SinoInsight 1
Starting from Feb. 28, a picture of a Weibo post by controversial Peking University professor Kong Qingdong made the rounds on social media (the original post appeared to have been deleted). In the Weibo post, Kong modified a Song Dynasty-style poem by Mao Zedong (“Two Birds: A Dialogue,” or 念奴嬌·鳥兒問答) with several references that can be understood as an attack on Xi Jinping and his allies:
- Xi is likened to a “bird in a cage” and it is implied that he has surrendered to the United States in the trade war in face of American economic and military might.
- Xi and PRC vice premier Liu He’s trade war strategy is questioned. Kong’s poem implies that Liu and/or Xi have essentially signed an “unequal treaty” with America before the Lunar New Year (the “phase one” Sino-U.S. trade deal) and have been playing word games to obscure that fact.
- With the outbreak of the coronavirus, there might not be a need for a coup to dispose of Xi because a “color revolution” awaits (presumably because the CCP’s handling of the crisis could backfire).
OUR TAKE
1. In analyzing Kong Qingdong’s earlier attack on Xi Jinping, we established his links with the Jiang Zemin faction, which rivals the Xi leadership. We also explained that Xi’s opponents “very likely believe that conditions are favorable for a serious coup attempt” because Xi “faces a ‘perfect storm’ of problems.”
The fact that Kong is able to target Xi again on social media and does not appear to have run into trouble with the central government suggests that the political strength of the forces behind him is not insignificant.
Perhaps more troubling for Xi is the fact that Kong targeted him after the Feb. 23 mass national teleconference meeting. We analyzed that Xi was able to hold the meeting in part because he “could have sold the other CCP elites a way to transform the regime’s unprecedented risks into unprecedented opportunity to advance the Party’s domination agenda” and thus convinced the warring CCP factions to “temporarily put hostilities on hold.” However, we also noted that Xi is “most definitely not out of the woods” even if he had dealt with an immediate political challenge from his rivals. Kong’s latest social media post affirms our earlier analysis.
2. In analyzing Xi’s Feb. 14 remarks on biosecurity and the Feb. 15 publication by Qiushi Journal of his Feb. 3 speech to the Politburo, we believe that the nature of the factional struggle in the CCP has shifted from “you die, I live” (你死我活) to “perish together” (同歸於盡) — a major inflection point. This shift has far-reaching political implications for Xi and the CCP regime. One consequence of this shift is that “truces” and “consensuses” between Xi and his rivals are more ephemeral than ever, and may only serve the purpose of gaining temporary “breathing space” to regroup and prepare for the next attack.
Political stability in the CCP is more fragile and illusory than external appearances suggest, and the CCP today is in an unprecedented political crisis. This crisis is on track to worsen as the factional struggle escalates amid the coronavirus outbreak in China and the “perfect storm” of economic, social, and geopolitical problems facing the Xi leadership.
Businesses, investors, and governments must closely track CCP factional struggle developments to mitigate political risks and avoid being blindsided by political Black Swans. Those who continue to act on the assumption that Xi Jinping is unchallenged in the CCP, or that he and the Party will emerge from the coronavirus crisis even stronger than before do so at their own peril.
SinoInsight 2
On Feb. 26, the CCP Organization Department issued a notice requesting that local Party committees “guide voluntary donation work” among CCP members. Party committees are instructed to “respect the decision of Party members” on donations and should not “make hardline requirements,” issue “forced orders,” or “withhold work wages” from Party members in securing the donations, but should also ensure that donations should be solicited “in an orderly manner.” Donations that have been solicited should be “conscientiously” remitted up to the central government and “not be retained or used for other purposes” locally. The donation money will be used to support “frontline medical staff, grassroots cadres, public security officials, and social workers,” according to the Organization Department notice.
On Feb. 27, PRC state mouthpiece Xinhua reported that Xi Jinping and the other six members of the Politburo Standing Committee had “taken the lead” in donating money from their own pockets to support the effort to curb the novel coronavirus during a high-level meeting to address epidemic prevention work and economic development on Feb. 26. The Xinhua report, however, did not say how much money the CCP’s top leadership donated to the cause.
In the two days after the Xinhua report on Xi making donations, various local governments (Chongqing, Henan, Sichuan, Heilongjiang, etc.) and central government departments (PRC Ministry of Foreign Affairs, Ministry of Civil Affairs, Central Political and Legal Affairs Committee, etc.) announced via media reports or official websites that “Party members are enthusiastically donating to support novel coronavirus epidemic prevention and control work.” In tallying the donation figures that were reported in official channels as of Feb. 29, over 10.37 million Party members nationwide “voluntarily donated” 1.18 billion yuan.
OUR TAKE
1. The CCP is trying to “crowdfund” the coronavirus epidemic prevention and control effort under the guise of “voluntary donations” from Party members. This is evident from the Organization Department’s Feb. 26 notice calling on local Party committees to “guide” the “voluntary donation” effort in an “orderly manner,” i.e. systematically force Party members to cough up money. Also, Xi and the Politburo Standing Committee “taking the lead” in donations is a piece of propaganda that is likely designed to help local Party committees more effectively pressure Party members into “donating voluntarily.”
The “voluntary donation” drive does not appear to be very successful at present. Given that there were 90.594 million Party members as of June 30, 2019, only about 11.45 percent of all members made “voluntary donations” as of Feb. 29, 2020. The amount donated per Party member also leaves much to be desired—each member only contributed about 113.79 yuan ($16.27) on average.
The poor donation showing could be partly due to the fact that Xinhua did not disclose how much of their own money Xi and the Politburo Standing Committee donated to support the epidemic prevention and control work. Xi and the other top officials probably decided against disclosing how much they donated because any figure they put out would have “bad optics”—large sums would draw attention to the wealth of senior officials and official corruption, while small sums would show that they are miserly. Yet the flipside of the senior CCP leadership not disclosing a donation figure is that Party members have less incentive to donate generously to the cause; indeed, Party members could read the Xinhua piece on Xi donating and come away with the impression that the act of showing that they made donations (for propaganda purposes) is more important than the amount of donations made.
2. In assessing the PRC’s economic situation and the disruptions caused by the coronavirus epidemic, we believe that Xi’s “voluntary donation” drive is less propaganda work and more a way to replenish the central government’s depleted coffers.
On March 1, the PRC National Bureau of Statistics announced that the manufacturing purchasing managers’ index (PMI) fell to 35.7 in February from 50.0 in January, well below the 45.0 mark that economists expected. The PRC’s February PMI is the lowest on record. Meanwhile, non-manufacturing PMI fell to a record 29.6 in February as compared to 54.1 in January. PMI figures below the 50 mark represents a contraction.
In assessing official economic data on 10 key industries in China (including tourism, automobile, home services, clothing, cellphone, aviation, liquor, film, etc.), financial analysts estimate that the PRC could see losses of as high as 5 trillion yuan if the epidemic persists until the end of March. If the epidemic lasts for several months, then China could see nearly zero GDP growth in 2020. After accounting for epidemic prevention and control costs (including “stability maintenance” costs) and the withdrawal of supply chains from China, there is a good chance that the PRC’s GDP growth this year could be negative.
According to PRC data, China’s national general public budget revenue for 2019 was 190.382 billion yuan, an increase of 3.8 percent from a year ago. Tax revenue was 157.992 billion yuan, an increase of only 1 percent year-on-year. Meanwhile, China’s general public budget expenditure was 238.874 billion yuan (8.1 percent increase YoY) and the fiscal deficit reached a high of 4.85 trillion yuan.
