1 Possible reasons for Beijing holding population sample survey two years early
Population changes census
Oct. 10
The PRC National Bureau of Statistics announced that it would conduct a nationwide sample survey to track population changes in 2023.
According to the announcement, the scope of the sample survey would be selected urban and rural areas in mainland China. The survey would track names, citizenship numbers, gender, age, ethnicity, education level, migration status, work status, marital status, birth and death status, housing status of individuals, and other items during the period of survey. The survey reference date will be set at Nov. 1, 2023, and census workers will be collecting information on-site from Oct. 10 to Nov. 30.
Per official information, the purpose of this sample survey, which examines 1 percent of the population, is to ascertain the changes in China’s population since the last census (published in May 2021). The sample survey also seeks to gather statistical information to support the study of future trends in population conditions and the formulation of national economic and social development plans.
Oct. 12
The PRC National Health Commission published its statistical communiqué on healthcare development in China in 2022 (2022年中國衛生健康事業發展統計公報). According to the communiqué, China recorded 9.56 million births in 2022, or the lowest number since records began in 1949. Of the newborns, 38.9 percent were the second child in the family, while 15 percent were the third or more child. The sex ratio at birth in 2022 was 111.1 boys for every 100 girls.
The statistical communiqué also noted that 6.835 million couples registered for marriage in 2022, a decrease of 10.6 percent from the previous year. The marriage rate was 4.8‰, down 0.6 ‰ from the previous year.
In an Aug. 8 report, mainland media Yicai cited Qiao Jie, a scholar at the Chinese Academy of Engineering and director of Peking University’s School of Medicine, as saying at a forum that the number of newborns in China has dropped by about 40 percent in the past five years. Qiao estimated that the number of births in 2023 would be approximately “7 million to 8 million,” or down from the 9.56 million in 2022.
September economic data
Oct. 13
1. The NBS released data showing that the national consumer price index (CPI) remained unchanged from a year ago and rose 0.2 percent month-on-month, while the national producer price index (PPI) fell 2.5 percent from a year earlier and rose 0.4 percent from the previous month.
2. The PRC General Administration of Customs released China’s trade data for September. In dollar terms, China’s exports in September fell by 6.2 percent year-on-year, imports fell by 6.2 percent, and the trade surplus was $77.71 billion. The September data meant that China’s exports and imports had declined for the fifth consecutive month; in August, exports fell by 8.8 percent, imports fell by 7.3 percent, and the trade surplus was $68.36 billion.
China’s foreign exports in September only increased to Russia (up 20.6 percent), to the United Kingdom (up 5.3 percent), and to India (up 2.1 percent).
The GAC listed China’s total trade volume from January to September as being down 6.4 percent year-on-year (compared to down 7.2 percent against the official data over the same period in 2022), exports down 5.7 percent (compared to down 6.6 percent against the official data over the same period in 2022), and imports down 7.5 percent (compared to down 8.0 percent against the official data over the same period in 2022).
Our take
The CCP authorities typically conduct a sample survey of 1 percent of the population between two censuses. With the last census done in 2020, the authorities should be holding the sample survey in 2025, not in 2023. We see three likely reasons why Beijing wants to carry out the sample survey two years ahead of schedule:
1. The Xi leadership could be looking to pinpoint the domestic reasons behind China’s lackluster post-COVID economic recovery.
The external reasons contributing to the poor performance of the Chinese economy have been clear for some time. Rising inflationary and recessionary pressures worldwide, as well as Western efforts to “de-risk” from China, have curbed global demand for Chinese goods, a phenomenon that is reflected in China’s slumping trade.
Beijing, however, would have been struggling to comprehend why there has been persistently “insufficient demand” in China and poor “domestic circulation” so many months after “zero-COVID” restrictions have been lifted. The conducting of a sample survey suggests that the Xi leadership believes the PRC’s much-vaunted (in propaganda) “ultra-massive markets” (超大規模市場) is not producing the scale advantages that it should be delivering, and is looking to verify suspicions that the lack of scale advantages stem from a substantial change in China’s demographic in recent years.
2. The Xi leadership suspects that the 2020 census was inaccurate or does not reflect demographic changes post-COVID, and therefore is holding an early sample survey to better capture demographic changes and make better policies.
