1 Analyzing Qin Gang’s reported demotion and other political speculation
Qin Gang demoted?
Sept. 8
The Washington Post reported that former PRC foreign minister Qin Gang had been assigned a low-level job at World Affairs Press, a state-owned publishing house affiliated with the PRC Ministry of Foreign Affairs, citing two former U.S. officials.
The former officials said that Qin’s demotion came sometime in the spring of 2024. One of the officials said that the demotion is a “fall from grace,” but he is also “off the hook.” Qin is “not going to jail, but his career is over,” said an official, adding that was not just a punishment but also a cautionary tale.
The Post said that Qin’s demotion follows a precedent set by former assistant foreign minister Shen Guofang. In 2005, Shen was suddenly reassigned to serve as editor in chief at World Affairs Press, with rumors at the time saying that he was being punished for an affair. The Post said Shen “nonetheless kept a public profile in his new job, giving regular speeches and interviews, in which he has claimed to have no idea why he was reassigned.”
Sept. 10
Hong Kong newspaper Ming Pao cited a source in Beijing as saying that there is an employee at World Affairs Press by the name of “Qin Gang,” but that employee just happens to share the same name as the former foreign minister. The source added that former foreign minister Qin Gang does not work at the publishing house.
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Qin Gang was removed from his position in July 2023 after spending just 207 days on the job. The earliest political rumors claimed that Qin’s downfall was due to his having an affair with Phoenix TV reporter Fu Xiaotian and having a child out of wedlock with her in the United States.
In December 2023, Politico Europe cited sources as saying that Qin had died “either from suicide or torture” in late July in the military hospital in Beijing that treats top PRC leaders. We expressed deep skepticism of Politico’s information at the time.
Rumors that Qin Gang had been demoted to serve as president or vice president of World Affairs Press first circulated on overseas Chinese social media in early July 2024, or before the Third Plenum of the 20th Central Committee.
On Aug. 9, Victor Gao, the vice president of the Center for China and Globalization think tank and a former translator for top PRC leaders, told Al Jazeera host Mehdi Hasan that Qin Gang is “somewhere in China” but “you will never see him.” Some Chinese commentators took Gao’s remarks to mean that Qin was already dead.
CMC vice chairs express support for Xi
Sept. 2
The PRC National Defense University held a special seminar for senior military officers to study and implement the spirit of the Central Military Commission’s political work conference that was held in Yan’an City.
In a speech at the seminar’s opening ceremony, CMC vice chairman He Weidong said studying and implementing the spirit of the CMC’s political work conference is a “major political task.” He called for resolutely implementing the decisions and deployments of CMC chairman Xi Jinping, adhering to the strategy of political military-building in the new era, and solidifying the military’s political development.
He Weidong also required senior military leaders to profoundly understand the decisive significance of the “Two Establishes,” uphold the “Two Safeguards,” adhere to the “CMC chairman responsibility system,” always follow the Party’s direction, and always listen to the Party’s commands.
Sept. 7
CMC vice chairman Zhang Youxia attended the closing session of the special seminar for senior military officers to study and implement the spirit of the CMC’s political work conference. At the closing session, Zhang summed up the special seminar and delivered a speech.
In his speech, Zhang called for:
- Persistent efforts to arm the military with Xi Jinping Thought on a “strong military.”
- Enhance the consciousness and thoroughness of ideological transformation.
- Further deepen the foundation of faith, temper Party character, and improve work guidance.
- Engage in true learning, true understanding, true believing, and true application (真學真懂真信真用).
- Firmly uphold the “Two Establishes” in thought and action.
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Chinese commentators previously speculated that the meeting between U.S. National Security Advisor Jake Sullivan and CMC vice chair Zhang Youxia was not merely an effort at maintaining regular communications between the U.S. and the PRC to “prevent competition from escalating into conflict or confrontation” per the rhetoric of the American side. Rather, Washington’s “real intention” in seeking out Zhang and the other senior PRC leaders was to get clarification on the internal dynamics and developments in CCP elite politics.
Chinese commentators reasoned that the U.S. side would be very interested to know what exactly was going on in the CCP in the wake of what they believe to be a string of curious developments and rumors in recent months, including Xinhua removing a special report titled, “Xi Jinping the Reformer,” as well as speculation that Xi was seriously ill and being targeted in a palace coup where Zhang Youxia was allegedly a central figure.
Our take
1. Qin Gang’s reassignment to World Affairs Press as reported by The Washington Post, if accurate, would affirm our earlier analysis of his political situation (see here and here).
To briefly recap, we believe:
- Qin is likely not guilty of serious wrongdoing.
- Contrary to the rumors, Qin is not dead and his case is not connected with corruption in the People’s Liberation Army.
- Qin’s downfall could be linked to efforts by Xi Jinping’s lingering factional enemies and the “anti-Xi coalition,” including elements opposed to Xi in the military or the CCP intelligence apparatus’s “hidden front” (see here and here), to exploit the Xi leadership’s prioritization of national security matters to “manipulate” the Chinese leader into removing his allies and ultimately undermining his own interests.
