1 Analyzing a possible Third Plenum date, and other political developments or rumors
Third Plenum to be convened?
Douglas Paal, a Distinguished Fellow at the Carnegie Endowment for International Peace, told Radio Free Asia that he learned from PRC officials while attending the 2024 China Development Forum that Beijing is currently planning to convene the Third Plenum of the 20th Central Committee in June.
Paal said plans for the Third Plenum are not official and changes could still be made. He added that Beijing hopes to have more details on how it will address some of China’s current challenges between now and June.
Radio Free Asia quoted an unnamed source in another report as saying that news regarding the convening of the Third Plenum was mentioned privately at both the China Development Forum and the Boao Forum for Asia, but has not yet been officially confirmed.
Military promotions
March 28
Wang Renhua, secretary of the Central Military Commission’s Political and Legal Affairs Commission, and Xiao Tianliang, president of the PRC National Defense University, were promoted to the rank of general. State media reported that Xi Jinping and both vice chairmen of the CMC attended the promotion ceremony.
Cai Qi in charge of CAC?
March 28
South China Morning Post reported that Cai Qi, the fifth-rank Politburo Standing Committee member and General Office director, was appointed head of the Central Cyberspace Affairs Commission, citing three sources familiar with the matter. A source in Beijing said that Cai’s appointment happened some time in the first half of 2023. Xi Jinping previously headed the CAC.
The CAC was established in 2014 by Xi to consolidate the CCP’s direct control over the internet. The organ started as the Central Leading Group for Cyber Affairs before being expanded to a commission in 2018.
Peng Liyuan rumors
March 24
Peng Liyuan, Xi Jinping’s wife, visited Changsha City in Hunan Province to inspect grassroots tuberculosis prevention work in her capacity as the World Health Organization’s Goodwill Ambassador for Tuberculosis and HIV/AIDS, according to a report from the PRC National Health Commission. Peng was accompanied by NHC deputy director Wang Hesheng and Zhang Yingchun, the executive vice governor of Hunan and member of the Hunan Party Committee’s Standing Committee.
Several Chinese commentators believed that Peng’s high-profile public appearance in Hunan signaled that she is preparing to or being prepared to assume a prominent role in CCP elite politics in her capacity as first lady. Some commentators also likened Peng to Jiang Qing, the ambitious wife of Mao Zedong who served as first deputy director of the Cultural Revolution Group in 1966 and joined the Politburo three years later at the 9th Party Congress. Some have speculated that Peng could join the Politburo at the Third Plenum of the 20th Central Committee.
CMC vice chair dispute rumor
He Weidong, the second-ranked CMC vice chairman, called for a crackdown on the military’s “fake combat capabilities” during a discussion with a People’s Liberation Army delegation at the Two Sessions on March 5.
Some Chinese commentators believe that He’s remarks were aimed at the recent corruption case involving the PLA Rocket Force and that he was indirectly implicating the first-ranked CMC vice chairman Zhang Youxia. The commentators noted that there was no official state media coverage of He Weidong’s remarks on “fake combat capabilities” and that he has not made any public appearances for some time, and interpreted that this indicated a split in the top ranks of the CMC.
However, Zhang Youxia and He Weidong both attended a promotion ceremony for generals on March 28, and both participated in a tree planting event in Beijing on April 1 along with other members of the CMC.
Former justice minister probed
April 2
The CCP anti-corruption authorities announced an investigation into Tang Yijun, the former PRC justice minister and current Jiangxi provincial Chinese People’s Political Consultative Conference chairman and Party secretary.
Tang’s last public appearance was on March 22, 2024 when he participated in a group study session of the Jiangxi provincial Party Committee’s theoretical learning center. He is the third former justice minister to be probed during Xi Jinping’s tenure after Wu Aiying and Fu Zhenghua.
Tang was appointed justice minister in April 2020. During the 20th Party Congress in October 2022, Tang was not appointed to the new Central Committee despite being some years away from retirement at the time. In February 2023, Tang was removed as justice minister and was transferred to the Jiangxi CPPCC a month later.