Beijing is undoubtedly aware that the current official demographic data is not very reliable given the deficiencies of the CCP authoritarian system. For one, officials have a bad habit of falsifying data to conform to the current political orthodoxy, protect and advance their own interests (obtain more subsidies from the central government, meet population control targets, etc.), as well as preserve legacy policies (the one-child policy, etc.) that promote their interests. The CCP bureaucracy has also acknowledged that there are many errors in its records pertaining to demographics; between 2014 to 2017, the CCP authorities cleaned up 3.147 million duplicate household registrations (hukou), deleted 5.786 million household registrations that should have been scrapped after deaths, naturalizations, and other reasons, and corrected 17.671 million errors in household registrations, according to official data.
The Xi leadership would likely be hoping that the sample survey would give it a better idea of China’s present demographic situation so that it can make the appropriate adjustments to any economic or development reform policies that could be unveiled at the Third Plenum of the 20th Central Committee. Without updated demographic figures, Beijing could end up setting unrealistic economic goals, misallocating resources, miscalculating revenue and expenditures, and ultimately wasting time in producing impractical economic or development reform policies. The CCP authorities also need a better grasp of the actual size of China’s working-age and military-age populations to make the appropriate adjustments to its social and military policies.
The new Central Committee usually holds its Third Plenum around the October to November period of the year after the Party Congress. However, the 20th Central Committee had not yet announced the date of the Third Plenum at the time this newsletter was published. It is possible that the Xi leadership is waiting on the results of the sample survey and looking to reassess the state of Sino-U.S. relations after Xi Jinping’s likely meeting with President Joe Biden in November at the Asia-Pacific Economic Cooperation summit in San Francisco before holding the Third Plenum.
3. The Xi leadership could be suspecting that its economic stimulus and rescue measures have been largely ineffective because China’s population saw a drastic reduction during the three pandemic years. Thus, Beijing is carrying out the sample survey two years in advance of the usual date to verify its suspicions and quickly make policy changes.
We previously analyzed that COVID-related deaths in China are likely far higher than what the CCP authorities have officially reported. Since then, there have been new signs that lend more weight to our analysis:
- On July 11, 2023, the Civil Affairs Bureau of Changyuan City in Henan Province disclosed in its 2023 mid-year work summary report that a total of 1,184 corpses were cremated from January to June 2023, an increase of 520 bodies (up 78.3 percent) from the 664 corpses that were cremated in the same period in 2022. Around the same time, the Civil Affairs Bureau of Huidong County in Guangdong Province stated in its mid-year report that funeral parlors in the county had cremated 4,804 corpses from January to May 2023, or a 114-percent surge as compared to the same period in 2022 (2,245 bodies).
- On July 13, 2023, the Civil Affairs Bureau of Zhejiang Province released data for the first quarter of the year which noted that there were 171,000 corpses cremated during that period, a year-on-year increase of 72.7 percent. The number of corpses cremated in the first quarter of 2020, 2021, and 2022 were 88,300, 93,000, and 99,000 respectively. Later, the Zhejiang Civil Affairs Bureau removed from its website the original report with the cremation data.
- On Sept. 25, 2023, Dajiyuan (Chinese-language edition of The Epoch Times) reported a mortician in a county in Anhui Province saying that as many as 200 to 300 corpses were cremated every day in 2022 when the pandemic was ongoing. The mortician added that the furnaces in funeral parlors were burning 24 hours a day and the morticians had no time to put makeup on the deceased before they were cremated. The mortician further estimated that the number of COVID-related deaths throughout China would not be less than 300 million (based on their observation). Also, the mortician believes that while the internal data of funeral homes across the country lists over 200 million corpses cremated, this figure is likely inaccurate.
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We believe that the Xi leadership could come closer to figuring out the changes in China’s demographic after the sample survey, but is still unlikely to get an accurate picture of the situation due as local officials look to cover up huge swings in population. And even if Beijing manages to get a good estimate of the demographic changes since the 2020 census, it will likely only make gradual changes to the PRC’s economic and other policies so as to avoid alerting those in China and abroad to trouble in the regime. This “lag” in policy adjustment will compound the PRC’s problems and prevent Beijing from effectively addressing China’s economic woes.
The continued deterioration of China’s economy will eventually trigger serious political problems for the Xi leadership, and force Xi Jinping to choose between preserving the Party or rescuing himself.
2 Geopolitical risks rise for Beijing amid conflicts, growing wariness towards the CCP
Dalio sees coming world war
Oct. 12
In a LinkedIn post, Bridgewater Associates founder Ray Dalio warned that the Israel-Hamas conflict has a “high risk of leading to several other conflicts of different types in a number of places, and it is likely to have harmful effects that will extend beyond those in Israel and Gaza.”
