SinoInsight 1
Real estate policy
Many local governments in China began easing property policy to stimulate the real estate market in the wake of the April 29 Politburo meeting. These policies include measures to relax purchase restrictions, lower down payments, increase the amount of provident fund loans, deed tax subsidies, etc.
April 29 to May 1
Shenyang City, Luoyang City, Lianyungang City, Zhongshan City, Huizhou City, Meizhou City, Zhuzhou City, Yueyang City, Huangshi City, and Wuxi City issued various policies benefiting the real estate sector, according to mainland media reports.
EH Consulting (億翰智庫) told state media Securities Times that there was a “blowout trend” in the easing of real estate policies in the past week, with an “intensity and scope” reaching a “first peak.” The company added that the policies issued mainly revolved around demand-side relaxation, with positive developments on the supply-side. Demand-side policies include significant relaxations of purchase restrictions, loans restrictions, and sales restrictions, as well as the relaxation of provident fund loans, reduction of mortgage interest rates, and subsidies for home purchases.
Mainland media also reported that more than 80 cities have released policies relaxing restrictions on the real estate sector so far this year, citing data from Centaline Property Research Institute. Over 30 cities made adjustments to their property policy in April alone.
‘Zero-COVID’
The PRC central government continues to advocate and adhere to the “zero-COVID” policy, and local governments have sought to meet policy goals by revising how “zero-COVID” is defined and reached. Meanwhile, grassroots-level governments are still implementing “zero-COVID” strictly, resulting in economic damage and humanitarian incidents. In turn, public anger and resistance are rising, particularly in places like Shanghai.
April 29
Li Bin, deputy director of the PRC National Health Commission, said at a State Council press conference that all localities are required to set up “yellow code” hospitals and open “cloud” clinics to ensure that critically ill patients receive treatment.
May 1
The Shanghai government announced the so-called “societal zero-COVID” (社會面清零) and “basically societal zero-COVID” (社會面基本清零) standards. Administrative areas are regarded as a unit, and risks are considered to be “controllable” if there is a “societal” (including control areas, prevention areas, personnel traffic in non-closed-loop management areas, etc.) decline in cases on a day-to-day basis. Thus, “basically societal zero-COVID” is achieved if the proportion of new cases in an area over three consecutive days is less than 1 in 100,000 of its population, and “societal zero-COVID” is reached when there are zero cases for three consecutive days.
Shanghai officials said that six of 16 districts (Fengxian, Jinshan, Chongming, Qingpu, Songjiang, Putao) are at “basically societal zero-COVID,” but no area has yet attained “societal zero-COVID.”
May 5
Xi Jinping presided over a meeting of the Politburo Standing Committee and delivered a speech, according to state media reports. The meeting analyzed the current epidemic prevention and control situation and epidemic prevention work deployments.
The meeting opened by affirming the “correctness” of the “zero-COVID” policy and its epidemic prevention “achievements.” The meeting said to “persevere with dynamic zero-COVID, constantly adjust prevention and control measures according to the situation, and achieve major strategic results in epidemic prevention and control.”
On the March outbreaks, the meeting claimed that the PRC had “withstood the most severe test of prevention and control since the battle to defend Wuhan,” and achieved “phased results.” The meeting claimed that Beijing’s prevention and control policy can “withstand the test of time,” and Beijing’s prevention and control measures are “scientific and effective.” Having won the “battle to defend Wuhan” against COVID-19, the PRC will “certainly be able to win the battle to defend Shanghai,” the meeting said.
The meeting blamed rising cases despite lockdowns on the “constantly mutating” virus, China’s large population, “a large elderly population, unbalanced regional development, and insufficient medical resources.” The meeting added that an easing of epidemic prevention and control measures would lead to “large-scale infections” and “a large number of severe cases and deaths.” Officials are therefore required to “profound, complete, and comprehensive understanding of the epidemic prevention and control policies set by Party Central,” and “always keep a clear head, unswervingly adhere to the general policy of dynamic zero-COVID, and resolutely oppose all distortions, doubts, and denials.”