Our take
1. The CCP typically discusses economic policies at the third plenary session of each Central Committee, which is usually held in the second year after a Party Congress. The Third Plenum of the 20th Central Committee was supposed to be held near the end of 2023, but Beijing has yet to officially announce when the plenary session will be convened. The lack of official announcement about the Third Plenum has unsettled foreign investors and businesses, who are losing confidence in the Xi leadership’s handling of the economy and are becoming increasingly disillusioned about China’s prospects. We analyzed on a number of occasions that the Third Plenum is likely being delayed because the Xi leadership is struggling to come up with effective economic rescue policies.
We believe that the CCP authorities let out that the Third Plenum could be held in June partly as a way to create anticipation for it and stabilize foreign confidence in the prospects of continuing to invest and operate in China. Beijing could have weighed that the continued lack of information about the Third Plenum is reinforcing negative views about China abroad, and decided to throw out a figurative bone to stop foreign investors and decision-makers from concluding that the Party cannot or is unwilling to address China’s economic problems, as well as create some breathing space for the regime to come up with solutions.
The roundabout and unofficial manner in which a possible Third Plenum date was disclosed to foreigners allows Beijing to be noncommittal and flexible about when the political conclave is eventually held. Beijing, however, would undoubtedly be aware that there is a limit to how many times it can pull off the anticipation stunt before it has to officially announce the convening of the Third Plenum or risk being perceived as untrustworthy and very unreliable in the eyes of foreigners (which would in turn negatively affect foreigner confidence in China).
We believe that the June date for a Third Plenum may not be entirely arbitrary. The CCP authorities could be thinking about cutting interest rates to stimulate the economy, and thus are waiting to see whether the Federal Reserve goes ahead with its planned rate cuts before proceeding. The Federal Open Market Committee has six more opportunities to cut rates this year, starting with a meeting at the end of April. When and whether the Fed lowers rates is likely to be a factor in determining when Beijing schedules the Third Plenum and what sort of policies are introduced.
2. The promotion of Wang Renhua and Xiao Tianliang, who are both in their early 60s, to the rank of general suggests good career prospects for both officials.
Wang Renhua’s promotion to general breaks with past precedent. The previous two secretaries of the CMC PLAC held the rank of lieutenant general. The post itself is also not particularly prestigious, being just one of 15 functional departments of the CMC. We see two possible reasons why Xi Jinping would want the secretary of the CMC PLAC to hold the top military rank. First, Xi could be looking to enhance the influence of the CMC PLAC secretary so that the department can better deal with growing instability in the military resulting from sweeping anti-corruption and criminal investigations. Second, Xi could be preparing another round of military reshuffles and promoted Wang Renhua first so that he would be ready for a new post. If Wang is indeed about to be reshuffled, then he could move to the CMC Equipment Development Department to serve as political commissar, a post that is currently vacant; Wang previously served as political department head of an institution under the General Armaments Department, or department that preceded the EDD.
Meanwhile, there is precedent of National Defense University presidents holding the general rank. Xiao Tianliang’s predecessor, Xu Xueqiang, was promoted to general in September 2021 while he was president of the National Defense University. In October 2022, Xu was transferred to head the EDD. Before Xu, most presidents of the National Defense University (a deputy theater command grade position) were also promoted to the rank of general.
3. Xi’s delegation of the top cybersecurity job to Cai Qi reflects firm trust in his political ally. Cai now handles three important portfolios, including cybersecurity, the personal security of top leaders (as General Office director, Cai oversees the Central Guard Corps), and propaganda.
Xi established the Central Leading Group for Cyber Affairs early in his tenure as a way to sideline the collective leadership system and push through his agenda while he was still consolidating power. After securing a third term at the 20th Party Congress and having centralized power to an even greater degree, Xi likely feels confident in handing over some of his previous duties to key deputies to manage.
4. The investigation of former justice minister Tang Yijun underscores the intractable nature of fighting corruption in the CCP regime and the limitations of Xi Jinping’s attempt to build a loyal and clean cadre through ideological indoctrination and the anti-corruption campaign.