Noteworthy points in Dalio’s post include:
- Dalio believes that “the odds of transitioning from the contained conflicts to a more uncontained hot world war that includes the major powers have risen from about 35 percent to about 50 percent over the last two years.”
- Dalio believes that it is “likely that the wars involving Israel, Hamas, Ukraine, and Russia will have big effects on the ongoing great power conflicts, and it is very likely that Hamas acted with support from more powerful countries.”
- Dalio writes and puts in bold print that the “two hot wars (the Israel-Hamas war and the Russia-Ukraine war) are not just between the parties directly involved in them—these wars are part of the bigger great power conflicts to shape the new world order—and they will have big effects on the countries who are allies and enemies of the four sides in these two seemingly irreconcilable wars. These two wars will cost the allies of these countries a lot. For example, the U.S. is now fighting proxy wars in Europe and the Middle East while preparing for war in East Asia. As these wars spread, they will cost more.”
- Dalio added, “Fortunately, the progression toward a world war between the biggest powers (the U.S. and China) has not yet crossed the irreversible line from being containable (which it is now) to becoming a brutal war between the biggest powers and their allies. If these major powers do have direct fighting with each other, in which one side kills a significant number of people on the other side, we will see the transition from contained pre-hot-war conflicts to a brutal World War III.”
Congressional commission says US must be ready for simultaneous wars with China and Russia
Oct. 12
A 160-page report by the bipartisan Congressional Commission on the Strategic Posture of the United States noted the “militarily troubling and increasingly aggressive behaviors of Russia and China over the past decade,” and claimed that the “new global environment is fundamentally different than anything experienced in the past, even in the darkest days of the Cold War.”
The report said that the U.S. and its allies and partners must be “ready to deter and defeat both adversaries [China and Russia] simultaneously.” Also, the “U.S.-led international order and the values it upholds are at risk from the Chinese and Russian authoritarian regimes.” The report believed that the PRC and Russia threats could become more severe during the 2027-2035 period, and said that “decisions need to be made now in order for the nation to be prepared.”
UK banks make China contingencies
Oct. 13
Reuters reported that big banks in the United Kingdom are preparing contingency plans in the event of further Western sanctions on the PRC following future escalations in geopolitical tensions, and have shared their “scenario planning” with the UK and U.S. governments.
Three senior London-based bankers told Reuters that their boards had discussed the possibility of tougher Western sanctions on China in future. A lawyer who advises banks said that “scenarios from major cyber-attacks through to a military intervention in Taiwan could potentially trigger further prohibitions on China.”
A security expert told Reuters that “The biggest financial institutions are … determining whether the exposure they have (to China) is tolerable given a pessimistic direction of travel for geopolitics.”
US tightens AI chip curbs
Oct. 17
The Biden administration announced updated rules that would tighten restrictions on the PRC’s ability to buy advanced semiconductors.
According to public information:
- The updated rules would go into effect in 30 days.
- The updated rules greatly expand the U.S. government’s authority to determine what American firms can or cannot sell in the name of national security.
- Shipments of high-end artificial intelligence (AI) chips to China, including those by Nvidia and Intel for the Chinese market, are banned without a license. A U.S. official said that the rules change would bar Nvidia from selling A800 and H800 GPUs chips in China. Also affected is Intel’s AI chip Gaudi2. Most consumer chips in laptops, smartphones, and gaming devices are exempt from the updated rules, but some will be subject to licensing and notification requirements by U.S. officials.
- The updated rules impose limits on how much computing power a chip can contain in a certain size, a measure intended to prevent workarounds using new “chiplet” technology that the PRC has indicated will be central to the future of its semiconductor industry.
- The updated rules expand licensing requirements for exports of advanced semiconductors to over 40 additional countries that present risks of diversion to China and are subject to U.S. arms embargoes.
- The updated rules ban chips from being shipped to units of companies located anywhere in the world if their parent companies are headquartered in China, Macau, and other arms embargoed countries.
- Twenty-one countries outside China now have a licensing requirement for chipmaking tools. Added to the list of restricted equipment are some deep ultraviolet (DUV) lithography systems.
- The updated rules do not address the transfer of technology to Chinese companies like Huawei and Semiconductor Manufacturing International (SMIC).