The meeting noted that “persistence is victory,” and called on all Party Committees and governments at all levels to “resolutely implement the decisions and arrangements of Party Central.” The meeting stressed that the handling of local epidemic clusters should be “speeded up,” various control measures should be “strictly implemented,” and “simplification and one-size-fits-all” approaches should be avoided. Also, the people’s basic livelihood and supplies should be met, as well as their medical needs.
In ending, the meeting called for Party Committees, governments and sectors of society at all levels to “align their thinking and actions with the decisions and deployments of Party Central,” as well as “consciously maintain a high degree of ideological, political, and action consistency” with Party Central.
Propaganda
May 1
State mouthpiece Xinhua reported that PRC vice premier Sun Chunlan led a working group to inspect and guide epidemic prevention and control work in Shanghai between April 2 to May 1. The article added that the “difficulty and complexity of prevention and control work” was increased in Shanghai because the city has a large and aging population, the scale of the epidemic is huge, and the Omicron variant is highly transmissible and “highly concealable.” However, the Shanghai epidemic situation is now “stable and improving,” and has been “effectively controlled,” according to the article.
Xinhua said that Sun Chunlan requested that “the goal of societal zero-COVID should not be relaxed” and “an epidemic rebound should be prevented.” She added that COVID management would be de-escalated in a “timely manner” for communities with no new cases for seven consecutive days to “speed up the restoration of normal social order.”
May 2
1. Xinhua published a review article titled, “Efficient Coordination of Epidemic Prevention and Control, and Economic and Social Development——Implement the Spirit of the Politburo Meeting and Do a Good Job in Current Economic Work (Part Two)” (新華述評：高效統籌疫情防控和經濟社會發展——落實中央政治局會議精神做好當前經濟工作系列述評之二).
The article boasted that adherence to “dynamic zero-COVID” would create favorable conditions for, and minimize the impact of, economic and social development. The article also claimed, “Since the outbreak of the new coronary pneumonia epidemic, China has developed a dialectical way of accurately coordinating epidemic prevention and control and economic and social development under the leadership of Party Central with Comrade Xi Jinping at the core.”
2. Xinhua published an article titled, “What’s the Difference Between ‘Dynamic Zero-COVID’ and ‘Zero Infections?’ How Does Critical Care Work?——A Response to the Focus on the Epidemic is Here” (“動態清零”和“零感染”有何區別？重症救治工作如何開展？ ——疫情焦點回應來了) in the important articles section on its website.
The article quoted several experts from the State Council Joint Prevention and Control Mechanism on the topics stated in its title. For instance, the article clarified that “dynamic zero-COVID” does not mean that there must be absolutely “zero infections” in an area, and bragged about the efficiency of Beijing’s “smooth logistics” policy.
May 3
Xinhua published an article titled, “Working Together, Perseverance Will Lead to Victory——Focus on the Battle Against the Epidemic in Shanghai” (齊心協力, 堅持定能勝利——聚焦上海戰“疫”攻堅).
The article claimed that the epidemic situation in Shanghai has been “steadily improving” and has been “effectively controlled” in the past month” under the “strong leadership of Party Central, the strong support of people in the country, and the joint efforts of the people of Shanghai.” Victory can only be achieved by “working together” and showing “perseverance.”
The article added that “Shanghai has a large population and an aging society. Prevention and control work has been extremely difficult and complicated due to the scale of the epidemic, the rapid spread of Omicron, and its strong concealment.” The article called for persevering unwaveringly to the general policy of ‘dynamic zero-COVID.’”
Lockdown measures
May 1 to May 3
The Beijing municipal government announced the opening of the Xiaotangshan makeshift hospital on May 1. Over the Labor Day holiday period, the Beijing municipal government suspended indoor activities such as performance venues, entertainment venues, internet cafes, and gymnasiums. The Beijing municipal government also carried out nucleic acid testing in 12 districts for three consecutive days from May 3.
May 3
Zhengzhou City announced mid-level lockdowns (管控區) in several places in the city’s main urban area for the next seven days to “achieve ‘dynamic zero-COVID’ in the shortest time.” Areas with outbreaks are already being placed under the highest level of lockdowns (封控區).
Lockdown tyranny
Official mainland media reports and videos circulating on Chinese social media exposed the Shanghai local governments brutal and strict enforcement of the “zero-COVID” policy.
