1 Analyzing the removal of Qin Gang and Li Shangfu as state councilors
Senior position reshuffles
Oct. 24
PRC state media reported that the Standing Committee of the 14th National People’s Congress concluded its sixth session. After the closing meeting, Xi Jinping signed presidential orders approving the appointment and removal of several personnel, including:
- Li Shangfu was removed from the posts of state councilor and defense minister.
- Qin Gang was removed from the post of state councilor.
- Wang Zhigang was removed from the post of minister of science and technology, and Yin Hejun was appointed to the post.
- Liu Kun was removed from the post of minister of finance, and Lan Fo’an was appointed to the post.
Xiangshan security forum
Oct. 24
Mainland media reported that preparations for the 10th Beijing Xiangshan Forum scheduled for Oct. 29 to Oct. 31 were “basically completed.” The Xiangshan Forum is an annual security forum hosted by the PRC.
Mainland media said that official delegations from over 90 countries and international organizations, including Russia and the United States, have confirmed their participation as of Oct. 23. Mainland media said that the number and level of representatives participating in the forum will reach a record high.
Zhao Yufei, the executive deputy secretary-general of the Xiangshan Forum’s preparatory committee, said that the theme of this year’s forum is “Common Security, Lasting Peace” and the forum aims to explore in-depth solutions to peace and security.
Zhao added that the forum seeks to “uphold the common values of mankind, oppose group confrontation and Cold War-mentality, promote resolving differences and conflicts between countries through peaceful means, jointly safeguard peace and tranquility of the world, and enlarge the discourse power and influence of developing countries in global security governance.”
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On Oct. 23, Michael Chase, the U.S. deputy assistant secretary of defense for China, said during a discussion at the Atlantic Council that the Pentagon plans to send participants to the Xiangshan Forum “that’s consistent with what we’ve done in the past.”
Chase added, “In terms of hopefully … kick-starting some of the military-to-military engagements, yes, I’m hopeful that we’ll have an opportunity to do that in the coming months.”
A Defence Department spokesman later confirmed that Xanthi Carras, principal director in the office of the deputy assistant secretary of defense for China, Taiwan and Mongolia, would lead a U.S. delegation. PRC state media China Daily reported Chad Sbragia, who led the U.S. delegation when the Xiangshan Forum was last held in person in 2019, was among the registered attendees on the U.S. side.
Reuters previously reported on Oct. 11 that Beijing had invited U.S. Defense Secretary Lloyd Austin to the Xiangshan Forum, but the U.S. would not have him attend the event.
Our take
The official removal of Li Shangfu and Qin Gang as state councilors suggests that the Xi leadership has likely made up its mind on how to deal with them. Beijing could subsequently find a politically convenient moment to make known the charges against Li and Qin.
When viewed in conjunction with other developments, the timing of Li and Qin’s official removal also provides some insight into the current state of factional struggle in the CCP elite, as well as how Xi Jinping plans to approach Sino-U.S. relations.
Intensifying factional struggle
Qin Gang and Li Shangfu were officially removed from their posts about a month after China Evergrande chairman and executive director Hui Ka Yan was officially arrested. In analyzing the purge of Hui, we noted his links to the Jiang Zemin faction (also see here) via the faction’s current de facto head Zeng Qinghong, and how Xi Jinping would have “greater incentive politically to move against Hui and Zeng now if he suspects that Zeng and his remaining political enemies have been manipulating events behind the scenes to compel the removal of Xi’s allies like Qin Gang and Li Shangfu.”
In the week leading up to the official removal of Li and Qin, rumors circulating on the Chinese internet claimed that Hui Ka Yan had made several “confessions” while being detained. For instance, it was rumored that Hui implicated nearly 800 senior officials (retired and active), including:
- Nine members of the Politburo Standing Committee.
- Nineteen members of the Politburo and their family members.
- Eighty-eight officials at the provincial and ministerial levels.
- More than 670 bureau level officials.
These officials were allegedly involved in so-called “power-money” transactions totaling 1.6 trillion yuan.