- Qin could potentially get off more lightly than Xi ally and former securities regulator Liu Shiyu.
2. It cannot be ruled out that the Xi camp deliberately “leaked” news about Qin Gang’s political fate so that it would be reported in Western media. By making it known that Qin was demoted and the handling of his case could be similar to that of former assistant foreign minister Shen Guofang, the Xi camp would be looking to end the speculation that Qin is dead.
Speculation that Xi Jinping had Qin Gang killed undermines the Xi leadership’s “quan wei” and reputation both inside and outside China. Western governments who believe Xi Jinping is an exceptionally ruthless authoritarian like Stalin would be more inclined to exercise extra precautions against the PRC and take stronger measures in countering the CCP. Party officials who believe that Xi had been merciless toward a political ally and loyalist would feel alienated and be less inclined to support the Chinese leader.
We assess Ming Pao’s information about the “Qin Gang” at the World Affairs Press to be probable, but less reliable than the information obtained by the Post. The Jiang Zemin faction influenced many legacy Hong Kong media outlets like Ming Pao, and the information on “Qin Gang” provided by Ming Pao’s Beijing source suits the Jiang faction’s agenda of keeping the former foreign minister’s fate murky so as to facilitate the demonizing of Xi.
3. Zhang Youxia and He Weidong’s show of support for Xi Jinping and his political theories at the special seminar for senior military officers at the National Defense University indicates that the propaganda line upholding Xi’s “quan wei” has not shifted and affirms our analysis that Xi’s “grip on power is secure and his political position is stable.”
Zhang’s remarks in particular debunk the rumor that he had launched a coup against Xi. Had Zhang truly mounted a coup, he would have issued remarks that hinted at Xi losing power instead of getting senior military officials to rally around Xi by studying Xi Jinping Thought on a “strong military” and firmly upholding the “Two Establishes” in thought and action.
Meanwhile, analyses by Chinese commentators that there was special meaning behind Zhang Youxia’s meeting with Jake Sullivan are likely based on them placing too much stock in the rumor that Zhang had somehow upstaged Xi, as well as other tales of political intrigue in Zhongnanhai that are currently in circulation. We already explained above that Xi is firmly in charge and there is no sign that Zhang has turned against Xi. The CCP is also very unlikely to disclose the internal dynamics and developments in its elite politics in formal settings, especially in meetings with foreign officials.
We believe that Beijing allowed Zhang Youxia to meet with Sullivan to show sincerity in maintaining stable military communications between the PRC and the United States. The Xi leadership has an interest in managing tensions with the U.S. and its allies in the South China Sea, East China Sea, and the Taiwan Strait to prevent accidental clashes and incidents (擦槍走火), particularly with the political uncertainty in the U.S. in the lead up to the presidential election in November.
4. The Xi leadership’s effort to intensify the political indoctrination of senior military officials appears to be part of its post-Third Plenum attempt to double down on propaganda and stabilize the regime amid mounting internal and external crises.
2 Beijing’s removal of foreign investment restrictions, renewed attempt to encourage foreign-owned hospitals hint at regime woes
Sept. 8
1. The PRC National Development and Reform Commission and the Ministry of Commerce issued a new “negative list” for foreign investment (外商投資進入特別管理措施 [負面清單] [2024年版]). The list is set to take effect on Nov. 1, 2024.
The total number of items on the 2024 negative list, or restricted sectors for foreign investment, was reduced from 31 items in the 2021 version to 29 items. The removal of the two items — restrictions involving rules on publication and printing, as well as the application and production of traditional Chinese medicine — meant that all restrictions on foreign investment in the manufacturing sector have been completely eliminated.
2. The Ministry of Commerce, the National Health Commission, and the National Medical Products Administration issued a notice on expanding the pilot program for opening up the medical field.
The notice allowed:
- Foreign-invested enterprises to engage in the development and application of human stem cell and gene diagnosis and therapy technologies in the four free trade zones of Beijing, Shanghai, Guangdong, and Hainan. All products that have been registered, listed, and approved for production can be used nationwide.
- Foreign-invested enterprises to establish wholly foreign-owned hospitals (excluding traditional Chinese medicine centers and the acquisition of public hospitals) in Beijing, Tianjin, Shanghai, Nanjing, Suzhou, Fuzhou, Guangzhou, Shenzhen, and Hainan (locations that are relatively affluent cities and provinces in eastern or southern China). The specific conditions, requirements, and procedures for setting up wholly-foreign owned hospitals would be announced separately.
Backdrop
1. The number of restricted items on China’s negative list for foreign investment has been reduced from 93 in the initial list in 2013 to 31 by 2021.
2. The PRC National Health Commission issued a notice on conducting pilot work for establishing wholly foreign-owned hospitals (關於開展設立外資獨資醫院試辦工作的通知) as early as 2014. The notice followed a decision by Party Central on “several major issues concerning comprehensively deepening reform” (中共中央關於全面深化改革若干重大議題的決定) announced at the Third Plenum of the 18th Central Committee.
