SinoInsight 1
On June 21, the General Office of the Central Military Commission (CMC) issued regulations regarding an economic audit of senior military officials. The regulations, which take effect July 1, 2020, state that all senior military officials in the People’s Liberation Army and the People’s Armed Police, as well as Party cadres with “economic responsibilities” in the military, will be subjected to the economic audit. Also included in this audit are retired senior officials at the corps level and above (军级以上).
On June 25, Cai Xiaoxin, a military history writer and son of the Mao-era PLA major general Cai Changyuan, posted a military audit announcement on his Weibo account which indicated that former PLA Navy commander Wu Shengli will be audited for his economic activities as navy commander from early June to mid-July this year.
On June 28, state mouthpiece Xinhua reported that the CCP Central Committee issued a decision to bring the reserve forces under the direct leadership of the Central Committee and the CMC starting July 1. Previously, the reserve served under the jurisdiction of the PLA and local Party committees and governments.
OUR TAKE
1. The above developments indicate Xi Jinping is still tightening his control over the PLA, emphasizing his personal authority, and purging the Jiang Zemin faction networks in the military. This suggests Xi feels insecure despite having consolidated power to a high degree, likely due to the CCP factional struggle escalating.
2. The CMC’s economic audit of senior military officials is very unusual as it calls for an audit of not only active duty officials, but also retired officials. This development especially threatens retired officials who climbed the ranks during Jiang Zemin’s era of dominance (1997 to 2012), the heyday of institutionalized corruption in the PLA. According to overseas Chinese media reports, Xu Caihou, the former CMC vice chair and Jiang faction member, once said that when he and the second CMC vice chair, Guo Boxiong, were in charge, virtually all promoted generals had to pay them bribes to attain their position or rank.
Wu Shengli served as PLA Navy commander from August 2006 to January 2017, a period when buying and selling of offices and ranks was commonplace in the PLA until Xi Jinping launched his anti-corruption campaign in 2013. Given the culture of corruption fostered by Xu Caihou and Guo Boxiong, it is hard to imagine Wu was completely clean on the “economic activities” front while serving as navy commander. It is also likely that Wu kept his office for an extended period because he was either a Jiang faction member or a trusted associate; Xi would not have had sufficient “quan wei” (權威) during his first term in office to move against Wu. Wu’s questionable “economic activities” during his time in office, his career longevity, and his factional ties lend credence to reports that he has been subjected to corruption investigations in recent years by overseas Chinese media.
Xi Jinping could be looking to make an example of Wu Shengli as a warning to the Jiang faction and other political rivals. Wu could be officially investigated if Xi deems it necessary. Even if Xi does not publicly investigate Wu, the latter would think twice before challenging or supporting people to challenge Xi, seeing as how he has been put on notice.
3. Xi’s decision to place the PLA reserve forces directly under his control via the CMC and the central government echoes a similar move with the People’s Armed Police. The move prevents local governments or Party committees from mobilizing the reserve forces to stir trouble and undermine the Xi leadership. The fact that Xi ceaselessly tries to “coup-proof” his leadership suggests he is perturbed about the CCP factional struggle despite his paramount position in the regime.
SinoInsight 2
On June 28, PRC premier Li Keqiang attended an online symposium of government officials and enterprise executives on stabilizing foreign trade and investment. Representatives of enterprises from multiple sectors (home appliances, clothing, medical equipment, e-commerce, etc.), including those from well-known Chinese companies like Galanz, Orient International, Neusoft Corporation, Homestar, Jollychic, and Sichuan Grand Royal, delivered presentations on their company’s production, operations, import, and export situation.
According to PRC media reports, Li said that China’s foreign trade will “remain grave and complex” with the COVID-19 pandemic and a global economy that is plunging into recession, while China’s economy is “deeply integrated into the world economy.” Li stressed efforts to maintain the “six stabilities” and “six guarantees,” and called on enterprises to plan and execute preparations for tough times ahead.
On June 29, PRC official media announced that the 127th China Import and Export Fair (Canton Fair) was held online for the first time and that nearly 26,000 domestic and foreign companies had participated in the event. However, official media did not publish the number of orders or amount of transactions made at the Fair, also a first.
OUR TAKE
1. Li Keqiang’s symposium with enterprises is yet another signal the CCP is very pessimistic about China’s economic prospects this year, particularly with the ongoing coronavirus pandemic and the escalating Sino-U.S. “new cold war.”
2. Recent economic data released by the CCP shows the Chinese economy is far from recovering from the impact of the coronavirus and the Sino-U.S. trade war.
Manufacturing data has traditionally been an important barometer of China’s economic performance. The latest figures suggest that while the Chinese economy has regained some ground recently, recovery is still some ways off. In June, China’s manufacturing purchasing managers’ index increased 0.3 percent from the previous month to 50.9 percent. While PMI above 50 percent points to economic expansion, PMI is also a monthly indicator, which means it has to be considered relative to the previous months. The coronavirus caused China’s manufacturing PMI to fall to 35.7 percent in February. While PMI rose to 52 percent in March due to increased global demand for personal protective equipment PPE, the PMI for the following three months all hovered around the 50 percent range, suggesting weak manufacturing recovery.
China’s PMI sub indices are also not optimistic, with shrinking employment in May and June 2020. Sub indices for new export orders, orders on hand, and imports have also been below the 50 percent expansion line for a year.
Meanwhile, fixed assessment in manufacturing saw a year-on-year decline of 31.5 percent in February according to official figures. While the decline narrowed in May, it still fell 14.8 percent from the previous year.
3. China’s economic prospects for the year look even grimmer given rising geopolitical tensions. The U.S. is already preparing sanctions over the PRC’s Hong Kong national security law, and other countries could follow suit. Hong Kong’s status as an international trading hub is in serious question, and a poorly performing Hong Kong economy will undermine the mainland economy. The potential outbreak of a second wave of infectious diseases in the latter half of 2020 puts China’s economic recovery in severe jeopardy.
