SinoInsight 1
At the annual political and legal affairs work meeting in Beijing from Jan. 15 to Jan. 16, Xi Jinping said that law enforcement and judicial agencies must “turn the blade towards themselves, scrape the poison off their bones, and resolutely eliminate the black sheep.”
On Jan. 17, state mouthpiece Xinhua published a commentary titled “Resolutely Eliminating ‘Two-faced People.” The commentary emphasized the points that Xi made about “building high-quality officials” which were published in the Central Committee-published ideological journal “Qiushi.”
On Jan. 18, “Xiakedao,” the People’s Daily-run social media account, wrote in an article that there is a high probability of “another tiger” being taken out after the fall of Zhao Zhengyong, the former Party secretary of Shaanxi Province.
OUR TAKE
Xi Jinping appears to be signaling a thorough clean up the political and legal affairs system, a process which he started six years ago but lacked both political authority and sufficient pressures to follow through. With the intensifying CCP factional struggle and the deadline to reach a trade agreement with the United States looming, Xi has an impetus to act boldly and fast.
We believe that Supreme People’s Court chief justice Zhou Qiang is very likely a key target of the political and legal affairs system purge. Based on our research, Zhou is a member of the Jiang faction, which opposes the Xi leadership.
SinoInsight 2
On Jan. 14, China’s customs administration released data which showed that the total value of the country’s trade in 2018 had hit a record high ($4.62 trillion, up 12 percent). However, China’s trade surplus had fallen to the lowest point since 2013 ($357.6 billion, down 16.2 percent).
Meanwhile, China’s trade surplus with the U.S. in 2018 ($323.32 billion) reached the highest on the record dating to 2006.
OUR TAKE
1. China’s total trade value in 2018 may seem impressive at first blush, but not quite in considering that the country’s import cost has gone up with the depreciation of the renminbi and foreign exchange earnings have sharply decreased with fewer exports.
Worse, 91.9 percent of China’s trade surplus in 2018 came from trading with the U.S., not a good look with the ongoing trade war.
2. China’s 2018 trade figures affirm our April 12, 2018 analysis, which looks at seven points (including foreign exchange earnings) for why China cannot withstand a trade war with America.
Should Washington increase the tariff rate on $200 billion worth of Chinese goods from 10 percent to 25 percent and even add on 25 percent tariffs on another $267 billion worth of Chinese exports, then China’s economy could go off the cliff. Severe economic troubles will result in serious social problems that will imperil the CCP regime.
3. We believe that the CCP will do everything possible to reach a trade agreement with the U.S. by March 1 to avoid additional tariffs.
Per our China 2019 outlook:
“China and the U.S. could reach a framework agreement which Washington finds acceptable by the end of the 90-day trade negotiation period in March. Further Sino-U.S. trade talks will be held.
The Trump administration will continue to reshape the current world order (in areas such as trade, military cooperation, diplomatic relations, etc.) and advance the isolation of the CCP regime on the international stage.”
