Of the total:
- State-owned holding companies realized 757.98 billion yuan in total profits, a year-on-year decrease of 17.9 percent.
- Joint-stock enterprises realized 1.49624 trillion yuan in total profits, a year-on-year decrease of 22 percent.
- Foreign, Hong Kong and Macau, and Taiwan-funded enterprises realized 467.99 billion yuan in total profits, a year-on-year decrease of 16.2 percent.
- Private enterprises realized 524.03 billion yuan in total profits, a year-on-year decrease of 22.5 percent.
- The mining industry realized 475.24 billion yuan in total profits, a year-on-year decrease of 12.3 percent.
- The manufacturing industry realized 1.37237 trillion yuan in total profits, a year-on-year decrease of 27 percent.
- The textile industry realized 15.65 billion yuan in total profits, a year-on-year decrease of 30.2 percent.
- The clothing and apparel industry realized 13.33 billion yuan in total profits, a year-on-year decrease of 17.9 percent.
- The paper and paper products industry realized 7 billion yuan in total profits, a year-on-year decrease of 51.6 percent.
- The computer, communications, and other electronic equipment manufacturing industry realized 86.16 billion yuan in total profits, a year-on-year decrease of 53.2 percent.
May 29
NBS data showed that urban unemployment among 16- to 24-year-olds in China hit a record 20.4 percent in April, or about four times the broader unemployment rate.
May 31
The NBS announced that China’s official manufacturing purchasing managers’ index fell 0.4 percentage points from the previous month to 48.8 in May, a five-month low and the second consecutive month of contraction since the end of “zero-COVID” in December 2022.
Of the five sub-indices that comprise the manufacturing PMI, four of them (production, new orders, raw material inventory, and employment) were below the 50-point mark separating expansion from contraction. The new export orders index (47.2) and imports index (48.6) were also 0.4 and 0.3 percentage points lower in May as compared to a month ago.
Meanwhile, the non-manufacturing PMI fell 1.9 percentage points from the previous month to 54.5 in May. By industry, the business activity index of construction fell 5.7 percentage points to 58.2 and service decreased 1.3 percentage points to 53.8.
June 1
The Henan local government released a 100-day plan to ensure “zero dynamic clearing” (language similar to “zero-COVID”) of youth unemployment in the province. The plan called for promoting jobs in public institutions and state-owned enterprises, second degrees, and grassroots or rural employment projects, with the goal of ensuring the “smooth employment of college graduates.”
Western investors show pessimism
May 21
Rockefeller International chair Ruchir Sharma wrote in the Financial Times that “something is rotten in the Chinese economy, but don’t expect Wall Street analysts to tell you about it.”
Sharma cited figures indicating that China did not see a reopening boom, including low revenue growth in the first quarter of the year, falling imports, weakening credit growth, and rising urban unemployment.
Sharma also noted that China’s growth model, which was “dependent on stimulus and debt was always going to be unsustainable,” has now “run out of steam.” Further, China’s potential for growth has “fallen to half that” of Beijing’s 5 percent growth target for the year because GDP growth is a function of population and productivity growth and “China’s negative population growth means fewer workers are entering the labor force, and heavy debts are slowing output per worker.”
In concluding, Sharma wrote that “‘boomy’ chatter has contributed to investors’ loss of hundreds of billions of dollars in China in just the past four months” and “global growth may prove weaker than expected in 2023.” He added, “It is time to expose this charade before the fallout gets worse.”
May 23
European Union Chamber of Commerce in China head Joerg Wuttke told reporters in Beijing “we are possibly facing a ‘plateau China’ with a little upside happening for the next 10 or 20 years.” With regard to economic growth rates, “we have to say goodbye eventually to the 4 percent to 5 percent scenarios and settle more for 2 percent to 3 percent.”
Wuttke also said that China has much less “wriggle room” to maneuver in fiscal, financial, and monetary terms as compared to earlier economic downturns. “So my worry, if I look at China today, is that they might actually end up like Japan on a bigger scale but also on a lower level of GDP per capita,” he said.
