SinoInsight 1
On April 3, several members of the CCP leadership participated in a tree-planting event in Beijing. Xi Jinping, Li Keqiang, and the other five members of the Politburo Standing Committee were in attendance. Also present was PRC vice president and Xi’s top ally Wang Qishan.
On April 4, Xi Jinping, Li Keqiang, the other Politburo Standing Committee members, and unofficial “eighth” Politburo Standing Committee member Wang Qishan attended a memorial event to commemorate the victims of the COVID-19 coronavirus. This marked the first time in several months where Wang accompanied Xi and other senior CCP leaders for public events on two consecutive days.
After meeting with Serbian first deputy prime minister and foreign minister Ivica Dačić at Zhongnanhai on Feb. 27, Wang Qishan ceased making public appearances until April 3, for a period of 36 days.
OUR TAKE
1. It is standard for active CCP officials to make public appearances. Conversely, something is amiss if an active CCP official suddenly vanishes from the public eye for a prolonged period. Wang Qishan’s 36 day-long “disappearance” is unusual and a sign of political trouble.
2. Several peculiar political developments occurred just before and during Wang’s “disappearance”:
- In February, an essay that was reportedly penned by former property morgul and prominent CCP critic Ren Zhiqiang made the rounds on the Chinese internet. The essay, titled “The People’s Lives are Being Harmed by the Coronavirus and the [Government] System’s Ills,” referred to Xi Jinping as a “power-hungry clown.”
- A Voice of America report noted that Ren Zhiqiang was taken away by the authorities on March 12. Ren’s eldest son and secretary were also detained, while his sister and other family members were “affected” by his arrest. The VOA report also noted that the PRC government had deemed Ren’s case to be a major one, and that “nobody is allowed to intervene, get involved, plead for leniency, possibly even Wang Qishan.” Wang and Ren are both Party princelings and have been friends since junior high.
- On March 21, Chen Ping, the chairman of Sun TV in Hong Kong, shared a “proposal” on his WeChat account that called for the convening of an enlarged meeting of the Politburo to “discuss the problem of Xi Jinping” to decide whether or not he should be ousted. The “proposal” advocated that Li Keqiang, Wang Qishan, and Wang Yang should chair the enlarged meeting.
- According to online speculation, five CCP elders (Li Ruihuan, Wen Jiabao, Li Lanqing, Hu Qili, Tian Jiyun) supposedly submitted a letter to Party Central on March 25. Some commentators believe that the letter likely deals with similar themes brought up in the “proposal” that Chen Ping shared on WeChat.
- According to information circulating on the Chinese internet, several Chinese business leaders, including former Alibaba boss Jack Ma and Lenovo founder Liu Chuanzhi, submitted to Li Keqiang an open letter addressed to Xi Jinping on March 26. The letter contained nine major requests, one of which was the release of Ren Zhiqiang.
- According to information circulating on the Chinese internet, Xi Jinping reportedly responded to the various petitions addressed to him during a recent meeting of the Politburo.
The intense speculation about petitions calling for Xi to “abdicate” (逼宮) and increased pressure from various Party and business elites likely led Xi Jinping to make a show of unity in his leadership by appearing together in public with Li Keqiang and Wang Qishan. CCP elites have a tendency to put on displays of unity during times of serious turbulence in the ranks to maintain regime stability.
2. Petitions aside, other unusual signs have surfaced in recent days which hint at political trouble in Beijing:
- A video circulating on the Chinese language social media shows large numbers of soldiers entering Beijing on private buses on April 3.
- According to accounts on the Chinese language social media, gunshots were heard on Beijing’s Fuyou Street near Zhongnanhai in the early hours of April 4. Experienced eyewitnesses said that the gunshots sounded like those made by a QBZ-95, a bullpup-style assault rifle used by the People’s Liberation Army.
- On April 4, there was intense speculation on Chinese language social media that a senior cadre from a previous Central Committee was in trouble because a recent government rule changed prohibited individuals from possessing government documents on the Second Plenary Session of the 18th Party Congress. Some observers believe that the senior cadre in question is a retired Politburo Standing Committee member. Of all the members of the Politburo Standing Committee of the 18th Central Committee, the two who are most at risk of being investigated are Jiang Zemin faction members Liu Yunshan and Zhang Dejiang, with Liu looking the more likely of the two.
