1 Xi steps up counterintelligence ops, signals intend to rectify intelligence and united front apparatuses
May 8
1. Xi Jinping met with representatives from the 10th Conference for Friendship of Overseas Chinese Associations at the Great Hall of the People in Beijing.
According to state media, the Conference is “an important platform for communication and exchange among major overseas Chinese associations and their leading members around the world.” The Conference, which has the theme of “enhancing communication between China and the world and advancing the building of a community with a shared future for humanity,” was attended by nearly 500 leading members of overseas Chinese associations from over 130 countries and regions.
2. State broadcaster CCTV aired a 15-minute investigative report claiming that Western countries had sought to contain and suppress China by stealing information and intelligence in sectors like the military, economy, and finance in recent years.
The report added that domestic consulting companies with “complex backgrounds” had helped Western actors “steal state secrets and intelligence in key areas” of the regime “in order to evade our laws and regulations, and the supervision of key sensitive industries.”
The report then focused on Capvision, an expert-networking consulting company with joint headquarters in Shanghai and New York, as well as offices in Beijing, Suzhou, Shenzhen, and other parts of China. The report said that Capvision’s experts had provided information about defense, energy and high-technology companies, medicine and health, and other key industries to foreign clients. An unnamed official with the Shanghai branch of the PRC’s national security agency claimed that some of Capvision’s experts “leaked internal sensitive content, even state secrets and intelligence” to its clients, according to the report. The official added that the authorities would further enhance its scrutiny of the consulting industry.
The report said that the police have raided Capvision offices in several cities and added that “lawful measures” would be taken against the company and its employees.
Other official mainland media would later report on the issue in a high-profile manner. On May 10, Capvision posted on its official WeChat account that it had formed a new compliance committee composed of CEO Xu Rujie and two other top executives.
May 15
The Suzhou Intermediate People’s Court convicted John Shing-wan Leung, a 78-year-old U.S. citizen and Hong Kong permanent resident, of espionage, according to a short statement on the court’s official social media account. The court handed a life sentence to Leung, confiscated his personal property worth 500,000 yuan, and deprived him of political rights for life. The court statement said that Leung was detained on April 15, 2021 by state security authorities in Suzhou on suspicion of engaging in espionage.
According to publicly available information, Leung was the president of the U.S.-China Friendship Association based in Houston. The Association once issued a statement supporting the implementation of the Hong Kong National Security Law in 2020. Leung was also the director of the Texas Council for the Promotion of China’s Peaceful Reunification when the organization was active from 2008 to 2011. Further, Leung had previously taken photos with several high-level CCP officials and political celebrities, including former PRC foreign minister and CCP Central Foreign Affairs Commission Office director Yang Jiechi.
Background
1. On April 26, the Standing Committee of the National People’s Congress passed changes to the PRC’s anti-espionage law. Among the revisions include expanding the definition of espionage and the law enforcement powers of national security agencies, as well as requiring postal, telecommunications, and internet service providers to cooperate with the authorities in cracking down on espionage. The changes to the anti-espionage law will take effect on July 1, 2023.
2. Xi Jinping deviated from personnel reshuffle norms at the 20th Party Congress by promoting then-state security minister Chen Wenqing to Party secretary of the Central Political and Legal Affairs Commission. Concurrently, Xi appointed Chen Yixin, his former subordinate in the Zhejiang local government, as the new minister of state security.
Xi also departed from personnel reshuffle norms by appointing his political ally Shi Taifeng as a secretary of the Central Secretariat and head of the United Front Work Department.
Our take
1. Beijing stepping up counterintelligence operations and strengthening national security measures appears to be part of Xi Jinping’s long-term effort to tighten the CCP’s control over Chinese society and better deal with internal instability as he moves to resolve the regime’s many crises.
Worsening Sino-U.S. tensions and geopolitical pressures in recent years also seem to be factors pushing Beijing to more tightly control the flow of information and intelligence, as well as take double-edged actions that strengthen regime security at the cost of further alienating the PRC from foreign countries and investors.
2. The Xi leadership’s recent counterintelligence operations and previous key personnel appointments could also be aimed at more deeply “rectifying” several key apparatuses that were earlier more closely under the sway of the Jiang Zemin faction.
The Jiang faction’s influence over the intelligence apparatus, the diplomatic apparatus, and the united front apparatus led to incidents during Xi Jinping’s tenure that were inconsistent with the latter’s political agenda even if they appeared to be characteristic of the CCP regime. For instance, we previously looked at the appearance of “anti-Xi” messaging in articles published in pro-CCP Hong Kong media outlets like HK01 and the now-defunct Duowei News, and how some of those media outlets began tweaking their messaging in a “pro-Xi” direction following Xi’s greater power consolidation at the 20th Party Congress and the 2023 Two sessions.
