SinoInsight 1
Last week, the Trump administration issued strong remarks and rolled out several hard-hitting measures aimed at the CCP:
Aug. 4
- Secretary of State Mike Pompeo issued a statement criticizing the CCP’s extra-territorial authoritarianism, citing PRC arrest warrants “for six pro-democracy advocates resident outside of China, including a U.S. citizen.”
Aug. 5
- Secretary Pompeo announced the “Clean Network” program to protect America’s critical telecommunications and technology infrastructure. In a statement, Pompeo singled out malign actions by the CCP and PRC companies, and noted that “more than thirty countries and territories are now Clean Countries.”
- In an interview with the Washington Examiner, U.S. Ambassador-at-Large for International Religious Freedom Sam Brownback said, “The Chinese Communist Party is saying they have a legitimate system for the rest of the world to emulate. And we are saying they do not.”
Aug. 6
- President Trump signed executive orders targeting PRC-owned companies TikTok and WeChat on national security grounds.
- The Trump administration discussed a proposal to delist PRC companies on U.S. stock exchanges by 2022 unless they comply with U.S. audit requirements, according to news reports.
- The U.S. is negotiating the sale of sophisticated SeaGuardian surveillance drones to Taiwan, according to Reuters.
Aug. 7
- The Trump administration imposed sanctions on 11 Hong Kong and CCP senior officials “for undermining Hong Kong’s autonomy and restricting the freedom of expression or assembly of the citizens of Hong Kong.”
- William Evanina, Director of the National Counterintelligence and Security Center, issued an election threat update noting that the U.S. intelligence community assessed that “China prefers that President Trump–whom Beijing sees as unpredictable–does not win reelection.”
Aug. 9
- Foreign ministers of Australia, Canada, New Zealand, and the United Kingdom, as well as Secretary Pompeo, issued a joint statement on the erosion of rights in Hong Kong. The statement expressed concern at the CCP’s imposition of the National Security Law over Hong Kong, called on the Hong Kong government to reinstate recently disqualified candidates for the city’s Legislative Council (LegCo), and urged the Hong Kong government to hold LegCo elections “as soon as possible.”
The CCP, however, remained relatively placid as Sino-U.S. tensions ratcheted up several notches. PRC diplomats, recently notorious for their aggressive “wolf warrior” diplomacy, toned down their confrontational rhetoric and instead played the “victim” and “peacemaker”:
Aug. 4
- Speaking at the Aspen Security Forum, PRC ambassador to the U.S. Cui Tiankai said that China and the U.S. should be cooperative on trade, the coronavirus pandemic, climate change, and nuclear proliferation instead of becoming confrontational. “I don’t think a new Cold War would serve anybody’s interest,” he said. “We’re in the 21st century. Why should we allow history to repeat?”
Aug. 5
- In an interview with state mouthpiece Xinhua, PRC foreign minister Wang Yi said, “there have always been forces in the United States attempting to rebut the leadership role of the CCP and China’s path of socialism with Chinese characteristics.” He added that the CCP is “not interested in rivalry of systems, or ideological confrontation with any country.” Wang also said that there must be a “clear-cut framework” for the Sino-U.S. relationship: “First, steer clear of red lines and avoid confrontation … Second, keep the channels open for candid dialogue … Third, reject decoupling and uphold cooperation … Fourth, abandon the zero-sum mentality and stand up to shared responsibilities.”
Aug. 7
- In a signed commentary published in Xinhua, Politburo member and CCP Foreign Affairs Office director Yang Jiechi wrote, “China and the U.S. should avoid strategic miscalculation and manage well their differences. Cooperation and win-win is the only right choice for the two countries. The U.S. must abandon its Cold War mentality and the misguided zero-sum game approach.”
- According to a report in the Chinese-language edition of Radio Free Asia, the PRC’s “Fifty-cent Army” recently received orders to tone down anti-American sentiment and instead promote Sino-U.S. “win-win.” One of the orders being circulated states that “Fifty-cent Army” workers will be fined from their previous month’s pay and could even be punished by the Party disciplinary commission for publishing anti-American content. The RFA report also noted that the “Fifty-cent Army” previously went dark on America before the Xi-Trump meeting at the G20 in 2019.