May 1
1. State broadcaster China Central Television reported that the Shanghai Public Security Bureau was looking to “concentrate” its forces and focus on investigating and punishing so-called “black riders” (黑騎手), or delivery workers operating without government permits during an outbreak. According to the report, 828 people (806 cases) had been found to have made illegal deliveries as of May 1, resulting in the seizure of 828 vehicles and the detention of 535 people.
The Shanghai government’s move was widely questioned by the public, who believed that the former was attempting to cut residents off channels to shop in private, and force them to accept high-priced, government-facilitated “group purchases.”
May 2
1. An elderly man from Jinze Town in Shanghai’s Qingpu District emerged from a supermarket holding a piece of pork and complaining loudly that the retailer had been selling food rations as the pork bore a stamp from another province, according to a video circulating on Chinese social media. Bystanders attempted to stop the police from arresting the man, resulting in a commotion.
Other information circulated at the time said that Jinze residents held a protest that night.
2. Six police officers in protective clothing broke down the door of two women believed to be residing in Shanghai to take them to a makeshift hospital for isolation, according to a widely circulated video on Chinese social media. The police claimed that the two women were notified that they were positive cases on April 29, but did not produce any official reports backing their claim when pressed by the women. Netizens described the police action as “lawless” and “banditry.”
Humanitarian cases
May 1
1. Viral videos on the Chinese internet show an elderly resident from a Shanghai nursing home nearly being transported away to be cremated. Staff from one of Shanghai’s crematoriums found that an elderly person from the New Long March Social Welfare House in Putuo District was alive when they were about to transport the “body” into their vehicle. When the crematorium staff pointed out that the elderly person was not dead, staff from the welfare house still moved to have the “body” taken away for cremation. The welfare house staff finally wheeled the elderly person back inside the welfare house after they were shouted at by the crematorium staff. The videos generated intense discussions online.
The Putuo District authorities confirmed the incident on May 2 and said that an elderly person had been moved to a hospital and the person’s vitals were stable. Several officials were later held accountable for the incident, including the director and deputy director of the Putuo Civil Affairs Bureau, the section chief of the elderly care services department, and the president of New Long March Social Welfare House. The doctor who issued a death certificate for the elderly woman was also investigated and his medical license was revoked.
2. A trending search item on Weibo, “Family of three in Shanghai locked up for 44 days: (Spent) 20,000 RMB buying cauliflower” (上海一家3口被封44天：買菜花2萬人民幣), sparked heated discussion among netizens. The search item referred to an April 30 video where a family of three in Shanghai showed that they had spent 20,000 yuan (about $3,026) on grocery shopping since they had been quarantined at home for 44 days.
Protests
April 28
Residents in several communities in Shanghai banged on their pots and pans in protest of the lockdown and “zero-COVID” restrictions. Residents described the “Smash Pots (to Demand) Supplies” (砸鍋要物資) movement as a “concert,” and led some to exclaim that Shanghai was seeing an “uprising.”
Local officials attempted to dismiss the protest as the work of “hostile foreign forces” and police threatened to arrest the organizers.
April 30
Residents of Sitang No. 2 Village in Shanghai’s Baoshan District found that the neighborhood Party Committee had hoarded nearly 100 boxes of supplies without distributing them to the community, according to several videos circulating on Chinese social media. The supplies included boxes of rice and cooking oil, as well as rotting vegetables. Around the same time, neighborhood Party Committee members of the neighboring Sitang No. 4 Village were spotted ferrying supplies covered up in black plastic bags out of the area.
That evening, Huang Yixin, director of the Baoshan Zhangmiao sub-district office where the villages were located, visited residents and promised to carry out a thorough investigation.
May 1
Hundreds of residents in Jiwang Town in Shanghai’s Minhang District who ran out of food after being locked up for 45 days broke down their area’s epidemic prevention barrier and rushed out into the streets, according to a video. There were some clashes between the police and residents.
May 2
A video titled, “Screams of Shanghai” (上海的吶喊) went viral. The video featured residents raging against the CCP regime and condemning the “zero-COVID” policy, and appeared to be inspired by an earlier video detailing the plight of residents under the lockdown titled, “Voices of April” (四月之聲).