In analyzing the possibility of Tang replacing Fu Zhenghua as justice minister after it appeared that the latter had been purged back in April 2020, we noted that Tang appeared to be an official that Xi trusts. A review of Tang’s career showed his lack of career progression during the Jiang faction’s era of dominance, a factor that could have led the Xi leadership to promote and rely on him. However, Tang’s marginalization at the 20th Party Congress suggests that the anti-corruption authorities had found evidence of his corruption or his being a so-called “two-faced person” (individuals who prioritize their interests over that of the regime, or who publicly give the appearance of being loyal to Xi when their other behavior indicates otherwise).
The downfall of officials who appear to be in the Xi camp (Qin Gang and Li Shangfu) or whom the Xi leadership appears to have groomed for top office due to their loyalty, lack of connections to the Jiang faction, and other reasons will likely deepen the chill felt by Xi allies and the officialdom at large. As the anti-corruption campaign increasingly consumes more of Xi’s loyalists and allies, Xi and the officialdom will become alienated from each other, to the detriment of governing efficiency and effectiveness during a time of worsening crises for the CCP regime.
5. The recent speculation about Peng Liyuan is not the first time that Chinese commentators have suggested that Xi’s wife could become more involved in political matters. After Xi consolidated power to an even greater degree at the 20th Party Congress, Chinese commentators increasingly came to compare or equate him with Mao. Such comparisons extend to Xi’s political allies and his wife, but are often highly speculative, rely on flimsy logic, and are not based in fact. For instance, some Chinese commentators began floating the idea after State Councilor Shen Yiqin became president of the All-China Women’s Federation in October 2023 that Peng could potentially “skip three grades” (i.e. alternate member of the Central Committee, full member of the Central Committee, and member of the Politburo) and join the Politburo. Chinese commentators argued that the Politburo should have a female member, and Peng is therefore tipped to join the elite political body since Shen was not a Politburo member. However, there is no official requirement for female Politburo members, and there has been no female member of the Politburo since the current Politburo was unveiled at the 20th Party Congress. There is also no link between Shen Yiqin’s appointment as president of the All-China Women’s Federation and Peng Liyuan allegedly assuming a more prominent political position.
We believe that Chinese commentators are overinterpreting Peng’s role in CCP elite politics and Xi’s “quan wei” level. For one, Peng’s recent tuberculosis prevention work inspection is geared towards propaganda and publicity rather than a genuine inspection tour of the sort carried out by top officials. Peng has also not made any unusual political moves or public appearances that would suggest she is being primed for high office. Further, the personnel reshuffles at the 20th Party Congress indicate that Xi does not have overwhelming “quan wei” in the CCP regime and cannot override all internal Party rules and operations to send his wife to the Politburo, much less force such a move at the Third Plenum of the 20th Party Congress. Even Mao Zedong, who had significantly higher “quan wei” than Xi, was only able to elevate Jiang Qing to the Politburo after purging a large number of senior cadres and observing internal Party rules and operations by having her join the Politburo at a Party Congress.
6. The speculation of a split between He Weidong and Zhang Youxia appears to be based on a misunderstanding of CCP operations. Each vice chairman of the CMC has his own responsibilities, which means that their public appearances and attendance at meetings will vary accordingly. As such, it is normal for He to not be at some of the public events attended by Zhang, and vice versa. Moreover, Zhang and He have recently attended some events together, further debunking the speculation.
It is also very unlikely that He Weidong is threatening Zhang Youxia given the power difference between the two and their factional allegiance. Both men are with the Xi camp, and He, who was just promoted to the position of CMC vice chair, does not have sufficient connections or qualifications to move against Zhang even if he wanted to.
7. The spread of political rumors and speculation about Xi Jinping (including his family members) and the Xi leadership reflect the increasingly negative perception that people both inside and outside the country have about Xi. The spread of such information will likely increase the paranoia of the Party elite and officials towards Xi, thereby making the CCP regime more fragile and less able to show resilience in the face of various external shocks.