Wuttke added that China has over expanded on infrastructure and skimmed on social support.
May 29
The Hang Seng China Enterprises Index fell as much as 0.8 percent during a morning session, which took its losses from a Jan. 27 peak to over 19 percent. Bloomberg reported that China’s “wobbling economic recovery, intensifying geopolitical tensions and a weaker yuan” had caused the shares to move closer to bear-market territory.
May 30
The Financial Times reported that Stephanie Hui, head of Goldman Sachs Asset Management’s Asia-Pacific private and growth equity arm, said at a private equity conference in Hong Kong that she had ceased attempting to raise funds in the United States due to geopolitical tensions between Washington and Beijing.
May 31
Refinitiv data showed that foreigners sold $1.71 billion worth of mainland shares in May via the Shanghai-Hong Kong Stock Connect, and $659 million worth of mainland shares in April. However, foreigners’ net purchases of mainland shares stood at $25.05 billion for the first five months in 2023 despite outflows in February, April, and May.
Backdrop
China’s lackluster economic figures in May and recent foreign investors’ pessimism towards the country follow huge optimism about economic recovery in China after the end of “zero-COVID.”
The gloomy outlook on China also comes after the G7 called for “de-risking, not decoupling” from the PRC, as well as for “build(ing) constructive and stable relations with China” while acting in “our national interest.”
Our take
1. We wrote in our China 2023 Outlook: “Financial institutions and investors could bet on the Chinese economy recovering under the expectation that things will return to normal with the easing of ‘zero-COVID.’ However, 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.” The CCP’s official economic figures, acknowledgment of “insufficient demand” in China, tourism indicators, unemployment situation, and other factors have contributed to curbing enthusiasm in the country’s economic prospects, and is putting our prediction on track for verification.
2. Several signs indicate that China is seeing serious economic deterioration this year.
In 2022, when “zero-COVID” had been in full force for nearly three years and economically important areas like Shanghai were placed under lockdown, industrial enterprises above designated size still managed to make about 2.66 trillion yuan in profits and see 3.5 percent year-on-year growth in the first four months of the year. At the time, SOEs and joint-stock enterprises also managed to see over 10 percent growth in profits. In sharp contrast, industrial enterprises above designated size saw greatly reduced (down over 20 percent year-on-year) instead of surging profits in the first four months of 2023 even after the lifting of “zero-COVID.” Even SOEs, which have an “administrative monopoly” advantage (行政壟斷 i.e. government policy stipulates that only SOEs can operate certain industries, akin to the monopolies on salt and iron enterprises in imperial China), saw their total profits drop by 17.9 percent.
The CCP’s official figures also suggest that China is seeing “insufficient demand” both domestically and globally. For instance, both the mining and manufacturing industries, which are responsible for China’s exports and supplying local demand, saw reduced profits. Likewise, the sharp drop in profits in the textile industry, the clothing and apparel industry, as well as the computer, communications, and other electronic equipment manufacturing industry, reflect a serious shortage of external demand because those industries account for a large proportion of China’s exports.
An indirect sign that manufacturing, one of the key drivers of the Chinese economy, is faltering is profits of the paper and paper products industry declining by more than half. Paper and paper products are required for packaging, and the reduced need for packaging hints at lower manufacturing activity.
Finally, the high youth unemployment and early signs that the CCP authorities are looking to seriously address the issue (e.g. the Henan government’s “dynamic zero clearing” of youth unemployment) suggest that companies, and especially private enterprises, may not be hiring much this year due to reduced demand and the economic slowdown. More worrisome for the CCP, the lack of demand for workers could partly be the result of mass business closures over the past three years of “zero-COVID.”
3. China’s poor economic prospects, increased geopolitical tensions between the PRC and the West, and a weaker renminbi have all contributed to Western investors’ loss of confidence in China’s economic recovery. Deflating confidence and the increasing inversion of U.S. and Chinese government bond yields will put greater pressure on capital to flow out from China. The fall of both the onshore and offshore renminbi exchange rates to above 7.1 on May 31 suggests that the trend of capital outflows is strengthening.