While the details of the rumor might not be completely reliable, we believe that it is directionally accurate. Hui Ka Yan had close ties with senior officials in the Jiang faction, and Jiang faction supporters at varying levels of government would have been involved in some manner (legally and illegally) in aiding Evergrande’s rise to become the leading real estate company in China. Naturally, an investigation into Hui would very likely see him rat on his numerous former political associates as he looks for leniency from the Xi leadership by cooperating on anti-corruption matters; given the seriousness of the Evergrande crisis, Hui would welcome sharing a similar fate as Tomorrow Group founder and Jiang faction “white glove” Xiao Jianhua.
Xi Jinping could invite increased opposition by targeting many senior officials at once as he intensifies factional struggle against his remaining factional enemies. We previously wrote that Xi will “greatly heighten political instability in the CCP elite, and by extension, his own political risk levels, by turning the anti-corruption campaign against senior officials at the sub-national level and above who are not disloyal to him.”
Easing Sino-U.S. tensions
Xi Jinping has increased incentive now to repair Sino-U.S. relations as geopolitical pressures pile on the PRC. The outbreak of the Israel-Hamas war and the CCP’s unwillingness to go along with the U.S. and its allies in condemning Hamas and supporting Israel has reinforced negative perceptions about the PRC in the international community, including fears that the PLA will invade Taiwan and Beijing’s plan to create a “new world order” with Russia and Iran at its side (see item two in this newsletter).
The official removal of Li Shangfu allows the Xi leadership to go along, in at least one aspect, with the Biden administration’s effort to build “guardrails” with the PRC. Beijing previously refused to have high-level military communications with the U.S. given that the latter imposed sanctions on Li in 2018. But with Li no longer serving as defense minister, the Xi leadership can pick someone who is not being targeted by Washington and step up what appears to be a gradual resumption (starting with the attendance of senior U.S. officials at the Xiangshan Forum) of high-level military engagements with the United States.
Coincidentally or otherwise, the PRC defense ministry announced that it would hold the 10th Beijing Xiangshan Forum on the day that Hui Ka Yan’s arrest became official, and it would be later reported that the PRC invited U.S. Defense Secretary Lloyd Austin to the forum.
We believe that Beijing could have used the official removal of Li Shangfu as a bargaining chip to improve relations with the United States. The move signals that the Xi leadership is open to establishing “guardrails” with the Biden administration as the geopolitical climate deteriorates. In exchange for the “concessions,” Beijing would likely be hoping to secure assurances of some sort from Washington that its “red lines” on Taiwan and other matters (see newsletter item two) would not be crossed.
What’s next
Beijing could make pragmatic moves to stabilize the Sino-U.S. relationship and reduce geopolitical pressures on the CCP regime. Concurrently, Xi Jinping will likely step up anti-corruption purges, particularly in the financial sector, as he seeks to wipe out the lingering factional opposition to his rule and get a grip on the political situation at home so that he does not need to remove more political allies and can focus his efforts on addressing critical issues like rescuing the economy.
2 Xi appears set for US visit as worries are raised about global conflicts
Xi prepares for US trip?
Oct. 18
Xu Xueyuan, deputy chief of mission of the PRC Embassy in the U.S, said at an annual gathering of the Institute for China-America Studies that a meeting between Xi Jinping and President Joe Biden on the sidelines of the Asia-Pacific Economic Cooperation summit in San Francisco can only take place if the PRC feels that it is respected by the American side.
Xu outlined four “bottom lines or red lines” touching on the PRC’s “core interests” that the U.S. must show consideration for:
- Taiwan.
- Democracy and human rights.
- China’s path to development and its political and economic system.
- China’s right to development.
Oct. 23
The Wall Street Journal reported that Beijing is “gearing up an American charm offensive” that appears to be intended to pave the way for Xi Jinping’s trip to the U.S. in November 2023 for the APEC summit.
The Journal noted that PRC foreign minister Wang Yi is set to meet U.S. Secretary of State Antony Blinken in Washington in the week of Oct. 23, 2023, according to Biden administration officials. Part of the purpose of Wang’s trip is to prepare for a Xi-Biden summit, according to people briefed on the plans.