OUR TAKE
1. Based on our assessment, the Wuhan coronavirus, the CCP’s response to the pandemic (cover-up, “mask diplomacy,” propaganda and disinformation, increased regional aggression, etc.), and economic conditions resulting from the coronavirus are the primary factors driving the Trump administration’s rapid rollout of countermeasures against the CCP. Other factors like the CCP’s erosion of Hong Kong’s autonomy, rights, and freedoms, as well as the U.S. presidential election in November, serve as catalysts for tougher anti-CCP action from the Trump administration. The CCP and Trump critics’ argument that President Trump is clamping down on China chiefly as an election ploy does not hold water in considering the Trump administration’s strategic approach to the PRC since 2017.
We believe that the Trump administration will almost certainly take further action against the CCP in the lead up to the November presidential election to secure the election from CCP interference and safeguard America’s national security. The administration’s actions targeting the CCP could get incrementally tougher and follow a “salami-slicing” approach as the U.S. seeks to roll back CCP presence and influence in America while minimizing costs and risks to the American people and economy.
2. The CCP’s recent mitigation of anti-American propaganda is akin to the first few months of the U.S.-China trade war where the Trump administration’s imposition of sanctions caused the CCP to lose control of the trade war narrative.
The CCP’s current propaganda stance indicates that a) it recognizes the “new cold war” reality but does not want to publicly acknowledge it, b) it does not wish to see America escalate the “new cold war” with even more punitive measures, c) it fears the worst case scenario where America formally ends diplomatic ties with the PRC and recognizes the ROC, d) it retains hope that Sino-U.S. ties can revert to the “engagement” era if President Trump loses in November. The aforementioned considerations rule out a “hot” war between the U.S. and the PRC in the near future, and suggests that the CCP will continue playing the “victim” card for the interim.
The CCP, however, will not take the Trump’s administration’s recent actions lying down. The CCP touts itself as “great, glorious, correct” (偉光正) and Party nature dictates it will not long tolerate humiliation without some form of retaliation. Additionally, Xi Jinping will come under pressure from factional rivals and PRC nationalists for “allowing” the Americans to walk all over the CCP without responding in kind, and political pressure will force Xi to act.
The CCP has already responded to some U.S. actions with tit-for-tat measures (such as ordering the U.S. Chengdu consulate closure in response to the PRC Houston consulate closure). With the U.S. keeping a close eye on election interference, however, the CCP will rely on “unrestricted warfare” strategies and tactics (like those we listed in our “Pearl Harbor” article) to hit back hard against President Trump and his administration, but in a manner that would not alienate a subsequent administration from “resetting” the acrimonious U.S.-China relationship. For instance, the CCP could double down on its “racism” card by singling out “certain high-level officials” in the Trump administration for being “anti-China” or even “anti-Chinese,” while tapping into its “Red Matrix” and “Great External Propaganda Plan” (大外宣) assets to spread the narrative of a “racist” Trump presidency using U.S. and Chinese traditional and social media, as well as other channels. The CCP’s agenda is to sow outrage, chaos, and turmoil across America before November, ultimately swaying voters against re-electing President Trump. The Trump administration can consider a “culture strategy” to effectively counter the CCP’s “racism” card.
3. Escalating Sino-U.S. “cold war,” as well as a “perfect storm” of problems in China (steep economic decline, natural disasters, CCP factional struggle, etc.) will hasten the arrival of a “Berlin Wall” moment for the CCP. Businesses, investors, and governments need to prepare contingencies for a post-communist China, including minimizing political liabilities and risks stemming from previous support of the CCP regime.