Some of the screams in the video include:
- “The CCP’s sky is a dark sky, and the CCP’s people have no shame”;
- “Bandits used to dwell in the mountains. Now they are in the police”;
- “Our two children, including a two-year-old, are at home! Do you have no conscience? Do you have children?”
OUR TAKE
1. As we noted in the May 2 edition of this newsletter, Beijing’s move to ease property sector restrictions is a sign of economic deterioration and a coming recession. Economists are now more willing to describe what they are seeing with the Chinese economy as a “recession” or “growth recession.”
The fact that so many Chinese cities and areas have rushed to relax real estate policy shortly after Beijing gave the “go-ahead” at the April 29 Politburo meeting further underscores the dire situation. Local governments appear to have an urgent need to “support localities in improving real estate policies based on local realities” to boost their revenue through land sales, stimulate the real estate sector, and rescue their respective local economies.
The fact that so many Chinese cities and areas have rushed to relax real estate policy shortly after Beijing gave the “go-ahead” at the April 29 Politburo meeting further underscores the dire situation. Local governments appear to have an urgent need to “support localities in improving real estate policies based on local realities” to boost their revenue through land sales, stimulate the real estate sector, and rescue their respective local economies.
Recently data shows that China’s leading real estate companies performed dismally in sales in April. According to mainland real estate information provider CRIC, the top 100 real estate firms generated 428.47 billion yuan in sales in April, a decrease of 16.2 percent month-on-month and a drop of 58.6 percent from a year ago, the largest year-on-year decline for single-month sales in recent years. Of the 100 companies, just 39 saw month-on-month sales increases, or down 11 companies from March, while only three companies had year-on-year sales increases, or down three companies from a month ago.
China Index Academy, another real estate information provider, found that the top 100 real estate companies made 21.22 billion yuan in sales on average over the January to April 2022 period, a year-on-year decline of 50.2 percent. Only three companies had sales exceeding the 100 billion yuan range from January to April compared with nine over the same period in 2021. Meanwhile, 57 companies had sales exceeding 10 billion yuan, a 45 percent (46 less companies) decrease year-on-year. The top 100 real estate companies also spent just 362.6 billion yuan on land acquisition from January to April, a 55.9 percent decrease from a year ago.
Local governments, however, could find that easing property sector policies will not do much to turn things around. The “zero-COVID” regime, poor economic conditions, various demographic problems (including decreasing marriages), rising unemployment, the Chinese people’s shrinking consumption power, and other factors are significant headwinds to housing growth.
External factors will worsen the already gloomy domestic economic situation. On May 4, the U.S. Federal Reserve announced a half-percentage-point interest rate increase and plans to shrink its $9 trillion asset portfolio starting in June 2022 to curb inflation. The Fed’s rate hike, coupled with China’s Russia-Ukraine war risks, Sino-U.S. tensions, and foreign investors’ wariness about Beijing’s tech sector crackdowns, will likely accelerate capital outflows from China and other “spillover risks.”
2. Official propaganda and the Politburo Standing Committee meeting about the “zero-COVID” policy shows that the Xi leadership is attempting to “spin tragedy into victory” (喪事當喜事報) to keep it on the books and preserve Xi Jinping’s political legacy. Blame for “zero-COVID’s” failure is assigned to Shanghai’s “large and aging population,” the “scale” of the pandemic, and the characteristics of the Omicron variant of COVID-19. The Politburo Standing Committee meeting also indirectly faults local governments (“Party Committees, governments and sectors of society at all levels”) for not understanding and properly implementing Beijing’s epidemic prevention and control policy, resulting in serious problems with “people’s basic livelihood and supplies … as well as their medical needs” in places like Shanghai. Meanwhile, Shanghai’s adjustments to how it would define attaining “societal zero-COVID” appear to pave the way for the authorities to announce “phased success” (階段性成功) against the virus at a later date.
The current propaganda direction indicates that Shanghai Party secretary and Xi ally Li Qiang, as well as some key officials along the Shanghai official hierarchy, will likely not see their respective careers being impeded by the “zero-COVID” fiasco in Shanghai. Instead, the CCP could publicize their “achievements” in persevering in “zero-COVID,” protecting the people’s lives, and facilitating “economic and social development.” Xi Jinping has incentive to ensure that his political client Li Qiang escapes the crisis relatively unscathed so that his own “quan wei” (authority and prestige) and political legacy are preserved. Punishing Li would be tantamount to Xi shooting himself in the foot in the lead up to the 20th Party Congress, where he is attempting to make a successful bid to extend his tenure.