A delegation of Chinese business, cultural, and sports figures, including basketball star Yao Ming, is also due in New York in the week of Oct. 23 for a series of public engagements. The Chinese delegation’s trip follows “an uptick in academic exchanges and Vice President Han Zheng’s efforts to drum up investment into China when he attended the United Nations General Assembly in September,” according to the Journal.
The Journal further reported that PRC vice premier He Lifeng is planning a U.S. trip to meet with senior Biden administration officials like Treasury Secretary Janet Yellen and Commerce Secretary Gina Raimondo, citing people close to Beijing. The people said that He may meet his U.S. counterparts on the sidelines of the APEC meeting in November.
Oct. 24
The CCP authorities held an international symposium to commemorate the 10th anniversary of the PRC’s principles of amity, sincerity, mutual benefit, and inclusiveness (親、誠、惠、容) in neighborhood diplomacy. Foreign minister Wang Yi attended the symposium and delivered a speech on behalf of Xi Jinping.
Wang later said that the PRC will work with regional countries to make Asia a demonstration zone for Belt and Road cooperation, as well as a pilot zone for implementing the Global Development Initiative, the Global Security Initiative, and the Global Civilization Initiative.
The CCP authorities also released a document titled, “Outlook on China’s Foreign Policy on Its Neighborhood In the New Era” at the symposium. The document emphasized the PRC’s commitment to “promoting regional peace, stability, development, and prosperity” in Asia. The document also noted the PRC’s willingness to cooperate with countries in the Asian region, actively participate in multilateral mechanisms, and rejection of the “Cold War mentality.” The document wrote, “The right choice for Asia should be openness, solidarity, cooperation, justice, and harmony rather than isolation, division, confrontation, hegemony, and zero-sum approach.”
Oct. 25
1. State media reported that Xi Jinping wrote in a letter to the National Committee on United States-China Relations in New York that the PRC is willing to work with the U.S. to “advance mutually beneficial cooperation, properly manage differences, and make joint efforts to tackle global challenges, contribute to each other’s progress, and push for common prosperity so as to deliver benefits to both countries and the whole world.”
2. In a meeting with California governor Gavin Newsom in Beijing, Xi said that the PRC’s policy toward the U.S. is consistent, which is “mutual respect, peaceful coexistence, and win-win cooperation,” according to state media. He added that the PRC will keep working in this direction and hopes that the U.S. will meet China “halfway.”
Pentagon releases PRC military report
Oct. 19
The U.S. Department of Defense published its annual report to Congress on the PRC’s military power.
Some notable points in the report include:
- The Pentagon estimates that the PRC had over 500 operational nuclear warheads as of May 2023, up from more than 400 operational nuclear warheads in 2021. The Pentagon estimates that the PRC will have over 1,000 warheads by 2030.
- The U.S. documented over 180 instances of People’s Liberation Army coercive and risky air intercepts against American aircraft in the region between the fall of 2021 and the fall of 2023, or more in the past two years than in the previous decade.
- The PRC is expanding its global military footprint, but that is still much smaller than the U.S.’s network of bases.
- The PLAN had more than 370 ships and submarines, up from the 340 ships stated in last year’s report. The PLAN is expected to grow to 395 ships by 2025 and 435 ships by 2030.
- The PRC is “almost certainly” learning lessons from the Russia-Ukraine war that are “most applicable to the PRC’s goal of strengthening its whole-of-government approach to countering a perceived U.S.-led containment strategy.”
- The Pentagon believes that an amphibious invasion of Taiwan by the PLA is a “significant political and military risk for Xi and the CCP, even assuming a successful landing and breakout past Taiwan beachhead defenses.”
Biden admin. concerned about simultaneous conflicts
Oct. 20
Axios reported that many top U.S. government officials are privately worried about so many overseas conflicts occurring all at once.
The officials identified five global threats that “could fuse into one,” including:
- “Israel’s response to the Hamas terrorist attack, and growing fear of a spreading war that reaches to Iran and beyond.”
- “Vladimir Putin meeting in China (in the week of Oct. 16, 2023) with Xi Jinping to further strengthen their anti-America alliance.”
- “A malicious Iran … U.S. officials fear Hezbollah — a much bigger terrorist group than Hamas, funded by Iran — will strike the moment Israel gets stuck in Gaza.”