- Chinese chip startups Biren and Moore Threads were added to a U.S. trade blacklist.
Commerce Secretary Gina Raimondo said that the goal of the updated rules was to limit China’s “access to advanced semiconductors that could fuel breakthroughs in artificial intelligence and sophisticated computers that are critical to [Chinese] military applications.”
PRC says Israel has gone too far in responding to Hamas attack
Oct. 15
PRC foreign minister Wang Yi said in a phone conversation with Saudi Arabian foreign minister Faisal bin Farhan Al Saud that the PRC “opposes and condemns all acts that harm civilians” in the Israel-Hamas conflict, but “Israel’s actions have gone beyond self-defense and it should heed the call of the international community,” according to a report by state mouthpiece Xinhua.
Wang added that the PRC is in “intensive communication with all parties to push for a ceasefire and an end to the fighting.”
Our take
We believe that Ray Dalio’s concern about the transition from “contained conflicts” in the Middle East and Eastern Europe to an “uncontained hot world war” between the U.S. and China is not unfounded. After all, conflict of some form (be it a “new cold war,” competition over advanced technologies, etc.) between both sides is inevitable because both Washington and Beijing have irreconcilable worldviews and global agendas.
The CCP’s Marxist-Leninist ideology dictates that the Party will strive for world domination, and the Xi leadership has been advancing the Party’s international agenda through the Belt and Road and propaganda like “a community of shared future for mankind.” The Xi leadership has also maintained the PRC’s longtime stance on Taiwan and “reunification,” and has stepped up military maneuvers and preparation with the goal of intimidation and taking the ROC by force if necessary.
The Biden administration has stuck to its “autocracy versus democracy” framework, and has clearly identified Russia and China as its chief global rivals. In a September 2023 speech at the John Hopkins School of Advanced International Studies, Secretary of State Antony Blinken said that the PRC “poses the most significant long-term challenge because it not only aspires to reshape the international order, it increasingly has the economic, the diplomatic, the military, the technological power to do just that.” In view of the challenge by China and Russia, the Biden administration is working to strengthen America’s military capabilities, make the world safe for democracy, and preserve the U.S.-led rules-based international order.
The recent actions of Washington and Beijing would have only served to convince each other of the “correctness” of their respective worldviews. For instance, the Xi leadership would see the Biden administration’s impending AI curbs as a sign that the U.S. is insincere about “engagement” and wants to keep down the PRC at all costs. Meanwhile, the Biden administration would read the PRC’s official statements about the Israel-Hamas conflict as a sign that Beijing does not stand with the U.S. and its allies on key global issues, but chooses to take the side of “revisionist autocracies” like Russia and Iran. Growing distrust between the two sides makes it easier for miscommunications and accidents (collisions between military vehicles in the South and East China Seas, etc.) to become major points of contention and potential sparks to a hot conflict.
We previously advised in April 2023 that the U.S. should “consider moderating its hawkish approach to tackling the CCP threat and lean more towards challenging the PRC on issues such as human rights, universal values, and morals.” We added that Washington would also “benefit from focusing international efforts on exposing the CCP’s Marxist-Leninist ideology, propaganda, disinformation, and various influence operations.” The Biden administration has made inroads into some of the aforementioned areas, but Washington on the whole remains hawkish and more focused on the “hard” aspects (military, advanced technology, etc.) of countering the PRC. Should the Biden administration attempt to be deliberately provocative by crossing the PRC’s “red lines” on Taiwan and other issues, it may find it hard to avoid the veering of Sino-U.S. competition into hot conflict and a possible world war.
We currently assess that Beijing is too preoccupied at present with defusing serious domestic crises to invade Taiwan in the near term or embark on other acts of aggression. That being said, the CCP authorities will almost certainly continue with their aggressive military maneuvers and drills in the Taiwan Strait, the South China Sea, and the East China Sea as it prepares for various conflict scenarios amid growing geopolitical instability.
Growing pressures from the U.S. and rising geopolitical risks stemming from the Russia-Ukraine and Israel-Hamas conflicts will likely compel Xi Jinping to double down on maintaining domestic political stability so that he can better prepare the CCP regime for future international escalations. To that end, Xi could step up his anti-corruption campaign and move more rapidly to eliminate lingering factional enemies, including the remnant Jiang Zemin faction represented by Zeng Qinghong. Drastic moves by Xi to get the CCP’s house in order are likely to produce the opposite effect in the short term, and could see political Black Swans emerge in China.