The PRC’s inability to court foreign investments will further aggravate the financial and debt crises of local governments, as well as stymie China’s economic recovery more broadly. If China has to deal with another mass COVID outbreak or the spread of other infectious diseases, natural disasters, or the trigger of various financial risks in the second half of the year, the central government will not be able to step in to rescue the localities. Beijing could potentially see its control over parts of the regime weaken as local governments and populations increasingly come to fend for themselves after their pleas to the central government for help go unheeded.
2 CCP’s bureaucracy blamed instead of wet weather for Henan wheat damage
Henan, China’s largest wheat-growing province, received heavier-than-normal rainfall in the last week of May. The rain caused some grain to sprout or be hit by blight days ahead of the harvest.
The Henan local government took some steps to speed up the harvesting to save as much of the crop as possible, including allocating 200 million yuan in emergency funds for wheat drying. The public, however, blamed the authorities more than the weather for the crop damage after learning about bureaucratic issues that hampered grain harvesting ahead of the downpours.
Rain ruining crops in wheat-growing areas
According to mainland media reports, rain had fallen almost continuously in the wheat-growing areas of central and southern Henan since May 25, affecting the local wheat crop. The Henan provincial agricultural authorities told state media that the wet weather was the worst to have occurred during the wheat-ripening period in a decade. A farmer named Yao in Henan’s Zhumadian City told mainland media on May 28 that his 600 mu (about 99 acres) of wheat crop started sprouting during the rainfall and he almost had nothing left to harvest.
Meanwhile, rain has also affected other wheat-growing areas like Anhui, Hebei, Jiangsu, and southern Shaanxi. Farmers in Shaanxi said that the rain will cut the local wheat production in half while the water-damaged crop can only be sold for half the price of the regular harvest. Ma Wenfeng, a senior analyst with Beijing Orient Agribusiness Consultancy, estimated that around 30 million tons of wheat in China will be impacted by the rain, with between 10 million and 20 million tons possibly having sprouted and being unfit for human consumption.
‘Harvesters can’t get off highways’
According to information circulating on Chinese social media, the highway administration authorities in Henan’s Nanyang City began charging highway toll fees to harvester transports traveling into the city for the start of the wheat harvesting season (roughly around the second last week of May). Public rumblings over the situation eventually led state media to cover the development; on May 28, state media China National Radio reported that “over a hundred harvesters” were stuck on highways in Nanyang City because the vehicles transporting them were not allowed to get off without paying tolls.
On May 29, the phrase “over a hundred harvesters can’t get off the highway due (to them being) ultra-wide and ultra-high” became a top search item. Videos of long lines of harvester transports on Henan highways also began circulating on Chinese social media. Information circulating on the Chinese internet claimed that more than a hundred harvesters traveling to the city before May 22 had been stuck on the highways for up to seven days for those that arrived early, and between three to five days for those that showed up later.
On May 30, the Nanyang City authorities and the highway administration company claimed that there were no more than 20 harvester transports “passing slowly” on the highway. The authorities also maintained that they stopped enforcing overweight vehicle regulations on harvester transports after May 22.
In an interview with mainland media China Newsweek, a harvester operator who has been involved in cross-regional operations for 30 years who was commenting on the Henan situation said that harvesters were always allowed to be transported on highways free-of-charge and this was the first time that toll fees were being assessed. The harvester operator added that he and five other operators had to collectively pay more than 4,000 yuan at the Tanghe Toll Station in Nanyang City on May 22 after being held up for nearly a day before their harvester transport was allowed to exit the highway. The harvester operator also said that more than 10 other operators were still stranded at the toll station that day.
Other mainland media reported that some harvester operators who were headed for Nanyang were not subjected to strict inspections when they got on the highway from elsewhere but were only held up in Tanghe, Xinye, and other counties of Nanyang. Additionally, at least six people were punished by the public security authorities for “spreading rumors” after they shared videos about harvesters unable to exit highways in Henan, with two of the six subjected to “administrative detention.”
