Xi’s policies reveal plan to leverage finance and tech to advance domination agenda; PLA Daily issues political guidance after a week of ‘silence’

  1   Xi’s policies reveal plan to leverage finance and tech to advance CCP global dominance

  January Politburo session

On Jan. 31, the CCP Politburo held its 24th group study session of the 20th Central Committee on forward-looking planning and the development of future industries. State media reported that Yu Xiaohui of the China Academy of Information and Communications Technology (CAICT) delivered a briefing and put forward work recommendations to members of the Politburo. The members listened to the presentation and held discussions.

After the briefing and discussion, Xi Jinping delivered an important speech with the following main points:

• Cultivating and developing future industries is of great significance for seizing the commanding heights of science and industry and taking the initiative in development; for fostering new quality productive forces and building a modern industrial system; and for improving the people’s quality of life and promoting the all-round development of the people and comprehensive social progress.
• Future industries are characterized by forward-looking, strategic, and disruptive features, and require scientific planning and overall coordination.
  • It is necessary to comprehensively consider factors such as national strategic needs, the maturity of technologies, and the availability of supporting factors, and to pursue development tailored to local conditions with differentiated positioning.
  • Industrial coordination should be strengthened to ensure that future industries complement and reinforce emerging and traditional industries.
• The extent of technological breakthroughs largely determines the speed, breadth, and depth of the development of future industries.
  • Full play should be given to the advantages of the new whole-of-nation system to accelerate the transformation and application of scientific and technological achievements.
• The role of enterprises as the main drivers should be strengthened, with various innovation resources concentrated in enterprises, and strong efforts made to cultivate leading technology enterprises and high-tech firms with advanced core technologies and strong innovation capabilities, thereby driving industries toward frontier and high-end fields.
• Given the long cultivation cycle and high market risks of future industries, policies should provide support and governments should focus on delivering services.
  • Fiscal, taxation, and related policies should be improved, and technology finance should be vigorously developed.
• As the development of future industries spans a wide range of areas, governance systems must be improved.
  • Development and security should be coordinated, with exploration of scientific and effective regulatory approaches to prevent related risks.
  • International cooperation should be deepened, with active efforts to promote joint standard-setting, shared rule-making, and collaborative industrial development among all parties.
  • Leading cadres at all levels must strengthen their study of cutting-edge scientific and technological knowledge, and strive to understand technology, comprehend industry, and excel in decision-making.

  Qiushi piece on financial development

On Feb. 1, the CCP Central Committee ideological journal Qiushi published excerpts from a speech delivered by Xi Jinping on Jan. 16, 2024 at a special seminar for principal leading officials at the provincial and ministerial levels on promoting high-quality financial development. Titled “Following the Path of Financial Development with Chinese Characteristics and Building a Strong Financial Nation,” the Qiushi article goes over how the Xi leadership has advanced financial development since the 18th Party Congress.

The article summarizes eight defining features of the so-called “path of financial development with Chinese characteristics” (中國特色金融發展之路):

• Upholding the centralized and unified leadership of Party Central over financial work
  • Party leadership is the most essential feature of the path of financial development with Chinese characteristics, and represents the greatest political and institutional advantage of China’s financial development.
• Upholding a people-centered value orientation.
• Upholding financial services to the real economy as the fundamental purpose.
  • If finance becomes obsessed with self-circulation and self-expansion, it will turn into water without a source or a tree without roots, and crises will eventually emerge.
• Upholding risk prevention and control as the enduring theme of financial work.
• Upholding the advancement of financial innovation and development along market-oriented and law-based tracks.
• Upholding the deepening of supply-side structural reform in finance.
  • An important feature and advantage of China’s financial system is the dominance of state-owned financial institutions. But there are problems with this arrangement, such as an excessively high share of indirect financing and debt financing, insufficient inclusiveness of financial services, financial overexpansion, disorderly financial operations, and a large number of illegal financial activities. To address these issues, supply-side structural reform in finance must be deepened, and the relationships between indirect and direct financing, and between equity financing and debt financing, must be properly rationalized.
• Upholding the coordination of financial opening-up and security.
  • Financial opening-up must ensure national financial and economic security. It is necessary not only to guard against risks brought about by opening-up itself, but also to guard against risks deliberately created by strategic competitors.
• Upholding the general principle of making progress while maintaining stability.

The article notes that these eight features constitute an integrated whole of the basic positions, viewpoints, and methods of the path of financial development with Chinese characteristics. This path, the article notes, is fundamentally different from Western financial models. The article urges officials to strengthen their confidence, and continued exploration and refinement should be carried out in practice, so that this path becomes ever broader.