We also explained in several newsletters (for the most recent, see here) how the clash between the Xi camp and the Jiang faction over Jiang Zemin’s negative political legacy led to the CCP’s curious handling of Falun Gong in Hong Kong. In brief, the CCP went from stepping up harassment and intimidation of Falun Gong practitioners in Hong Kong at the start of Xi Jinping’s tenure to abruptly shutting down the Hong Kong Youth Care Association, a notorious anti-Falun Gong united front group founded in 2012, at the end of 2020. As Xi consolidated more power and began to influence key appointments in the Hong Kong government, CCP united front operations against Falun Gong began to taper off while the Hong Kong authorities started to arrest and punish pro-CCP elements who targeted Falun Gong practitioners and property in the territory. Falun Gong practitioners and Falun Gong-linked media have also not been targeted under the National Security Law thus far despite them being natural targets under the legislation.
CCP united front organizations and elements in other parts of the world, however, have continued to target Falun Gong. Falun Gong-linked media and websites have reported that pro-CCP individuals harassed Falun Gong practitioners and damaged their information booths in New York, Toronto, and Tokyo, with some of the attacks happening as recently as 2022 and 2023. The discrepancy between the CCP’s stance on Falun Gong in Hong Kong and elsewhere indicates that the Xi leadership does not fully control the CCP’s united front, intelligence, and other apparatuses responsible for overseas influence operations, and is currently working to make sure those apparatuses are in sync with Beijing.
3. It is unclear if John Shing-wan Leung was indeed guilty of espionage or to which faction in the CCP elite his political allegiances belonged if he had any. The targeting of Leung, however, would send a signal to CCP united front elements abroad that they have to fall in line with the Xi leadership and its agenda, and abandon whatever former allegiances and agendas they might have. Otherwise, united front elements would still be found to be “politically incorrect” by Beijing, and the CCP regime would find ways to punish them like Leung.
It is also possible that Beijing is looking to “kill the chickens to scare the monkey” by prosecuting Leung to dissuade foreign elements who are engaging in real espionage against the regime.
2 Vladivostok port transit deal offers Xi political leverage
On May 15, the PRC General Administration of Customs China (GAC), National Development and Reform Commission, Ministry of Transport, and Ministry of Commerce jointly announced that Vladivostok in Russia would be added as a cross-border transit port for domestic shipments in Jilin Province effective from June 1.
A GAC document (No. 44 of 2023) issued on May 4 listed the above arrangement and added that two ports in Zhejiang Province, Zhoushan Yongzhou Container Terminal and Jiaxing Zhapu Port, would be used as entry ports for the cross-border transportation of domestic goods.
China’s northeast cross-border domestic goods transport
The “cross-border transport of domestic trade goods” refers to goods departing from a port in China and transiting through an overseas port en route to another port in the country. This practice is mainly done to move goods from northeast China down south to ports in Shanghai, Ningbo, and Guangzhou.
According to state media, the PRC had agreed to transit southbound goods from northeast China to the ports of neighboring countries in accordance with international transit business since 2007. State media added that the land transportation distance of moving goods from Jilin and Heilongjiang down south can be shortened by over 800 kilometers if they pass through Vladivostok instead of transiting through ports in Liaoning Province.
Sino-Russian cooperation
Xi Jinping signed two statements with Russian leader Vladimir Putin pledging strategic and economic cooperation between the PRC and Russia when he visited Moscow from March 20 to March 22.
Vladivostok, Chinese history, and map renaming
Vladivostok was originally a Chinese settlement known as Yongmingcheng (永明城, or “city of eternal light”) during the Yuan Dynasty and Haishenwai (海參崴, or “sea cucumber bay”) during the Qing Dynasty. During the mid-19th century, the Qing court signed away vast portions of land (between 600,000 to over a million square kilometers) in northeastern China to Tsarist Russia as part of unequal treaties, including Sakhalin (Kuyedao, 庫頁島) and Vladivostok.
On Feb. 14, 2023, the PRC Ministry of Natural Resources issued new regulations requiring that old Chinese names be added parenthetically to the current Chinese transliterations of Russian geographical names for eight cities and places along the Russian-Chinese border. Vladivostok and Sakhalin were among the eight places, and had to be alternatively referred to as “Haishenwai” and “Kuyedao” respectively in Chinese. Commentators speculated at the time that Beijing was looking to take advantage of Russia’s weaknesses stemming from the Russia-Ukraine war to position the PRC to “recover lost territory” in the event of a Russian political collapse.