According to the PRC’s regulations governing the administration of toll roads, combine harvesters and their transport vehicles with a “cross-regional operation permit” are exempt from paying highway tolls. In April and May 2023, the PRC transport ministry issued two documents requiring combine harvesters and their transport vehicles that are oversized to have an “over-limit transport permit” in addition to the “cross-regional operation permit” to travel toll-free on highways.
Instigation by ‘foreign forces’?
After the Nanyang harvester incident drew widespread criticism from the public, PRC state media claimed that “foreign forces” had instigated the issue. Netizens ridiculed the “foreign forces” claim, with several asking “what do foreign forces have to do with this matter,” why the authorities “bring up foreign forces whenever something happens,” and “are foreign forces stationed in Henan?” One netizen wrote, “People can be shameless, but please let there be a bottom line.”
Netizens also hinted that the CCP authorities were the ones to be faulted for the harvester incident and the delays in wheat harvesting that it caused. “First, [the authorities] did not go to the wheat fields in Henan for on-site inspection, and second, [the authorities] did not monitor the highway toll stations,” one netizen wrote. Another netizen wrote, “Whenever something bad happens, [the authorities] don’t investigate to see whether it is true or reflect whether [they have] loopholes, but immediately raise their arms up and yell enthusiastically: It must be done by foreign forces!”
Wheat harvesting in Nanyang
Located in the south of Henan, Nanyang is the main wheat-growing area in the province. In 2022, Nanyang’s wheat-growing area was about 18 million mu and total wheat output was 8.67 billion catties (about 4.779 million tons), accounting for 11.38 percent of Henan’s total wheat output. Nanyang is also one of the areas in Henan where wheat ripens and needs to be harvested the earliest; the harvesting period typically lasts over a period of 10 days from mid-May to the end of May.
Harvesters are deployed to carry out more than 97 percent of the wheat harvesting in Henan. The harvesters will move from the south of the province up to the north in time with the wheat ripening. A harvester can typically gather crops from about 100 mu to 150 mu (1 mu is about a sixth of an acre) of land in one day (10 hours of work). Assuming 100 harvesters were stuck on highways for between three to five days before the continuous rainfall from May 25, then the harvesting of wheat in between 30,000 to 75,000 mu of land would have been delayed; the area of land harvested would roughly double if there are night shifts.
Our take
1. Winter wheat accounts for the bulk of China’s annual output. The damage to wheat crops by abnormal weather will affect China’s grain supply, worsen the regime’s problems with food security, and could indirectly impact social stability at a time when the PRC is facing severe internal and external crises.
2. The heavy rain in Henan, and not the holding up of harvesters on highways in Nanyang, is the primary reason for the wheat crop destruction in the area. In terms of preventing crop damage, the Henan local authorities could be partially blamed for not mobilizing harvesters earlier based on weather forecasts for the month. However, the Chinese public have come to believe that bad bureaucracy was the main reason for delays in saving the wheat crop; this assumption is likely borne out of the Chinese people’s longtime distrust of the CCP and their dislike of local officials’ oppression. This phenomenon suggests that the CCP authorities have fallen more deeply into the “Tacitus Trap” (i.e. an unpopular government is hated regardless of whether it does right or wrong) and will continue to lose more public support over time irrespective of what it does.
The Henan provincial government and the central government undoubtedly wanted to save as much of the wheat crop as possible to make the best of a bad situation. The city-level authorities in Nanyang, however, seem to have prioritized local interests over broader regime interests by looking to make a quick buck off harvester operators entering the area from elsewhere by forcing them to pay toll fees to exit the highway. For instance, the Nanyang authorities should have been flexible enough to shut one eye to “illegal” harvesters and their transports (i.e. those that did not have the relevant permits) if there were indeed any given the wheat crop emergency and the importance of allowing those harvesters to get to work as soon as possible.
Local governments in the PRC have long had a bad habit of squeezing companies and the Chinese people through administrative fees and fines to boost their fiscal revenue. The levying of those fees and fines, which are often arbitrary, became more prevalent with the rapid deterioration of the Chinese economy in recent years, the escalation of Sino-U.S. tensions from 2017 onwards, and the enactment of the “zero-COVID” pandemic control policy from 2020 to 2022.