In the article, Xi sets out the goal of accelerating the building of a strong financial nation, including:

• Possessing a strong currency that is widely used in international trade, investment, and foreign exchange markets, and that enjoys global reserve currency status.
• Possessing a strong central bank capable of effectively conducting monetary policy regulation and macro-prudential management, and of promptly and effectively preventing and defusing systemic risks.
• Possessing strong financial institutions with high operational efficiency, strong risk-resilience, a comprehensive range of services, global deployment capabilities, and international competitiveness.
• Possessing strong international financial centers capable of attracting global investors and influencing the international pricing system.
• Possessing strong financial regulation, a sound financial rule-of-law framework, and substantial voice and influence in the formulation of international financial rules.
• Possessing a strong contingent of financial professionals.

Xi pointed out that although China is already a major financial country — with the world’s largest banking sector and foreign exchange reserves, the world’s second-largest bond and equity markets, and an insurance sector that also ranks among the largest — it is, overall, large but not strong.

Xi further stated that building a strong financial nation requires accelerating the establishment of a modern financial system with Chinese characteristics, including having:

• A scientific and prudent financial regulation and control system.
• A reasonably structured financial market system.
• A financial institution system with clear division of labor and coordination.
• A comprehensive and effective financial regulatory system.
• A diversified and specialized system of financial products and services.
• An autonomous, controllable, safe, and efficient financial infrastructure system.

Finally, Xi called for actively cultivating a “financial culture with Chinese characteristics”:

• Uphold honesty and trustworthiness, and do not cross bottom lines.
• Seek profit through righteousness, not profit above all else.
• Act with prudence and stability, avoiding impatience and short-termism.
• Uphold fundamental principles while innovating, and avoid drifting away from the real economy into virtual excesses.
• Act in accordance with the law and regulations, and refrain from reckless or unlawful behavior.

  Backdrop

1. Beijing’s development strategy has undergone a marked shift since the outbreak of the Sino-U.S. trade war in 2018. The CCP’s previous focus on “hiding strength and biding time” (韜光養晦) has gradually been replaced by an emphasis on “high-level technological self-reliance and self-strengthening” (高水平科技自立自強), accompanied by a pronounced “spirit of struggle” (鬥爭精神).

Key data points in U.S.–China technological competition include:

• Semiconductors: In 2024, China’s chip exports grew by 23.5 percent, reaching 355.2 billion yuan.
• AI talent: Nearly half of the top 20 percent of AI researchers globally were born in China, but only about 10 percent currently work at Chinese institutions.
• Computing power and infrastructure: Utilization rates of China’s AI data centers are currently around 32 percent. Since 2021, the CCP authorities have invested $100 billion to support data center construction.

2. The CCP downplayed its “Made in China 2025” policy (introduced in 2015) following geopolitical pressures from the United States. However, the policy’s core objective — raising the level of manufacturing self-sufficiency — has been carried forward under the framework of “new quality productive forces.” Meanwhile, U.S. export controls on advanced semiconductors (imposed in 2022 and 2023 under the Biden administration, and sustained with caveats in the second Trump administration) appear to have prompted Beijing to accelerate the “de-Americanizing” of its supply chains.

Beijing’s technology strategy and the deployment of “new quality productive forces” involve:

• Core priority areas: Quantum technology; sixth-generation mobile communications (6G); embodied intelligence (humanoid robots); brain–computer interfaces; hydrogen energy and nuclear fusion; and biomanufacturing.
• Capital investment: Phase III of the National Integrated Circuit Industry Investment Fund (“Big Fund”) was established in May 2024 with registered capital of 344 billion yuan, focusing on the entire semiconductor industry chain.
• Infrastructure scale: As of 2025, cumulative transaction volume of the digital renminbi (e-CNY) has exceeded $2.3 trillion. Also, China’s CIPS system has connected financial institutions in more than 180 countries worldwide.

3. In the financial sphere, Beijing put forward the goal of “building a strong financial nation” for the first time at the 2023 Central Financial Work Conference. This concept seeks to reverse an earlier model in which the Chinese financial system was overly dependent on property-driven growth and to redirect financial resources toward technological innovation. At the same time, sanctions imposed on Russia through the SWIFT system following the Russia–Ukraine war heightened Beijing’s sense of urgency about establishing “parallel financial infrastructure” (such as CIPS and mBridge).

The six key elements of the “strong financial nation” concept include:

• A strong currency possessing global reserve currency status and being widely used.
• A strong central bank capable of macro-prudential management and preventing systemic financial risks.
• Strong financial institutions with global deployment capabilities and international competitiveness.
• Strong international financial centers that are able to attract global investors and influence the international pricing system.
• Strong financial regulation that is supported by a sound legal framework and possesses significant voice in the formulation of international rules.
• A strong pool of financial professionals.

  Our take

The January Politburo meeting and Xi Jinping’s speech in Qiushi reveal a calculated strategy to overcome U.S. strategic containment. By searching for advantages in next-generation technologies and reshaping the global financial architecture, Beijing is looking to establish a “new world order” capable of operating independently of, or directly confronting, Western rules-based systems.