Our take
1. State media claims that the Vladivostok cross-border transit port arrangement is in line with the PRC’s national strategic plan to promote domestic trade and revitalize the aging industrial base in northeast China. This does seem to be the case, at least on paper.
China’s northeast is an important production and storage base for energy, raw materials, commodities, and grain. However, the transportation of goods and material from the northeast to the south in a timely manner has long been bottlenecked by limitations in transport capacity and earlier cross-border arrangements. With Chinese ships being able to transit through Vladivostok from June, goods would be able to flow to other parts of China much quicker and cheaper (e.g. companies transporting goods from Suifenhe City in Heilongjiang Province to Taicang Port in Jiangsu Province via Vladivostok stand to save about 2,000 yuan in freight fees per container), and the CCP would be able to more effectively mobilize the regime’s resources.
The Xi leadership is likely betting that in the long run, the Vladivostok cross-border transit arrangement would boost the local economies of China’s northeastern region, breathe new life into the old industrial base, encourage population growth, and ultimately help the national economy.
2. Russia and China are natural geopolitical competitors and both sides have long been wary of the other’s ambitions along the border regions. However, increasing Western pressure on both countries over the Russia-Ukraine war is driving Beijing and Moscow to strengthen their strategic partnership and deepen their economic cooperation.
Russia’s Far East contains vast reserves of natural resources, including forests, coal, gas, oil, gold, diamonds, fish and seafood. Yet the Far East has seen steady population decline over the years and lags in economic development. Deepening economic cooperation with the PRC could see Russia step up imports of China’s excess production capacity and technology, a move which could boost China’s exports while providing Russia with what it needs to develop its Far East region.
China’s northeastern region already appears to have benefited somewhat from the increased trade between the PRC and Russia since the outbreak of the Russia-Ukraine war. Official economic data for the first quarter of 2023 saw Heilongjiang (5.1 percent), Liaoning (4.7 percent), and Jilin (8.2 percent) produce GDP figures that exceeded the national average (4.5 percent), a rare phenomenon given the northeast’s decline over the past decade. Nationally, China’s overall trade with Russia increased 30 percent from a year ago in 2022 to hit a record-high $190 billion. Meanwhile, Russia’s imports from China grew 13 percent to $76 billion in 2022 while its exports rose by 43 percent to $114 billion.
While the West and the international community have become increasingly concerned about a potential PRC invasion of Taiwan, Xi and the CCP have much more to gain politically, economically, and geopolitically from expanding cooperation with Russia in China’s northeastern region. Unless the U.S. and its allies cross Beijing’s “red lines” on Taiwan, the Xi leadership will more likely invest more effort over the next decade or so into deepening its strategic and economic cooperation with Putin’s Russia to shore up regime security rather than pursue the destabilizing action of seriously preparing for aggression in the Taiwan Strait (this does not mean that the PRC will not ready itself for an invasion if it has to or enhance defensive measures).
3. Xi Jinping stands to acquire more political achievements and political bargaining chips by cooperating with Russia to develop its Far East and China’s northeast:
- Barring unforeseen circumstances, the development of Russia’s Far East and China’s northeast will likely bring economic, food, energy, and security benefits to the PRC. Xi can then claim credit for securing those benefits for China, boost his “quan wei” (authority and prestige), and carve out for himself more room to maneuver and negotiate with the Party elite in dealing with sensitive matters like Taiwan.
- The PRC’s deepening cooperation with Russia in the latter’s Far East would give the CCP additional opportunities to gradually “Sinicize” the region and extend its influence there. This would lay the groundwork for Beijing to “recover lost territory” should the chance present itself, especially if the Russia-Ukraine conflict weakens Russia to the point of becoming a failed state, or if the war ends with Moscow overwhelmingly dependent on China.
- From the CCP’s perspective, the deal to allow the “cross-border transport of domestic trade goods” through Vladivostok is a sign of growing PRC influence in a “lost territory” and a nascent attempt at “recovery.” Should the Xi leadership later negotiate other arrangements that advance the perception that “lost territory” is being “recovered,” such as establishing special “Sino-Russia free trade zones” in former Chinese territory, then Xi Jinping would gain important political bargaining chips to use against the remnant Jiang faction and publicly criticize Jiang Zemin’s “incorrect political line.” Jiang was responsible for settling 98 percent of disputed border issues between China and Russia in the 1990s after the dissolution of the Soviet Union, and has frequently been accused by Chinese commentators, scholars, and experts of secretly “giving away” millions of square kilometers of disputed territory to Russia.