Local governments often find administrative fees and fines to be a more “sustainable” source of non-tax revenue as compared to income generated from the reimbursable use of state-owned assets (i.e. the sale and leasing of state-owned assets) even though the latter is the top source of non-tax revenue. In particular, the more economically backward areas possess fewer state-owned assets and are limited in how much income they can generate from selling or leasing those assets.
The central government has attempted to disincentivize local governments from levying administrative fines and fees. On Aug. 12, 2022, the State Council issued a decision on canceling and adjusting administrative fines which called for the promotion of reforms to “decentralize powers, enhance supervision, optimize public services” so as to “optimize the business environment.” On Aug. 17, the General Office issued an opinion on further standardizing the formulation and management of administrative discretionary benchmarks that stated that issuing arbitrary fines should be “resolutely avoided,” generating income through fines should be “strictly prohibited,” and also “strictly prohibited” the use of fine amounts to gauge performance ranking or as an indicator of performance appraisals.
The problem of arbitrary fines, however, has persisted despite Beijing’s orders. A May 13 episode on the state media channel “China Sannongfabu” (中國三農發布) that received much public attention noted that there was “chaos” in the fining of “overweight” transports in Henan’s Neihuang County. Many truck drivers reported their vehicle was “found” to be “overweight” in Neihuang County even though they never had that issue before and were subsequently issued huge fines. One truck driver said that he had received 58 fines in two years and was required to pay more than 275,000 yuan in penalties. A hidden camera recording featured in the episode had an official from the Comprehensive Administrative Law Enforcement Brigade of the Transportation Bureau of Henan’s Neihuang County say, “There is no money in the [local government’s] coffers now after three years of the epidemic. This is called doing law enforcement (執法到位), and the money that should be fined must be fined.”
The recent imposition of toll fees on harvester transports entering Nanyang City in Henan appears to be part of an ongoing arbitrary fine problem. That local governments in Henan are resorting to administrative fees and fines to generate revenue even during a crop crisis suggests that financial shortages in the province must be quite severe and local officials are desperate.
3. The local government problems in Henan Province show that Xi Jinping has been unable to inspire greater obedience from the officialdom despite 10 years of power consolidation, increased indoctrination, and various “self-revolution” (including the anti-corruption campaign) efforts. Officials are still prone to deploying “countermeasures” to the central government’s policies (上有政策, 下有對策), resorting to “one-size-fits-all” measures (especially during the “zero-COVID” years), and resorting to outright deception (we document some efforts here with regard to Beijing’s recent “restoration of farmland from forests”) to secure local interests over regime interests.
As long as Communist Party culture persists and local officials do not change their ways, the higher authorities in the PRC are doomed to see lackluster, if not outright counterproductive results from their efforts to rescue the regime. In the Henan wheat crop case, the provincial authorities could set aside 200 million yuan for emergency crop-saving measures, but no amount of money would have been of use once harvesters were stuck on highways with local officials demanding they cough up huge toll fees. Beijing may later punish the guilty officials for holding up the crop rescue effort, but the damage would have already been done and the CCP’s popular legitimacy would have suffered another blow.
3 Xi’s ‘integration’ of Marxism and traditional Chinese culture signals lack of political ‘self-confidence’
Xi Jinping inspected the PRC National Archives of Publications and Culture and the Chinese Academy of History on June 1 and June 2, respectively.
On the afternoon of June 2, Xi attended a symposium on cultural inheritance and development in Beijing and delivered a speech. Xi called for constructing a “modern Chinese civilization” at this new historical starting point, adding that this is the CCP’s “new cultural mission in the new era.” He also stressed the need to strengthen “cultural self-confidence.”
Xi added that prominent features of Chinese civilization are “unity,” “inclusiveness,” and “peaceful nature.” Also, “national unity is always at the core of China’s core interests” and there is a “harmonious coexistence of diverse religious beliefs in China.” Xi added that China has “always been a builder of world peace, a contributor to global development, and a defender of the international order,” and China will “promote cooperation rather than confrontation and will not create exclusive blocs.”