At the time, Beijing decided to conduct pilot projects for establishing wholly foreign-owned hospitals in Beijing, Tianjin, Shanghai, Jiangsu, Fujian, Guangdong, and Hainan. Foreign investors were allowed to set up wholly foreign-owned hospitals through new establishments, mergers, or acquisitions. Beijing delegated authority to approve such hospitals to provincial governments.
There were over 1.07 million healthcare institutions in China in 2021, of which just 302 were foreign-invested medical institutions, according to data from the National Health Commission.
Our take
1. The new negative list for foreign investment comes after the Third Plenum of the 20th Central Committee and appears to be in line with the Xi leadership’s pledge to “further comprehensively deepen reforms.” Beijing is likely trying to signal with this move that the PRC is still committed to “reform and opening up” in a bid to keep China attractive to foreign investors.
However, removing restrictions on investing in China’s manufacturing sector is likely to have little effect in courting foreign investment given the current trends and geopolitical climate:
- Domestic demand in China is sluggish and the Chinese economy faces high uncertainty.
- High-tech industries aside, other sectors of China’s manufacturing industry are currently experiencing overcapacity and intense competition. China’s high-tech industries are also at risk of U.S. sanctions as Washington looks to counter the CCP threat and safeguard U.S. national security. This makes it risky and potentially unprofitable for foreigners to invest in China’s manufacturing industry at this time.
- Foreign investors appear to be spooked by increasing authoritarianism in China, including Beijing’s efforts to strengthen national security, safeguard state secrets, establish Party organizations in foreign-invested companies, and step up ideological indoctrination. This has led to foreign firms withdrawing their investments from China as they account for political risks. According to official data, foreign direct investment in China totaled $33 billion on a net basis in 2023, down 80 percent from 2022 and a 30-year low.
- Foreign investors are becoming increasingly skeptical of the CCP’s commitment to reform. For example, the European Union Chamber of Commerce’s latest Position Paper noted, “At the start of the new millennium, reform plans announced by the Chinese government were seen by foreign companies as credible. Now, after more than a decade of largely unfulfilled pledges, doubts over China’s commitment to reform are increasing.”
- Sino-U.S. relations remain tense and are in danger of escalation depending on the state of domestic U.S. politics and the PRC’s provocative actions towards Taiwan and neighboring countries. The uncertain geopolitical environment is unfavorable to foreign investment in China.
2. Beijing could have ulterior motives in allowing foreign-invested enterprises to establish wholly foreign-owned hospitals, as well as engage in the development and application of human stem cell and gene diagnosis and therapy technologies.
Having foreign-owned hospitals that provide advanced and top-notch medical treatment and services in China means that wealthy Chinese citizens, who do not have access to the special privileges of CCP officials, are less likely to travel abroad for medical treatment. While this group of wealthy Chinese is relatively small compared to the entire population, they are likely numerous enough to provide considerable demand for foreign-owned hospitals. Keeping this group inside China is also a way for Beijing to reduce capital and personnel outflows.
The establishment of foreign-owned hospitals with cutting edge medical research and treatment also allows the CCP to partly meet the demand for high-end medical services by the Party elite and senior officials. The CCP also has a chance to steal human stem cell and gene diagnosis and therapy technologies that are developed by foreign-invested enterprises in China to profit from the technologies or even reappropriate them for potentially nefarious purposes.
3. It is uncertain if the CCP’s latest attempt to “open up” China to foreign investment will go beyond the paperwork. The PRC effort to establish wholly foreign-owned hospitals started in Xi Jinping’s first term but appeared to make little headway. At the time, the proposal at the Third Plenum of the 18th Central Committee clarified the requirements for setting up wholly foreign-owned hospitals, but the follow up to the pilot program only came a decade later. The recent notice also noted that the “specific conditions, requirements, and procedures for setting up wholly foreign-owned hospitals” were “to be announced separately.”
We believe that the move to establish wholly foreign-owned hospitals moved at a very slow pace likely because Xi lacked power in his first two terms to implement what he laid out at the Third Plenum of the 18th Central Committee in 2013. Therefore, Xi had to focus on the anti-corruption campaign and other power consolidation work first to shore up his political position before trying again to push through earlier reforms. But while Xi has more or less resolved the power problem, he still faces challenging obstacles to reform implementation, including endemic corruption in the officialdom, a rapidly deteriorating economy, government fiscal shortages, and growing dissatisfaction with him in the officialdom and across China.
Even if the measures to establish foreign-owned hospitals work out, they are potentially vulnerable to being exploited by private hospital networks like the Putian system. For instance, fraudulent private hospital networks could register foreign companies overseas for the purposes of “acquiring” their “parent” business on the mainland. Doing so grants the “parent” enterprise a veneer of foreign “respectability” and allows such scam networks to more effectively run their schemes.
We assess that Xi Jinping will struggle to enact his reforms given the entrenched habits within the bureaucracy and the serious deficiencies of the CCP authoritarian system.