- On April 5, videos showing armored vehicles on the streets of Beijing were shared on Chinese social media. Concurrently, information circulating online indicated that the Beijing Garrison had surrounded Xingshou Town, Changping District where Qincheng Prison, a maximum-security prison for the Party’s elite and political prisoners, is located. Local officials and cadres had ordered people in Xingshou Town to stay at home and not go out on the streets. Also, men clad in black and camouflage gear were spotted entering and searching the national parks behind Qincheng Prison. The series of events on April 5 caused some to speculate if Bo Xilai had perhaps broken out of Qincheng Prison.
Much of the information above is difficult to independently corroborate and verify. Some, however, may recall that there were similar “rumors” of gunfire near Zhongnanhai and armored vehicles on the streets before Bo Xilai was purged at the 2012 Two Sessions. At the very least, the information above adds to the sense that something big is afoot in Zhongnanhai.
3. The various signs of unease at Zhongnanhai is in line with our assessment (see here and here) that the political rules of the game in the CCP factional struggle has shifted from “you die, I live” (你死我活) to “perish together” (同歸於盡).
The following items in our China 2020 outlook appear to be on track for verification:
- Factional struggle in the CCP elite will be even fiercer in 2020 than in 2019.
- Both active and retired Party or state leaders could be investigated.
- Officials from the following apparatuses are at high risk of being purged: Political and legal affairs, propaganda, intelligence, finance, and Hong Kong and Macau affairs.
Businesses, investors, and governments must track developments in the CCP factional struggle to avoid being blindsided by political Black Swans and seize hidden opportunities.
SinoInsight 2
On March 27, the CCP Politburo called for the issuance of “government special bonds” (or “special treasury bonds”) to boost the coronavirus-hit economy. This would be the first issue of government special bonds in thirteen years and only the third time in PRC history. Mainland financial institutes expect the scale of the government special bonds to reach between 3 trillion and 4 trillion.
On April 4, Wei Baigang, director of the Department of Development and Planning at the PRC Ministry of Agriculture and Rural Affairs, said during a PRC State Council press conference that China has sufficient food in storage, with enough wheat and rice to feed the whole of China for about a year. Conversely, Wang Hong, director of the Department of Safe Storage and Science and Technology at the PRC National Food and Strategic Reserves Administration, said during the same press conference that medium- to large-sized cities in China only have sufficient refined grain reserves to meet 10 to 15 days of demand. Wang added that the PRC’s national food processing capacity for food in an emergency is 1.92 billion catties, or enough to feed all 1.4 billion people in China for more than a day at the rate of one catty per person per day.
OUR TAKE
1. Our China 2020 outlook prediction, “the PRC could issue upwards of 1 trillion yuan worth of special government bonds,” is on track for verification.
The main reason behind the CCP’s issuance of government special bonds is its need to make up the fiscal shortfall in the regime. The Sino-U.S. trade war caused China’s fiscal deficit to grow 29 percent from 2018 to reach a high of 4.85 trillion yuan in 2019. China’s financial situation grew bleaker this year after the PRC authorities dealt with the outbreak of the “CCP virus” by locking down most of China, resulting in plummeting consumption, canceled orders (domestic and foreign), and economic stagnation.
The PRC authorities issued the previous two batches of government special bonds by directly taking what amounts to an “overdraft” from the central bank to replenish the capital of the four major state-owned banks and inject funding into China Investment Corporation. The upcoming issuance of government special bonds will likely be used to finance the deficit and invest in the building of new infrastructure to stimulate the economy.
2. While the PRC government’s issuance of special treasury bonds could resolve China’s fiscal shortages, it would result in the development of other intractable problems. Making an “overdraft” with the central bank would negatively impact the currency exchange rate and create inflation. This would in turn affect food prices and compound China’s food crisis.
We previously looked at how the coronavirus epidemic caused countries to ban food exports. Being unable to import food from abroad (either due to export bans or financial issues) will worsen China’s food crisis. Yuan Longping, a Chinese agronomist hailed as China’s “Father of Rice” by mainland media, said in a CCTV interview in July 2019 that China does not grow enough to feed 1.4 billion people and must import a portion of its food. “China imports about 70 million to 80 million tons of soybeans every year. If nobody sells to us, then people will go hungry and there will be trouble. This is a problem,” Yuan said.