Xi then argued that “integrating the basic tenets of Marxism with China’s specific realities and fine traditional culture” is a path that “must be taken to explore and develop socialism with Chinese characteristics within the Chinese civilization.” He added that “despite their different cultural roots, Marxism and China’s fine traditional culture are highly consistent with each other.” Xi believes that the “integration” will boost the Party’s “historical self-confidence and cultural self-confidence,” allow the Party to “inherit the fine traditional Chinese culture,” and advance the “consciousness of cultural innovation” to “new heights.”
In presiding over the symposium, Politburo Standing Committee member Cai Qi praised Xi’s speech for being strongly “political, ideological, strategic, and instructive.”
Indoctrination campaign extremes
The CCP launched a “Xi Jinping Thought” political indoctrination campaign starting in April 2023 and later dispatched central supervision teams to the localities to check on the campaign’s implementation.
Beijing has since continued promoting the indoctrination campaign, and some localities have gone to extremes in advancing it.
May 23
Party mouthpiece People’s Daily published an article on its front page about Cai Qi attending a symposium on the publication of the first and second volumes of the selected works of Xi Jinping. Cai said during the symposium that in-depth “thematic education” on “Xi Jinping Thought” must be carried out, and “Xi Thought” must “infiltrate the brain, the heart, and the soul.”
May 29
China Police Net (中國警察網) reported that the Party Committee of the Guangxi Zhuang Autonomous Region Public Security Bureau had decided to implement “morning reading and evening recitation” (晨讀晚誦) activities during the period of “Xi Jinping Thought” thematic education period.
The Guangxi PSB Party Committee said that “morning reading and evening recitation” would be divided into individual reading and collective reading. Collective reading involves Party branches carrying out “Xi Jinping Thought” study sessions no less than twice a week, with Party members and civilian police required to share their takeaways and experiences in learning “Xi Thought” after those sessions. Individual reading requires individual public security officials to take notes about their “Xi Thought” learning. The Guangxi PSB also compiled and printed out Xi’s political theories into so-called “pocket books.”
The “morning reading and evening recitation” activities were initiated by Yang Weilin (age 55), the former Changchun City vice mayor and PSB director, after he was appointed as a vice chairman and PSB director of Guangxi on May 26. Reports on Guangxi’s “morning reading and evening recitation” activities, however, were later scrubbed from the internet.
Our take
1. We previously analyzed why Xi Jinping and the CCP are “embracing” traditional Chinese culture and what it entails. Xi’s speech at the symposium on cultural inheritance and development reveals both his political ambitions and the CCP’s ideological dilemma.
First, Xi is looking to solidify his paramount position (定於一尊), further differentiate himself from his predecessors, and highlight his importance to the regime’s present and future by building on the “Xi new era” motif. This is underscored in his call to construct a “modern Chinese civilization” at “this new historical starting point,” a sort of “founding emperor” declaration that has the effect of casting what Xi is doing and plans on doing as being fundamentally different from previous leaders of the regime. Xi’s effort to distinguish himself and his rule from the past also has implications for the factional struggle as it allows him to later criticize the “incorrect political line” of his predecessors (especially Jiang Zemin) and blame them for the PRC’s ills today while Xi plays the “savior.”
Second, Xi is likely looking to restore some of the Party’s badly eroded political legitimacy by binding its debunked and outmoded ideology with traditional Chinese culture and its greater prestige. That Xi has to resort to such “integration” in the first place, however, is tantamount to an admission of defeat for the Party. The CCP had long criticized and sought to destroy traditional Chinese culture (particularly during the Cultural Revolution) while touting the “superiority” of Marxism-Leninism. Yet the Chinese people have first-hand experience of the failures of Marxism-Leninism and the deficiencies of socialism over the course of the CCP’s seven decades in power. Moreover, the last three years of disastrous “zero-COVID” severely weakened an already rapidly deteriorating Chinese economy and further reinforced Xi and the CCP’s inadequacies instead of proving Marxism’s “superiority” and “systemic advantage.”