1. Xi’s speech at the special seminar in January 2024 for principal leading officials at the provincial and ministerial levels on promoting high-quality financial development goes beyond economic guidance, and signals a reassertion of CCP control over the financial sector.

i) The primary purpose of Xi’s speech was to politically mobilize senior Party officials around financial ideology and to demonstrate his grand ambitions for the PRC. The Xi leadership had previously expressed concerns in various settings that finance was not properly working for the PRC’s socialist system given the Chinese financial system’s absorption of elements of Western market-oriented practices over the past three decades. Xi’s “strong financial nation” concept is an attempt at transforming finance from an economic lever used to boost the GDP figure into a “political instrument” to serve the real economy and national strategy. An example of the concept in action is the movement of financial development away from real estate-driven fiscal models towards initiatives that support state-designated “hard technologies.”

Beijing’s elevation of financial development in the importance of nation-building (強國建設) is likely also intended to re-consolidate internal confidence within the CCP system amid dual pressures of domestic economic slowdown and increasing geopolitical pressures on China (i.e. Western tariffs and concerns about the export of Chinese excess capacity, etc.). By politically mobilizing the “key minorities,” the Xi leadership is looking to leading cadres to ensure that the bureaucratic machinery does not waver directionally during the critical period of policy transition.

ii) Against a backdrop of global economic uncertainty, Xi requires a new narrative to underpin the legitimacy of his highly centralized rule. As the era of sustained high GDP growth becomes increasingly difficult to maintain, the emphasis on “national financial security” and the critique of the “flaws of Western financial models” have become key justifications for strengthening Party leadership and constraining market freedoms.

Concurrently, Beijing’s intensification of financial regulation (i.e. regulations that come with “teeth and thorns,” with “clear edges and corners”長牙帶刺、有棱有角) is an effort at fusing anti-corruption work in the financial sector with political cleansing. By cracking down on so-called “financial crimes” and “moral hazards,” Xi is in practice purging forces within the financial system that do not align with his will, thereby enhancing the stability and legitimacy of his rule over the long term. Accordingly, the 2024 special seminar functioned both as a “strategy mission briefing” for senior officials and as a sort of “political oath” to Xi in his ongoing process of power centralization.

2. The six key elements in Xi Jinping’s “strong financial nation” concept are both a benchmark for the PRC’s development and a direct strategic counter-alignment against the global financial hegemony established by the U.S. since the Bretton Woods system.

• A strong currency means that in terms of monetary sovereignty, Beijing seeks to elevate the renminbi to global reserve currency status and achieve its widespread use in trade and investment. The CCP is thereby attempting to build a foundational settlement track independent of the traditional U.S.-dollar-based system.
• A strong central bank means aligning the role of the People’s Bank of China with the global influence of the U.S. Federal Reserve, promoting a shift in global liquidity management from a single center to a multi-center structure and increasing the “discursive power” of RMB-based banking.
• Strong financial institutions mean that Beijing hopes to build multinational financial institutions comparable to big-name Wall Street banks (JPMorgan Chase, Goldman Sachs, etc.), which dominate global capital allocation. The phased objective is to expand the influence of Chinese banks in Global South markets and challenge the traditional strongholds of Western banks.
• Strong financial centers mean that Beijing aims to establish Shanghai and Hong Kong as international financial hubs capable of competing with New York and London — which dominate global derivatives and commodity pricing — and to create a shadow pricing system in non-U.S. capital markets that is not fully controlled by Wall Street.
• Strong financial regulation means that Beijing seeks greater voice in the formulation of international financial rules and aims to build a regulatory framework with Chinese characteristics beyond the traditional Basel accords (Basel III) that can withstand Western sanctions.
• Strong financial talent means that Beijing wants to assemble a pool of top-tier financial technology and quantitative trading professionals comparable to those clustered on Wall Street, but who are politically reliable and loyal to the Party.

Xi’s pursuit of a “strong currency” stems from fear of the weaponization of U.S. dollar dominance through sanctions. The PRC’s path toward RMB internationalization has shifted from a narrow focus on trade settlement to systematic infrastructure building. Although the RMB’s share in global payments remains far below that of the U.S. dollar, it has already risen to second place in the area of trade finance. The “digital RMB” (e-CNY) and the mBridge project promoted by Beijing are in effect attempts to create an electronic settlement track independent of the dollar-based SWIFT system. These efforts could fundamentally alter the operating logic of global foreign exchange markets in the future.

Building “strong international financial centers” also reflects Xi’s recognition that as long as pricing power remains in the hands of the West, the PRC’s resource security and asset security will remain constrained. By strengthening Hong Kong’s role in re-export trade and financing, and by transforming Shanghai into a hub for RMB-denominated assets, Beijing is attempting to construct a “shadow pricing system” free from U.S. administrative interference. This poses a long-term challenge to America’s position as the ultimate destination for global capital.