- “Kim Jong Un and his frequent testing of long-range, nuclear-capable missiles.”
- “A massive spread of doctored or wholly fake videos to manipulate what people see and think in real time.”
Axios added that the simultaneous threats are hitting “at the very moment the American political system seems — and sometimes is — literally broken.”
PRC-Philippines clash in the South China Sea
Oct. 22
The PRC and the Philippines exchanged accusations over a collision in disputed waters of the South China Sea. PRC coastguards had repeatedly deployed vessels to block resupply missions by the Philippines to troops stationed on a rusted World War Two-era transport that is being used as an outpost on the Second Thomas Shoal in the Spratly Islands.
The Philippines condemned “in the strongest degree” the “dangerous blocking manoeuvers” of the PRC coast guard, while the PRC coast guard said that there was a “slight collision” between one of its ships and the Philippine vessel.
The U.S. government later issued a statement in support of “our Philippine allies in the face of the People’s Republic of China.” Japan also issued a statement expressing “serious concern for actions which increase regional tensions including a dangerous action that caused a collision between Chinese and Filipino ships on October 22nd.”
Oct. 25
Speaking alongside Australian prime minister Anthony Albanese at a press conference, President Joe Biden criticized PRC vessels for acting “dangerously and unlawfully” towards the Philippines, and added, “The United States’ defense agreement to the Philippines is ironclad. Any attack on the Filipino aircraft, vessels, or armed forces will invoke our Mutual Defense Treaty with the Philippines.
New ‘Axis of Evil’?
Oct. 18
In reporting the meeting between Russia’s Vladimir Putin and Xi Jinping at the Belt and Road forum in Beijing, The New York Times and The Wall Street Journal ran articles with similar headlines and narratives about how Russia and China are “doubling down” on their “vision” of a “new world order” differing from that championed by the United States.
Oct. 22
In an interview on Fox News, Senate Minority Leader Mitch McConnell (R-Ky.) said, “You have to respond to conditions that actually exist that are a threat to the United States. The Iranians are a threat to us as well. And so, this is an emergency. It’s an emergency that we step up and deal with this axis of evil – China, Russia, Iran – because it’s an immediate threat to the United States.”
“In many ways the world is more endangered today than it has been in my lifetime,” McConnell said, recalling that unlike when the Berlin Wall fell, the world faces a “big power competition” coinciding with the terrorism threats in the Middle East and culminating in Israel’s war against Hamas terrorists.
McConnell also said, “We know which side they’re on” with regard to the PRC’s stance on the Israel-Hamas war. “We need to view this as a worldwide problem,” he added.
Five Eyes intel chiefs warn about China
Oct. 22
In an interview with CBS’s “60 Minutes,” intelligence from the “Five Eyes” nations warned about a “global espionage campaign by China.”
Federal Bureau of Investigation director Christopher Wray said, “The People’s Republic of China represents the defining threat of this generation this era. There is no country that presents a broader, more comprehensive threat to our ideas, our innovation, our economic security, and ultimately our national security.” Wray added that the FBI has “2,000 active investigations that are just related to the Chinese government’s effort to steal information.”
Australia’s Director-General of Security Mike Burgess said that the PRC’s behavior “goes well beyond traditional espionage. This scale of the theft is unprecedented in human history. And that’s why we’re calling it out.”
In giving examples of PRC espionage, the United Kingdom’s MI5 director general Ken McCallum said that they had seen “over 20,000 examples” of the PRC using professional networking websites to reach out to people in Britain “who have information that the Chinese State wishes to get its hands on.”
David Vigneault, the director of the Canadian Security Intelligence Service, said that Canada has “seen and blocked attempts by the PRC to acquire locations near sensitive, strategic assets of the country where we knew that the ultimate purpose was for spying operations.”
Musk warns of World War III
Oct. 23
Speaking on an online panel discussion on X (formerly Twitter), Elon Musk said that he believes military conflicts in Ukraine and the Middle East could become a global war. “We’re sleepwalking our way into World War III,” he said.
“We need to figure out peace in Ukraine, and I think we need to restore normal relations with Russia,” Musk said, adding that the present situation could force Russia into a greater alliance with China. Musk also said that Ukraine’s war against Russia is a hopeless situation, and that a Russia-China-Iran alliance could overwhelm the West in a global conflict.