With the Chinese people becoming increasingly disillusioned with Party rule, Xi’s call to strengthen “cultural self-confidence” through “integrating” Marxism and “fine traditional culture” sounds like an attempt at Xi and the Party reassuring themselves that they still speak for the Chinese people despite their waning popularity. Xi is also “borrowing” the veneer of traditional Chinese culture to grant some legitimacy to the regime’s effort to “rejuvenate the Chinese nation.” However, Xi needing to resort to such propaganda betrays a serious lack of confidence in Marxism and great concern that the Chinese people would otherwise eventually reject the Party as a destructive “foreign force” lording over Chinese civilization.
Third, Xi is likely searching for solutions to overcome the geopolitical problems associated with the regime’s Marxist ideology. With the U.S. and other countries increasingly differentiating between the Chinese people and the CCP, as well as linking the regime’s ambitions with its Marxist-Leninist ideology, Beijing needs to find a way to make Marxism-Leninism more palatable to the Chinese people while rallying national support behind the Party. By “integrating” Marxism and “fine traditional Chinese culture” (that is, conflating Marxism with Chinese culture and identity), the CCP is hoping to use Western attempts at exposing its ideology to fuel nationalistic sentiment and boost the Party’s approval at home.
Meanwhile, Xi is hiding behind the Chinese civilization’s “unity,” “inclusiveness,” and “peaceful nature” to obscure the CCP’s ambitions of global dominance. Xi is also attempting to hit all the right notes with countries that do not wish to be pressured into aligning with the U.S. and its allies by claiming that the PRC has “always been a builder of world peace, a contributor to global development, and a defender of the international order,” will “promote cooperation rather than confrontation,” and will “not create exclusive blocs.”
2. In true “prefer left rather than right” fashion, CCP officials have been resorting to Maoist-style approaches in advancing Xi’s political indoctrination campaign.
Cai Qi’s call for “Xi Jinping Thought” to “infiltrate the brain, the heart, and the soul” has vague echoes of Lin Biao’s nauseating propaganda propping up Chairman Mao in the lead up to and during the Cultural Revolution. Chinese netizens roundly mocked Cai’s “infiltrate the brain, the heart, and the soul” phrase, with some comparing it to a poison (三尸腦神丹) that the leader of a martial arts cult in one of Jin Yong’s novels forced his members to take to ensure their absolute loyalty (antidotes to curb the poison’s deadly effects are given out once a year to loyal members). The subtext of the poison comparison is that the CCP, like the martial arts cult in the Jin Yong novel, is exercising cult-like control over Party members.
Meanwhile, the Guangxi PSB’s “morning reading and evening recitation” activities are reminiscent of the Cultural Revolution-era “requesting instructions in the morning and reporting at night” (早請示, 晚匯報) procedure that people perform to demonstrate their “loyalty” to Mao Zedong. The Guangxi PSB’s printing of “pocket books” on “Xi Thought” also replicates what the Nanning City authorities did on a broader scale (the books were distributed to Party organizations at all levels in the city and thousands of households) in February 2022. The Nanning “pocket books,” however, were eventually recalled and destroyed in May 2022; the scrubbing of the Guangxi PSB’s “morning reading and evening recitation” activities report suggests that the Guangxi PSB’s “pocket books” could be treated similarly to avoid unwelcome comparisons with Mao.
Xi Jinping needs to sustain his political indoctrination campaign partly because his “quan wei” (authority and prestige) is founded on propaganda and partly to create a high-pressure political environment that prevents the formation of meaningful opposition against his rule within the Party. The political indoctrination campaign, however, is also a double-edged sword as Party cadres and members will inevitably take reference from far-left, Maoist methods and measures to perpetuate what they believe to be a similar effort by Xi to establish a Mao-like “cult-of-personality.” The resulting political environment will further affect business and foreign confidence in the PRC, as well as further convince the international community that the CCP (especially under Xi) is deeply driven by ideology and that its agenda is incompatible with that of the rules-based international order. Increasing domestic and external pessimism towards the CCP will likely aggravate economic deterioration and worsen the many crises facing the regime.