The “strong financial nation” strategy is intended to transform financial resources, through state-led capital allocation, into strategic leverage for breaking through blockades on core technologies. Beijing seeks to use a model of “technology finance” to circumvent the limitations of traditional market-oriented venture capital, employing state-led industrial funds to provide long-cycle, high-intensity capital support to high–entry-barrier sectors such as semiconductors and quantum computing. This approach is fundamentally different from the U.S. model, which relies on private capital markets.

China’s efficiency in capital allocation is frequently questioned by Western academia. However, its capacity for administrative mobilization enables it to build scale advantages in mature-process semiconductors and new energy supply chains within a matter of years, thereby diluting the strategic pressure generated by U.S. export controls.

3. Xi Jinping’s discourse on “new quality productive forces” and “future industries” reveals the CCP’s ambition to achieve comprehensive superiority over the U.S. in the so-called “Fourth Industrial Revolution,” rather than merely following in its wake. In Xi’s view, technological competition constitutes the very foundation of financial hegemony.

i) Xi’s early-2026 policy deployments reveal the core strategic directions for the 15th Five-Year Plan in which the PRC plans to challenge the U.S. on the technology front.

• Quantum technology and 6G: Beijing aims to establish “unbreakable” communications systems and ultra-high-speed connectivity, thereby breaking the U.S. monopoly over the underlying protocols of the internet.
• Embodied intelligence and robotics: Beijing plans to leverage China’s mature manufacturing ecosystem to physicalize artificial intelligence (i.e. build humanoid robots) and create new advantages in labor productivity in the physical world.
• Hydrogen energy and nuclear fusion: Developing the “ultimate breakthrough” in the energy domain allows the CCP to fundamentally resolve dependence on external energy sources.
• Low-altitude economy and brain–computer interfaces: Beijing intends to open up entirely new industrial tracks and seize the commanding heights of those industries by setting early rules and standards.

ii) Xi’s concept of “new quality productive forces” is not just a technical term, but also represents his reinterpretation of Marxist theories of productive forces. It emphasizes the “leap in laborers, means of labor, objects of labor, and their optimized combinations” (勞動者、勞動資料、勞動對象及其優化組合的躍升), in CCP parlance. In practice, this means that Beijing is attempting to artificially compress technological iteration cycles through state power.

This strategy hinges on the idea that China will struggle to surpass the accumulated advantages of the West along traditional technological paths (such as internal combustion engines or legacy semiconductors). However, on disruptive new technological paths (such as electrification or quantum computing), China and the U.S. stand at the same starting line. Therefore, Xi is pursuing the “open strategy” of utilizing massive state-led capital investment and the “new whole-of nation system” to manufacture generational gaps in these future industries, thereby forcing the U.S. into a passive position on the technological front in the future.
4. In the struggle for dominance over the commanding heights of technology and industry, the PRC and the U.S. exhibit a highly tense and asymmetric configuration.

i) The prevailing view in the global technology community is that the U.S. continues to maintain an absolute lead in “0-to-1” innovation. This is underpinned by its open academic environment, mature venture capital system, and a culture tolerant of failure. In contrast, China possesses unmatched advantages in “1-to-100” application, or scaling and mass production.

• China’s advantages: Powerful supply-chain support (such as Shenzhen’s hardware ecosystem), vast data markets, and a seemingly almost inexhaustible dividend of labor and engineers. Once a technological direction is clarified, China can achieve industrial scale at astonishing speed and drive down costs. This kind of “capacity storm” leaves Western competitors in the same fields trailing in the wake.
• The U.S. dilemma: Despite possessing core technologies, offshoring of manufacturing and lengthy administrative approval processes (environmental and labor regulations) slow down commercialization and significantly raise costs. Although various administrations have attempted to reshore manufacturing (i.e. CHIPS and Science Act under the Biden administration, the Trump administration’s tariffs, etc.), its efficiency still lags behind China’s “full-industry-chain coordination.”

ii) Talent competition between China and the U.S. is the decisive factor in Xi’s efforts to build technological and financial strength. For one, ethnic Chinese scientists account for a substantial share of core talent in AI and semiconductors. Also, China produces far more STEM graduates annually than the U.S., and this “engineer dividend” underpins the country’s rapid iteration in hardware and applied AI.

However, China’s innovation is constrained by strict ideological control and internet censorship. The lack of freedom of thought makes it difficult to generate disruptive theoretical frameworks. Moreover, bureaucratism and political prioritization may divert resources toward “PowerPoint innovation” rather than genuine hard technology breakthroughs. In addition, accusations of technology theft and international technological blockades are cutting off China’s access to the latest global knowledge.

iii) In sectors aligned with CCP strategic priorities, Chinese firms can obtain state financing with little regard for returns (such as Phase III of the Big Fund). This contrasts sharply with the U.S. model, which relies on private capital constrained by quarterly earnings and market volatility. Xi’s strategy is to use the leverage of a “strong financial nation” to provide strategic reserves for a “strong technological nation.” This form of “sovereign-credit-backed innovation” constitutes unfair competition for Western private enterprises in the short term and is a core driver of China’s global market expansion.