Musk said, “We do not have an overwhelming advantage in industrial might. The foundation of war is economic power, especially industrial output, basically how many tanks and guns and drones can you make, relative to the other side.”
Our take
1. The U.S. and its allies are growing more vigilant to and increasingly calling out the CCP threat as the global geopolitical situation deteriorates with the Russia-Ukraine war and the Israel-Hamas conflict. Efforts by Beijing to draw closer to Russia and Iran could spur greater support for Taiwan in the international community and see countries in the Indo-Pacific region become more willing to stand up to the PRC’s bullying tactics and “gray zone” maneuvers in the East and South China Seas.
There is, however, a thin line between deterrence and provocation. Prominent attempts by the U.S. and its allies to push for “Taiwan independence” would put serious pressure on the Xi leadership to use aggression to safeguard the PRC’s “national sovereignty.” But the CCP authorities will unlikely take action or kick up a fuss beyond issuing the usual propaganda if the international community shows increased support for Taiwan and makes other public displays of solidarity. Nor would Beijing be able to do much should the U.S. and its allies spotlight the CCP’s massive human rights abuses and expose the Party’s pernicious Marxist-Leninist ideology; the CCP cannot publicly refute the U.S. and its allies for exposing it without inadvertently focusing attention on the disastrous aspects of its rule and undermining its political legitimacy on the mainland.
2. Xi Jinping appears to be keen on meeting President Joe Biden in the United States. We believe that Xi could be interested in finding a way to lower Sino-U.S. tensions through a one-on-one meeting with Biden and somewhat defuse the PRC’s growing geopolitical crises so that his leadership can focus on tackling more pressing economic, social, and political crises at home. To that end, it cannot be ruled out that Xi could offer up some concessions to the Biden administration during this U.S. trip as a sign that the PRC is willing to work with Washington in “good faith” and “overcome” the widening differences between both sides. For instance, Xi could resume to a partial or fuller degree the PLA’s bilateral engagements and military-to-military communications with the United States.
Efforts by Beijing to improve Sino-U.S. relations, however, are almost certainly intended also to help the CCP survive its current crises and so be able to advance its domination agenda in the future. The Xi leadership would be hoping to “delay and wait for change”—such as multiple global crises and domestic problems preventing the U.S. from being able to effectively check the PRC—and buy enough time for the CCP to withstand “major tests” that throw up “high winds and rough waves” (風高浪急) as well as “perilous situations” (驚濤駭浪).
3. Beijing is very likely as concerned as the Biden administration about simultaneous conflicts fusing into a global war, especially given that the PRC is presently in a highly disadvantageous position to fight one or engage in smaller regional conflicts. The CCP’s recent symposium promoting “neighborhood diplomacy” in Asia and commitment to making the region peaceful and prosperous appears to be an effort by Beijing to lower regional tensions and assure other Asian countries that the PRC is more interested in pursuing economic development than engaging in acts of aggression.
The deficiencies of the CCP authoritarian system, however, threaten to undermine whatever goodwill that Beijing is attempting to generate in its “neighborhood.” For example, the PRC coastguard’s clash with vessels from the Philippines appears to be a case of officials “preferring left rather than right” and acting in a manner that they interpret to be “politically correct” when faced with a situation on the ground. Xi Jinping may not necessarily have ordered those risky maneuvers or wanted the PRC coast guard to be deliberately provocative; the PRC spy balloon incident showed that Xi is not always fully aware of or in total control over what the military and paramilitary do.
The response to the PRC-Philippines incident by the U.S. and its allies could prompt the Xi leadership to give explicit orders to dial back risky military and paramilitary operations in the East and South China Seas (including the Taiwan Strait) to avoid accidents that could trigger serious incidents and result in a third world war. However, PRC military and paramilitary troops could still take risky actions in hotspot areas even if Beijing does issue stand down or partial stand down orders should officials default to Communist Party culture at crunch time. This means that there is always a chance of incidents in the East or South China Seas spiraling out of control regardless of what the Xi leadership does to mitigate accidents.