SinoInsight 2
On Aug. 7, the U.S. sanctioned 11 high-level Hong Kong and CCP officials for undermining Hong Kong’s autonomy and restricting freedom of expression in the territory. The sanctioned individuals are:
- Carrie Lam, Chief Executive of the Hong Kong Special Administrative Region (HKSAR);
- Chris Tang, Commissioner of Hong Kong Police Force;
- Stephen Lo, Former Hong Kong police commissioner;
- John Lee Ka-chiu, HKSAR Secretary for Security;
- Teresa Cheng, HKSAR Secretary for Justice;
- Erick Tsang, HKSAR Secretary for Constitutional and Mainland Affairs;
- Xia Baolong, Director of the Hong Kong and Macao Affairs Office of the State Council;
- Zhang Xiaoming, Deputy Director of the Hong Kong and Macao Affairs Office of the State Council;
- Luo Huining, Director of the Hong Kong Liaison Office;
- Zheng Yanxiong, Director of the Office for Safeguarding National Security in Hong Kong;
- Eric Chan, Secretary General of the Committee for Safeguarding National Security of the HKSAR.
According to a statement on the sanctions issued by the U.S. Treasury Department, “all property and interests in property of the individuals … and of any entities that are owned, directly or indirectly, 50 percent or more by them, individually, or with other blocked persons, that are in the United States or in the possession or control of US persons, are blocked and must be reported to OFAC [Office of Foreign Assets Control].” Also, OFAC regulations “prohibit all transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of designated or otherwise blocked persons.” Further, the prohibitions include “any contribution or provision of funds, goods, or services by, to, or for the benefit of any blocked person or the receipt of any contribution or provision of funds, goods or services from any such person.”
Key figures among the sanctioned struck a defiant tone. Hong Kong leader Carrie Lam denounced the sanctions as “shameless and despicable” and added, “we will not be intimidated.” Liaison Office director Luo Huining retorted in a statement, “Isn’t such a ‘sanction’ in vain as I don’t have any assets abroad? Of course, I can also send $100 to Mr. Trump for freezing.”
OUR TAKE
1. Carrie Lam and Luo Huining’s bravado could be genuine, and the sanctioned officials could be largely unaffected by American sanctions. The sanctions, however, are more than symbolic and will likely have an intimidating and far-reaching impact in Hong Kong and the CCP in general.
In Hong Kong, capable civil servants who do not wish to be sanctioned by the U.S. and do not want to throw in their lot with the CCP will be disincentivized from taking up high office. Those who are currently being sanctioned and would-be aspirants to those offices will have to tie their assets and future to the Party, if they have not already done so, and serve as the CCP’s loyal “henchmen” in Hong Kong.
In the CCP, the Hong Kong portfolio would become toxic and a “dead-end” career. Any senior official assigned to Hong Kong can expect to be sanctioned, which could prove especially problematic if they have substantial interests abroad (most global transactions rely on American financial institutions). Sanctioned officials would also likely not be considered for future offices that require overseas travel; successful lawsuits against one-time CCP high-flyer Bo Xilai in Australia, Spain, and other countries almost certainly counted against him, impeded his rise to the Party apex, and left him semi-marginalized in Chongqing. Further, senior officials are now liable to be “exposed” by Party rivals of being involved in curbing Hong Kong’s autonomy and freedoms, thus incurring U.S. sanctions and ruining their careers. All in all, senior officials assigned the Hong Kong portfolio in the future will be effectively “isolated” politically, and see their career trajectories stonewall as they become less valuable to the CCP due to U.S. sanctions.
2. U.S. sanctions, if strictly enforced and maintained, will weaken the CCP’s ability to rule and keep its cadres in line over time.
At the top, sanctions will result in escalations in the CCP factional struggle as elite interests are harmed. Xi Jinping will come under pressure for implementing policies that worsened Sino-U.S. relations and led to the incremental targeting of the CCP elite higher and higher up on the food chain (Xia Baolong, like the recently sanctioned Xinjiang Party boss Cheng Quanguo, is a sub-national level official). Xi’s factional rivals could be emboldened to take radical action against him to preserve the “Red Dynasty.”
The threat of U.S. sanctions will also force PRC officials in the middle to lower ranks to reconsider their loyalties. Those who believe in the Party must park their assets in PRC territory and chance rapidly rising political risks in China. Those who do not believe the CCP can protect their interests will consider defection. The CCP faces extinction when the majority of its members no longer believe it can preserve their self-interests in the face of strong external pressure.