5. Xi Jinping’s core strategic ambition appears to be the leveraging of a “strong financial nation” to finance the “strong technological nation,” exporting the combined power of both to the Global South to ultimately form a parallel system independent of U.S. control.

Already, the PRC is actively exporting “smart” cities, 5G/6G standards, and the BeiDou Navigation Satellite System to countries along the Belt and Road. The essence of this export is the “occupation of the underlying architecture.” When a country’s financial clearing relies on CIPS, its communication networks on Huawei, and its energy systems on Chinese hydrogen standards, that nation becomes deeply dependent on China politically and strategically.

At the same time, Beijing is constructing a “de-dollarized” financial closed-loop by promoting digital RMB settlements in the Global South. This not only reduces transaction costs but, more importantly, allows China to monitor the capital flows of these nations and achieve trans-border expansion through “financial aid-construction.” This non-military approach is more covert and sustainable than traditional military expansion, and it directly challenges the status of the U.S. as the world’s “ultimate creditor” and “technology provider.”

6. Xi Jinping’s strategy for building technological and financial power appears grand at the macro level. However, it is riddled with internal contradictions and high social costs at the micro and implementation levels.

i) The new quality productive forces promoted by Xi often evolve in practice into “supply-side overcapacity.” Due to weak domestic consumption, the PRC has little choice but to dump massive amounts of capacity in emerging industries (such as electric vehicles and mature-node semiconductors) into global markets. This has triggered global trade resistance from the West and even made many developing nations wary of China’s expansion. Such unilateral supply-chain expansion is more likely to cause geo-economic fragmentation than the “win-win system” Beijing envisions.

ii) Xi’s extreme fixation on “security” (coordinating development and security) often stifles vitality in finance and technology.

In finance, strict controls on capital flows may prevent systemic risk, but also deprive the RMB of the liquidity and credibility needed to become a true international currency.

In technology, heavy-handed censorship for data security and “political correctness” forces AI developers to expend vast energy and computing power on “information filtering” rather than “intelligence enhancement.” This politics-first model could allow the U.S. to create an insurmountable gap in the ultimate AI race (e.g., AGI) over China.

iii) While Xi demands that officials “understand technology, comprehend industry, and excel in decision-making,” those long embedded in the CCP’s authoritarian system are often more inclined toward “political bandwagoning” over professional judgment. This will likely lead to massive state funding being funneled into inefficient, redundant construction and “pseudo high-tech” projects. When technology finance becomes a “political task,” capital allocation efficiency plummets, potentially triggering the collapse of local government finances.

  What’s next

The coming decade will determine whether Xi Jinping’s financial and technological strategy thrives or collapses. If the PRC successfully establishes a parallel financial system and sets most of the technological standards of the “Fourth Industrial Revolution,” the world will see the emergence of a bipolar system with China in ascendance and the U.S. facing decline.

However, if the PRC’s internal structural debt crises, systemic overcapacity, and the evaporation of the demographic dividend erupt first, then Xi’s ambitious expansionist strategy may ultimately devolve into a massive bubble, dragging down both China and the global economy. Regardless of the outcome, this confrontation in finance and technology will likely have a fundamental impact on the geopolitical stage for decades to come.

  2   PLA Daily issues political guidance after a week of ‘silence’ following the Zhang-Liu purge

  PLA Daily on political rectification, anti-corruption work

Feb. 1
The PLA Daily published a front-page commentary titled “Continuously Deepening Political Rectification and Advancing the Campaign to Correct Conduct and Fight Corruption in Depth” (持續深化政治整訓 縱深推進正風反腐).

The article said that “political rectification remains a long and arduous task,” and explicitly notes that the investigation and punishment of Zhang Youxia and Liu Zhenli demonstrate Party Central’s determination to uphold the political character of the military and to win the fight against corruption. Party Central will also “further rectify the root causes politically, eliminate pernicious influences ideologically, remove corruption and regenerate organizational vitality, and consolidate and deepen the achievements of political rectification.”

In reviewing the historical experience of political rectification in the PLA, the article notes that “at every major historical juncture and important historical stage,” the CCP has used political rectification to “eliminate negative factors and unify thinking.” Political rectification, the correction of misconduct, discipline enforcement, and anti-corruption efforts have been advanced “with unprecedented resolve and intensity” under the Xi leadership since the 18th Party Congress, clearing away “major political hidden dangers that undermined the Party’s absolute leadership over the military and threatened the Party’s governing foundation.”