Propaganda, however, can only help so much. The rigid and draconian enforcement of “zero-COVID” at the grassroots level and higher in Shanghai, as well as the exposing of official corruption, could lead to serious social instability unless the situation improves dramatically for residents within a short period of time. Xi’s factional rivals are also likely to challenge him to provide satisfactory explanations for sticking with “zero-COVID” despite the economic and reputational damages it brought to Shanghai and the rest of China. The May 5 Politburo Standing Committee meeting hints at opposition to Beijing when it demands that officials “resolutely oppose all distortions, doubts and denials” about the “dynamic zero-COVID” policy, and instructs Party Committees, governments and sectors of society at all levels to “consciously maintain a high degree of ideological, political and action consistency” with Party Central. Xi and Li are by no means out of the woods.
SinoInsight 2
The heads of public security bureaus in several provinces in China were recently reshuffled. Also, multiple bureau-level and division-level cadres in the Beijing Municipal Public Security Bureau appear to have been recently removed as the Xi leadership moves to clear out the “poisonous influence” of Fu Zhenghua.
April 28
Former Xishuangbanna Prefecture (in Yunnan Province) Party secretary Zheng Yi (age 55) was listed as member of the Liaoning provincial government Party Group, a member of the Liaoning provincial Political and Legal Affairs Commission, and Liaoning provincial Public Security Bureau Party secretary and chief inspector on the official website of the Liaoning Public Security Bureau.
Background: Zheng Yi spent the bulk of his time as an official in Yunnan, with a mediocre career and no experience in the political and legal affairs apparatus. When Zheng was mayor of Lijiang City (February 2016 to December 2020), he was admonished and held accountable in October 2018 by the Yunnan provincial Commission for Discipline Inspection over environmental protection issues.
April 29
The local official primetime “Hebei Xinwen Lianbo” program reported that Liu Wenxi, the former deputy head of the discipline inspection group of the Central Commission for Discipline Inspection and National Supervisory Commission in the Ministry of Public Security, became a member of the Hebei provincial government Party Group. On May 4, the Hebei provincial Public Security Bureau’s official website reflected Liu’s earlier announced appointment and also listed him as a member of the Hebei Political and Legal Affairs Commission and Hebei Public Security Bureau Party secretary.
April 30
“Jilin Xinwen Lianbo” announced that Liu Kai (53), the former Hebei provincial Public Security Bureau director, attended an enlarged meeting of the Jilin provincial government Party Group on April 28.
Analysis: While there is no official change yet in the position of Jilin Public Security Bureau director, it is likely that Liu Kai will be appointed to that position in the near future.
May 2
1. Gao Yu, a prominent Beijing-based dissident journalist, tweeted that the Beijing Municipal Public Security Bureau launched an operation to eliminate Fu Zhenghua’s “poisonous influence,” leading to the removal of more than 50 bureau-level and division-level local leading public security cadres. A former justice minister, Fu spent the bulk of his career in the Beijing Municipal Public Security Bureau and eventually became its director in 2010.
Of the 50 purged cadres, Gao named the following:
- Gao Yan (59, bureau level), Beijing Police Academy Party secretary;
- Wang Yi (59, sub-bureau level), chief captain of the Beijing Municipal Public Security Bureau’s Public Security Management Corps;
- Shi Zhanping, head of the Beijing Municipal Public Security Bureau’s Economic Investigation Corps;
- Sun Changqing, Party secretary of the Economic Investigation Corps’s discipline committee;
- Wang Yuxia, Pinggu District Public Security Bureau political commissar;
- Che Yan, Shunyi Branch Public Security Bureau political commissar;
- Liu Peng, Daxing District public security sub-bureau political commissar;
- Wang Shenyu, Haidian District Public Security Bureau deputy director;
- Guo Ping, Tongzhou District Public Security Bureau deputy director;
- Cao Guodong, Daxing District public security sub-bureau deputy director.