2 Beijing signals a willingness to improve Sino-US relations amid growing regime crisis
Xinhua makes the case for a ‘better future’ for China-US relations
March 28 to March 31
State mouthpiece Xinhua published four commentaries in a series on the theme of “promoting the continuous, stable, and healthy development of China-U.S. relations” (推動中美關係持續穩定健康向前發展). The commentaries sought to interpret and elaborate on Xi Jinping’s remarks to representatives from the U.S. business, strategic, and academic communities during a March 27 meeting in Beijing on how Sino-U.S. relations “may have a better future.”
Key points in the four commentaries include:
“Establishing Correct Strategic Understanding” (“樹立正確戰略認知”)
- Xi Jinping again emphasized the fundamental role of “establishing the correct understanding in China-U.S. relations” and “fully made profound reflections” on the “crux” and “urgent tasks” of the bilateral relationship.
- China will not become another United States, and the U.S. cannot reshape China according to its own likes and dislikes. This requires both sides to respect each other’s choices.
- China-U.S. relations can develop in a positive direction if cooperation dominates perception. But if competition dominates perception, or if competition defines the entire relationship, China-U.S. antagonism will continue and may even slide into the abyss of a “new cold war.”
- In the China-U.S. relationship, establishing correct understanding and eliminating strategic misjudgments are particularly important.
- Xi’s meeting with American representatives reflects the efforts of PRC leaders at the highest level to promote exchanges between PRC and American think tanks, establish correct understanding between China and the U.S., and reduce strategic misjudgments.
- There has recently been an increase in interactions between high-level officials and people-to-people exchanges between China and the United States. The maintaining of positive momentum of stabilization in bilateral relations is in line with the interests of the people of both countries and the common expectations of the world. The “Thucydides Trap” is not inevitable.
“Expanding the Space for Mutually Beneficial Cooperation” (“拓展互利合作空間”)
- Xi personally briefed American representatives on China’s economic development situation, expounded on China’s development path and domestic and foreign policies, engaged in in-depth dialogue on China-U.S. relations, demonstrated a high degree of attention to bilateral economic and trade cooperation, and indicated China’s consistent attitude of adhering to openness and cooperation.
- The increasingly frequent friendly exchanges between China and the U.S. and increasingly close integration of interests have transformed economic and trade cooperation from the “peripheral field” into the “ballast” of China-U.S. relations.
- China’s economy is healthy and sustainable. The Chinese market has become a fertile ground for multinational corporations from the U.S. to promote global innovation.
- The American business representatives who met with Xi are all long-term partners of China.
- China’s development has undergone various difficulties and challenges to reach how it is today. China did not collapse in the past despite the “China collapse theory,” and now has not peaked despite the “peak China theory.”
- This year marks the 45th anniversary of the establishment of diplomatic relations between China and the United States. Both sides should draw inspiration from the past, mutually achieve success in their respective development, expand the space for mutually beneficial cooperation, and gather the strength to move in the same direction.
“Strengthening the Bond of the People’s Hearts and Minds” (“拉緊人心民意紐帶”)
- The future of China-U.S. relations lies with the youth. If the younger generation interacts amicably, there is hope for China-U.S. relations.
- The U.S. should walk in the same direction as China, and provide more support and convenience for people-to-people exchanges between the two countries.
“For a ‘Better Future’” (為了‘一個更好的未來’”)
- For China-U.S. relations to have a “better future,” at the conceptual level, there must be an abandonment of zero-sum thinking and the embracing of the mindset of cooperation and mutual benefit.
- To some American politicians who hold the views of “you lose, I win, your rise, my decline,” it is especially important to discard “Western-centrisicm” and the influence of colonial culture, as well as break free from the historical inertia of “American exceptionalism” and Cold War thinking. This is because the “Global South” has already awakened, developing countries are rapidly rising, and the world cannot return to the past.
- Growing individually in market competition, developing together in various fields of cooperation, and creating more well-being for the world should be the image of a “better future” for China-U.S. relations.
- As the world’s top two economies, how China and the U.S. interact influences the direction of international cooperation and shapes the course of century-old changes. When China and the U.S. compete, the world is tense; when China and the U.S. cooperate, the world benefits.
- If we always hold the “bright heart” of pursuing win-win outcomes for both countries and the world, China and the U.S. will surely illuminate the way forward and move towards a “better future.”