The article further pointed out that the PLA faces “complex and intertwined political tests,” and that many real factors still exist that affect the Party’s “absolute leadership over the military and erode the political character of the people’s armed forces.” Also, the task of “eliminating the soil and conditions that breed corruption remains extremely difficult and heavy.” The article added that political rectification must be fully recognized as an important component of accomplishing the established tasks of building a “strong military,” and that investigating corruption is meant to “reshape the people’s army.”

The article urged the entire military to persist in using Xi Jinping Thought on Strengthening the Military to “concentrate the heart and cast the soul,” and to strengthen ideological tempering and political training. It also stresses the need to “turn the blade inward and scrape away poison from bone,” thoroughly uncover deep-seated problems and completely eliminate lingering pernicious influences.

The article concluded by emphasizing that the military wields the gun, and that there must be absolutely no place for corrupt elements to hide within the armed forces.

Feb. 2
The PLA Daily published another front-page commentary titled “Advancing with a Strong Sense of Mission and Responsibility to Break Through Challenges” (以強烈的使命擔當攻堅奮進).

The article said that resolutely investigating and punishing corrupt elements such as Zhang Youxia and Liu Zhenli removes the “roadblocks and stumbling stones” (路虎、絆腳石) that hinder the development of the cause, and squeezes out the “water” that undermines the building of combat effectiveness. It calls on “all officers and soldiers to unify their thinking and actions with the major decisions and deployments of the Party Central, the Central Military Commission, and Chairman Xi, and to deeply understand the underlying trend that the more thorough the anti-corruption effort, the more solid the breakthroughs, and the stronger the foundation for building a strong military.”

The article noted that the Fourth Plenary Session of the 20th Central Committee made strategic deployments for achieving the centenary goal of building the military on schedule and for advancing national defense and military modernization with high quality. As the centenary goal draws ever closer, the PLA faces numerous arduous and complex risks and challenges, and urgently needs to strengthen “political forging” (政治鍛造).

The article emphasized that Party members and cadres in the military, especially senior officers, should take the punished corrupt elements as negative examples.

Feb. 3
The PLA Daily published a special feature titled “An Interpretation of the Tasks of Military Discipline Inspection and Supervision Work in 2026” (2026年軍隊紀檢監察工作任務解讀).

The article regards 2026 as a “year of decisive effort,” stating that discipline inspection and supervision work must serve the overall strategic objective of national defense and military modernization. Notable work priorities include:

• The article proposes “combat-oriented preparation for discipline inspection and supervision,” studying key difficulties in discipline enforcement and law enforcement in wartime, and directly transforming supervisory effectiveness into combat effectiveness. This marks the first time that the CCP has explicitly linked anti-corruption work with combat readiness.
• The article promotes the deep integration of inspection, auditing, and judicial supervision measures, and building an integrated “inspection–audit–investigation” coordination mechanism.
• The article calls for rectification efforts to focus on major projects and weapons and equipment procurement, and establishing joint military–civilian inspection and quality management systems.
• The article calls for strengthening oversight of senior officers’ decision-making power, and exploring ways to extend supervisory reach to the margins of officials’ personal lives and the endpoints of power.
• The article emphasizes the integrity and professionalism of discipline inspection and supervision personnel themselves, and establishing higher standards of self-restraint.

Through these “work priorities,” the article indirectly reflects entrenched problems and challenges currently present in military governance, including the following specific issues:

• Political issues
  • Lingering pernicious influences not yet eradicated: The article makes repeated references to the need to continue “eliminating pernicious influences,” indicating that the negative impact of past corruption cases still persists at a deep ideological level.
  • Inadequate political implementation: The article notes that some units show tendencies toward “hollowing out” or “superficialization” in carrying out political rectification.
• Operational and institutional issues
  • Persistent corruption risks in key areas: The article notes that risks of power–money transactions still exist in capital-intensive fields such as major construction projects and equipment and materials procurement.
  • Isolated supervision methods: The article observes that inspection, audit, and judicial supervision sometimes lack effective coordination, resulting in insufficient “penetrating power” of oversight.
• Readiness and practical issues
  • Lack of experience in wartime discipline enforcement: The article notes how the military conducts effective wartime supervision and discipline enforcement in the context of modern warfare remains a weak link.
  • Deficiencies in project quality control: The article notes that some major projects show problems of lax quality supervision during implementation.

  Our take

1. PLA Daily’s recent back-to-back front-page commentaries constitute key deployments for ideological cleansing and political realignment across the CCP’s military in the aftermath of the political “earthquake” that was the abrupt removal of Central Military Commission vice chairman and chief of the CMC joint staff department Liu Zhenli on Jan. 24.

i) The Feb. 1 PLA Daily piece characterizes the ongoing military purges as “political rectification.” In the CCP’s discourse, “rectification” carries strong connotations of ideological correction. When applied to the current context, “rectification” implies the existence of systemic deviations in thinking within the military.