Gao Yu also wrote that the Beijing municipal Organization Department issued “three cannots” to the work units who “received” the purged officials, namely, “cannot enter [government] mechanisms (機關), cannot manage people and property, and cannot be promoted or used.”According to information circulating on the internet, the Ministry of Public Security has made meticulously detailed internal adjustments to how problematic cadres and their associates are dealt with. When a cadre has been identified as problematic, all personnel who have had contact with the cadre and participated in activities with the person will be interviewed. The interviews would then be compared for caliber and content, and those with the slightest hint of problem will be separately investigated.
2. Local state media Guangxi Daily reported that Xu Xianhui, the former vice governor of Hunan Province and director of the Hunan Public Security Bureau, had accompanied Guangxi leaders to attend local carnival activities and is believed to be now working in Guangxi.
Analysis: Xu Xianhui is likely being lined up to replace Guangxi Public Security Bureau director Zhou Chengfang, who has reached the retirement age of 60.
OUR TAKE
1. The recent public security apparatus reshuffles and purges appear to be intended by the Xi leadership to shore up critical “stability maintenance” work ahead of the crucial 20th Party Congress, “rectify” the apparatus of Xi Jinping’s factional enemies, and make it harder for officials who might want to cause trouble from interfering with his third term bid and other political maneuvers.
To elaborate on the previous paragraph, the transfer of provincial public security bureau directors to another province disconnects them from any networks they might have established at their previous position. Would-be troublemakers would also find it harder to mobilize the lower ranks for nefarious purposes in a new environment. Shifting officials away from their base of operations also makes it easier for the Xi leadership to conduct investigations into them, if needed. Finally, the reshuffles afford the Xi camp opportunities to install or groom political and legal affairs officials who would be loyal to it.
Xi has more opportunities to make public security apparatus reshuffles this year. The Party Congress is still some months away. Also, at least six of the 31 provincial public security bureau Party secretaries are either retiring or near retirement age, while the position is vacant in Hebei and Hunan.
2. We believe that Gao Yu’s information about mass purges inside the Beijing Municipal Public Security Bureau is somewhat reliable. The Beijing Bureau has 23 internal institutions, two directly subordinated (直屬機構) institutions, eight district branches (區分局, or agencies, 派出機構), and three directly subordinated business work units. Each of the 36 institutions would have several cadres in their respective leadership teams; for instance, a district branch leadership team is comprised of a director and 11 deputy directors, a political commissar and a deputy political commissar, a political department director, and a discipline inspection secretary, or a total of 16 cadres. Assuming an average of 10 division-level and above leading cadres in all 36 institutions, the purge of over 50 bureau-level and division level local leading public security cadres represents less than 14 percent of the estimated total.
It also makes sense for Xi Jinping to clear out the Beijing Municipal Public Security Bureau of Fu Zhenghua’s “lingering poisonous influence” at this time. Fu spent many years in the Beijing Bureau, oversaw the promotion of cadres, likely exchanged benefits with numerous cadres, and almost certainly created a power network of sorts. The Xi camp would be concerned that the Fu network could attempt to stir unwanted “stability maintenance”-related trouble ahead of the 20th Party Congress; as we previously analyzed, Fu Zhenghua appeared have some role in 4,000 Beijing Municipal Public Security Bureau officials threatening to resign over the “Lei Yang Incident” in 2016, as well as a 10,000-strong military veterans petition outside the military headquarters in Beijing.
3. To date, Xi Jinping’s effort to “rectify” the political and legal affairs apparatus has led to the purge of most middle- and lower-ranking officials, while few senior cadres beyond Fu Zhenghua and Sun Lijun have been touched. There are several plausible factors for this, including Xi’s lack of political strength, immense resistance from the political and legal affairs apparatus, Xi simply working his way methodologically up the food chain of factional enemies and corrupt officials, Xi showing putting his political rivals on notice while showing some mercy to avoid escalating political risks, or a combination of these factors.
Regardless, Xi will almost certainly step up “stability maintenance” measures and strengthen his control over the political and legal affairs apparatus ahead of the 20th Party Congress to eliminate potential hiccups. Meanwhile, Xi’s factional foes could find ways to exploit heightened “stability maintenance” work to undermine the Xi leadership, just like how they might be taking advantage of the “zero-COVID” policy to embarrass Beijing as some observers suspect.