Biden-Xi phone call
April 2
President Joe Biden and Xi Jinping held a telephone call and discussed various issues. The New York Times said that Biden intended the call to be a “check-in” rather than a discussion with concrete outcomes, citing an unnamed senior administration official.
According to the White House readout, both sides “reviewed and encouraged progress on key issues discussed at the Woodside Summit, including counternarcotics cooperation, ongoing military-to-military communication, talks to address AI-related risks, and continuing efforts on climate change and people-to-people exchanges.”
Biden also raised concerns over “the PRC’s support for Russia’s defense industrial base and its impact on European and transatlantic security” as well as the PRC’s “unfair trade policies and non-market economic practices.” Biden stressed that the U.S. will “continue to take necessary actions to prevent advanced U.S. technologies from being used to undermine our national security, without unduly limiting trade and investment.”
According to the Xinhua readout, Xi told Biden that “the China-U.S. relationship is beginning to stabilize, and this is welcomed by both societies and the international community.” However, “the negative factors of the relationship have also been growing, and this requires attention from both sides.”
Xi added that China and the U.S. “should not cut off their ties or turn their back on each other, still less slide into conflict or confrontation,” “should respect each other, coexist in peace and pursue win-win cooperation,” and the relationship “should continue moving forward in a stable, sound and sustainable way, rather than going backward.”
Xi said that three overarching principles should guide the bilateral relationship in 2024, namely, that peace must be valued, stability must be prioritized, and credibility must be upheld.
Xi also urged the U.S. to “translate President Biden’s commitment of not supporting ‘Taiwan independence’ into concrete actions.” Xi further noted that U.S. suppression of China’s trade and technology development is “not ‘de-risking,’ but creating risks.” Xi said, “If the U.S. side is willing to seek mutually beneficial cooperation and share in China’s development dividends, it will always find China’s door open; but if it is adamant on containing China’s hi-tech development and depriving China of its legitimate right to development, China is not going to sit back and watch.”
Both the U.S. and PRC readouts noted that Xi and Biden discussed Taiwan and North Korea.
Yellen travels to China
April 2
The U.S. Treasury Department announced that Treasury Secretary Janet Yellen will travel to the PRC from April 3 to April 9 to continue her economic dialogue with top PRC officials. Yellen will meet with PRC premier Li Qiang, vice premier He Lifeng, former vice premier Liu He, finance minister Lan Fo’an, People’s Bank of China governor Pan Gongsheng, and other officials.
The Treasury statement said that Yellen will press her PRC counterparts on “unfair trade practices and underscoring the global economic consequences of Chinese industrial overcapacity.
Our take
1. Xinhua’s commentary series promoting a “better future” for Sino-U.S. relations appears to be an effort by the Xi leadership to persuade Washington, through a combination of propaganda and rhetoric, that the latter should ease tensions with the PRC so that both countries may benefit. The commentaries also reveal that Beijing is fully aware that the bilateral relationship cannot revert to how it was during the “engagement” era.
The commentary on establishing “correct strategic understanding” faults the U.S. for rising Sino-U.S. tensions and indirectly warns Washington against changing the PRC’s socialist system and government. The commentary also encourages the U.S. to adopt so-called “correct strategic understanding” in engagements with the PRC so that the “new cold war” can be ended and there will be no “Thucydides Trap” situation. The commentary further implied that Xi Jinping had communicated the need for a “correct strategic understanding” between the U.S. and the PRC during his meeting with American representatives in Beijing.
Next, the commentary on expanding “mutually beneficial cooperation” made the argument that the Chinese economy is still booming (“healthy and sustainable,” “peak China” has not arrived, etc.) in what is likely an attempt to convince American investors and businesses to stay and invest more in China.
The commentary on “strengthening the bond of the people’s hearts and minds” appears to be an attempt by the CCP authorities to put pressure on the democratic government of the United States by indirectly suggesting that the younger generation of Americans may not be pleased with their elected representatives for raising tensions with China and sabotaging opportunities for people-to-people exchanges.
Finally, the commentary on a “better future” makes the case that the U.S. should improve relations with the PRC because “the world cannot return to the past” of the U.S.-dominated world order with the “awakening” of the Global South.