This commentary sends three political signals:

• The anti-corruption struggle in the military will be a long-term and comprehensive affair. Notably, the commentary said that the increase in corruption cases following the central authorities’ investigation does not indicate a worsening of the problem (“the more we fight it, the more it grows”) but that the authorities are becoming more thorough in investigations (“we are digging deeper than ever before,” 越挖越深). Also, anti-corruption efforts are entering a critical phase of “decisive battle, protracted battle, and total warfare” (攻堅戰、持久戰、總體戰).
• This indicates that Beijing’s probe of Zhang Youxia and Liu Zhenli is merely the tip of the iceberg, and a broader circle of generals will inevitably be implicated in the anti-corruption struggle. Cadres who are particularly at risk are those who served with or worked under Zhang and Liu at their previous posts, such as the Equipment Development Department and the Joint Staff Department.
• Political loyalty to Xi Jinping and the CCP comes above all else in the PLA. Military rank, high office, seniority, and professional competence and achievements will not shield any soldier from political scrutiny. This is seen from the commentary’s point that the “serious investigation of Zhang Youxia and Liu Zhenli demonstrates a firm stance in safeguarding the political nature of the people’s army.”
• Purging Zhang and Liu is justified given the extraordinary circumstances that the CCP finds itself in. The commentary notes that the domestic, international, and military environments facing the PRC are complex, and that factors undermining the Party’s absolute leadership over the military “objectively exist.” Therefore, the probe of Zhang and Liu are not intended to destabilize the PLA, but stabilize it by “setting things right at the source” and eliminating deep-seated “hidden dangers” threatening regime security.

ii) The Feb. 2 PLA Daily piece on “mission and responsibility” appears to be focused on reviving morale in the military following the shock of the high-level purges.

The commentary opens by urging all officers and troops to “unify their thinking and actions with the major decisions and deployments of the Party Central, the Central Military Commission, and Chairman Xi.” The emphasis on “unity” here implicitly reflects existing divisions and “wait-and-see” attitudes within the military. To overcome this, Beijing is calling on the PLA to focus on “mission and responsibility” and hit the military’s 2027 centenary goals.

The commentary also indicates that the removal of the “roadblocks and stumbling stones” that were Zhang Youxia and Liu Zhenli will allow the PLA to maintain a high state of combat readiness in the lead up to 2027, and avoid paralysis during the key strategic window.

iii) There are several ways to understand how Zhang Youxia and Liu Zhenli were “roadblocks and stumbling stones” to Xi Jinping’s efforts at military development.

From the military perspective:

• Zhang and Liu could have acted in a manner that delayed or obstructed the PLA’s progress towards fulfilling its centenary goals. For instance, Beijing has publicly called for accelerating the integrated development of mechanization, informatization, and intelligentization by 2027, as well as modernizing the military in four key areas (military theories, organizational structure, military personnel, and weapons and equipment). At this juncture, it should be noted that while it is popularly assumed that Xi and the CCP want the PLA to be in a position to take Taiwan by 2027, there are no official CCP documents that make this proposition and it is unclear as to whether that actually is the case. In February 2023, then-CIA director William Burns said, “We know as a matter of intelligence that [Xi’s] instructed the People’s Liberation Army to be ready by 2027 to conduct a successful invasion. Now, that does not mean that he’s decided to conduct an invasion in 2027 or any other year, but it’s a reminder of the seriousness of his focus and his ambition.” In June 2024, The Financial Times reported that Xi told European Commission president Ursula von der Leyen in April 2023 that the U.S. was “trying to trick China into invading Taiwan, but that he would not take the bait.”
• Zhang and Liu could have obstructed the full implementation of the CMC Chairman Responsibility System by overriding Xi’s command authority on certain matters, approved unauthorized troop movements, hid major military intelligence from Xi, or refused to execute Xi’s orders. Xi likely believes that the proper implementation of the CMC Chairman Responsibility System means that command authority is highly concentrated in his person, without intermediary factional power or professional resistance.
• Zhang and Liu could have kept the PLA in “peacetime inertia,” blocking it from getting up to speed to undertake complex military operations such as those involving the Taiwan Strait.

Beyond outright rebellion, Zhang and Liu may have acted as “roadblocks” and “stumbling stones” through subtler forms of resistance:

• Zhang’s long tenure overseeing the Equipment Development Department could have allowed him to protect entrenched interest groups or outdated industrial systems in weapons procurement and technology choices, hindering military modernization.
• The PLA Daily’s reference to “squeezing out inflated combat capability” suggests that military exercises and training under Zhang and Liu may have watered down or were falsified. Beijing would have viewed discrepancies between reported combat capability data and actual operational readiness as a serious impediment to critical strategic decision-making.
• Zhang and Liu could have shown hesitation or questioned risky military plans or drastic force restructuring. Xi could have interpreted such behavior as challenges to his military modernization effort, particularly if he is very paranoid.
• Zhang’s long service meant that he almost certainly had established a deep network of personal connections within the military. The Xi leadership could have found evidence of or begun to suspect that Zhang’s network is an informal power bastion that weakens the penetration of central directives and obstructs the thorough political reshaping of the armed forces.