Likewise, Xi appears to hold the U.S. responsible for the deterioration of bilateral relations in his phone call with President Biden. Xi also warns Biden and the U.S. against backing “Taiwan independence” and further curbing the PRC’s trade and technology development. However, the tone of the Xinhua readout on the Xi-Biden call is generally conciliatory, which suggests that the Xi leadership would currently prefer to lower Sino-U.S. tensions over escalating them.
2. Beijing is sending somewhat mixed signals in the Xinhua commentaries mentioned above and in Xi’s call with Biden due to the predicament that the CCP regime currently faces.
On the one hand, the Xi leadership craves more U.S. and other foreign investments to help support the troubled Chinese economy:
- China’s economic recovery has been rather uneven. While China’s manufacturing purchasing managers’ index for March improved by 1.7 points from the previous month to reach 50.8, other indicators such as factory prices and employment remained below the expansion point. This suggests that the recent manufacturing sector growth could be due to sales from price cuts, which would explain why employment has gone down instead of up. If so, then it is premature to assess that China’s economic decline has bottomed out and a proper rebound is underway.
- China’s real estate sector crisis continues to worsen and have a greater negative impact on China’s economy and financial sector. For instance, news emerged around mid-March that China Vanke, a leading state-owned real estate company, encountered difficulties in making repayments to several insurance companies. Near the end of March, four provinces and cities closed their financial asset exchanges.
- Data released by the semi-official China Real Estate Association on April 2 showed that the sales turnover of the top 100 real estate companies in March was 358.32 billion yuan, a decrease of 45.8 percent from a year ago. The cumulative sales of the top 100 real estate firms also decreased 47.5 percent from the previous year to 779.24 billion yuan.
- Many real estate companies suspended the trading of their shares on the Hong Kong Stock Exchange on April 2 after delaying the publication of their respective annual financial reports. The companies include Country Garden, Ronshine China, Modern Land, Yida China, and Central China Management.
- Mainland media Yicai reported on April 2 that the total balance of non-performing loans to corporate clients of six major state-owned banks was 214.5 billion yuan in 2023, an increase of 16.7 billion yuan from the end of 2022 and an overall non-performing ratio of around 5.24 percent. The balance of non-performing loans for personal housing loans of the six banks was 121.4 billion yuan, an increase of about 4.9 billion yuan from the end of 2022 and an increase in the overall non-performing loan ratio from 4.4 percent to around 4.7 percent.
- Financial institutions in China are increasingly running into trouble. On April 1, mainland media reported that the Sichuan bureau of the National Financial Regulatory Administration approved the bankruptcy of Sichuan Trust. Sichuan Trust became the second Chinese trust company after New China Trust to enter bankruptcy proceedings.
- Xi Jinping and Li Qiang called for greater financial opening up and the defusing of risks in their respective events that were attended by foreigners. This suggests that China’s economic and financial problems are severe and the regime needs external capital to help it tide over multiple crises.
On the other hand, the CCP authorities continue to leave the U.S. and other countries concerned as they take steps to enhance regime security and strengthen ideological indoctrination:
- March 23: Hong Kong passed Article 23 of the Basic Law.
- March 24 to March 28: CCP leaders emphasized the PRC’s commitment to “Chinese-style modernization” to Americans and other foreigners attending key forums and meetings in China. We previously analyzed that “Chinese-style modernization” is the repackaging of the CCP’s brand of Marxism-Leninism into something that the Party believes that the Chinese people and the international community will find more acceptable.
- April 2: Xi warned Biden in their phone call that the PRC will not “sit back and watch” if the U.S. crosses its red line on Taiwan and suppresses the PRC’s trade and technology development.
- April 2: The Ministry of State Security issued a statement demanding that the U.S. and UK governments “immediately stop slandering and smearing China over cyberattacks.” The MSS also claimed that state security agencies firmly oppose the “politicization of cybersecurity issues” and “resolutely oppose and combat all forms of cyberattacks.”
We believe that the mixed signals that Beijing is sending will likely cause the U.S and other countries to become more guarded against the PRC and take more actions to counter the CCP threat.