2. The PLA Daily feature, “An Interpretation of the Tasks of Military Discipline Inspection and Supervision Work in 2026,” serves as the operational blueprint for internal military actions in 2026 and is likely intended to guide the military implementation of comprehensive rectification following the purge of Zhang Youxia and Liu Zhenli.

The year 2026 marks both the start of the CCP’s 15th Five-Year Plan and the sprint toward the PLA’s centenary year of 2027. The PLA Daily feature’s emphasis on investigating major projects signals a thorough cleansing of the equipment, R&D, and procurement interest chains left over from the Zhang Youxia era, and paves the way for the next phase of military spending.

The feature’s mentions of “studying key difficulties in discipline enforcement and law enforcement in wartime” and “assessing joint-operation discipline inspection capabilities” suggest that Beijing is going to extend discipline supervision into the operational command chain to ensure political oversight of every command decision in potential wartime scenarios.

Finally, the feature’s call to crackdown on “meal circles” (飯圈) and “social circles” (i.e. informal interest groups in the military) indicates that Beijing is looking to dismantle long-standing informal power structures within the military that are bound together by ties of hometown, school, or former service units. This “cleansing” is necessary to prevent any blowback or resurgence from personnel with loyalties to Zhang Youxia and other purged senior officers.

3. The three PLA Daily articles offer insight into the current state of CCP’s military and the Xi leadership’s objectives for it.

i) The PLA Daily pieces reveal that the PLA is facing simultaneous tests of political stability and combat effectiveness. Successive personnel “earthquakes” — only seven out of at least 30 generals and admirals who ran specialized departments and theater commands in 2023 are still in position, according to The New York Times — have sharply constrained the collective leadership function of the Central Military Commission. The remaining senior officers face unprecedented psychological pressure, and the erosion of trust between the PLA’s top commanders and the CCP leadership is likely to lead to a sharp decline in decision-making efficiency.

In the short term, Xi Jinping’s near-total annihilation of the military’s high-level command —especially those with operational experience—will inevitably affect joint command and staff operations. However, the Xi leadership is likely betting that the PLA’s operations and combat capability would substantially improve over the long run as it roots out corruption (“squeezing out water”) and establishes a more realistic and closely monitored combat effectiveness evaluation system.

Many PLA departments and commands will likely be run by the deputies of purged commanders in the short term as political rectification of the military rolls on. While this accelerates generational turnover and loyalty consolidation, the PLA will suffer even more from insufficient professional experience and expertise; one of the PLA’s chief and long-standing concerns is its lack of actual combat experience.

ii) The PLA Daily articles indicate that Xi Jinping is working towards achieving an extreme form of the CMC Chairman Responsibility System. By removing figures with independent prestige (Zhang) and professional authority (Liu), the Xi leadership is ensuring there are no intermediaries capable of bargaining, delaying, or diluting the execution of orders from the paramount leader.

The Xi leadership also appears to be clearing away potential or actual opposing voices as the PLA progresses along its path of modernization and prepares to be combat effective. The CCP acknowledges that the domestic, international, and military environments are becoming increasingly complex. To ensure that the PLA is ready to allow the PRC survive amid “tremendous changes unseen in a century,” Xi needs a command team that is absolutely obedient and executes orders without reservation. Zhang and Liu have been cast as potential sources of hesitation or defenders of traditional military interests, and have been deemed unsuitable by the Xi leadership to guide a PLA that is contemplating wartime scenarios.

Further, the Xi leadership is likely completely reshaping the military-industrial and procurement systems. Utilizing disciplinary inspection mandates to conduct a “bottom-up” purge of legacy issues within the Equipment Development Department is likely aimed at converting the PRC’s massive defense budget more directly into actual combat effectiveness rather than allowing it to be consumed by factional interests.

Finally, Xi Jinping is looking to remain absolutely in control in the lead up to and beyond the 21st Party Congress. The sweeping military purge is likely intended to guarantee that in Xi’s next term, the PLA will serve not only as a “great wall of steel” for the CCP regime, but also as the steadfast executor of Xi’s personal will.

4. Beijing’s anti-corruption struggle targeting the PLA is aimed at ensuring that it has only “one brain and one voice” on future military matters and political confrontations. Whether this “surgical operation” will damage the military’s vitality — and thus affect its actual combat performance in 2027 and beyond— will depend on the depth and breadth of the political rectification and disciplinary purge carried out in 2026.