SinoInsight 1
On Aug. 20, Xi Jinping carried out an inspection tour of Gansu Province. Two of Xi’s stops were the Monument and Martyrs’ Cemetery and Memorial Hall of the West Route Army of the Chinese Workers’ and Peasants’ Red Army in Gaotai County. Chinese vice premier Liu He, CCP General Office director Ding Xuexiang, and other senior officials from the Gansu provincial government accompanied Xi.
This year, Xi has carried out inspection tours in Shanghai, Hebei’s Xiong’an City, Tianjin, Chongqing, Inner Mongolia, and Jiangxi. While in Jiangxi, Xi visited a monument which commemorates the start of the Red Army’s Long March in Yudu County.
OUR TAKE
1. We previously analyzed the various political signals which Xi Jinping is sending when he tours “red” revolutionary sites. Xi’s visit to the revolutionary sites in Gansu dedicated to the West Route Army is likewise imbued with political significance.
The West Route Army was annihilated during the CCP’s “Long March” to Yan’an. History indicates that the West Route Army was “sacrificed” as a result of a high-level factional struggle in the CCP between Mao Zedong and Zhang Guotao, the commander of the West Route Army.
In June 1935, Zhang’s 80,000-strong Fourth Front Army (which later become the West Route Army) linked up with Mao’s 30,000-strong force in Sichuan during the Long March. Mao and Zhang had many disagreements, and Zhang formed a “second Party Central” to challenge Mao’s leadership. Zhang’s plans, however, were foiled when the Comintern ordered him to scrap the “second Party Central.” He suffered another setback when he lost three-quarters of his 80,000 troops in a disastrous attack to the south. In October 1936, Mao sacked Zhang as commander of his troops, who were by then renamed the West Route Army, and ordered the remaining 21,800 troops (about two-fifths of the Red Army strength) to carry out an expedition across the Yellow River against the Ma warlords and their 100,000-strong army. The West Route Army was wiped out after a five-month campaign, and Zhang Guotao lost power in the CCP. Zhang eventually defected to the Kuomintang’s Nationalist Government in 1938.
The history of the West Route Army is illustrative of the “you die, I live” nature of factional struggles in the Communist Party; CCP elites have no qualms about making costly sacrifices to wrestle power from one another. By commemorating the West Route Army, Xi Jinping is reminding the CCP elites that the chaos in Hong Kong has its roots in the Jiang faction’s control of Hong Kong.
2. Xi Jinping’s inspection tour to Gansu comes after the annual Beidaihe retreat and just when signs have emerged which suggest that Beijing does not want a crackdown in Hong Kong despite previously creating the impression that military/paramilitary intervention is imminent.
We believe that the CCP elites have reached a consensus at Beidaihe to “advance to retreat” on Hong Kong. Concurrently, the CCP seems to be taking advantage of the “hostage situation” it has created by threatening a crackdown in Hong Kong to breathe life into its trade talks with the United States and continue its delaying tactics against the Trump presidency with an eye on the 2020 U.S. presidential election.
The CCP elites may have come to a consensus on Hong Kong, but that does not mean that the various factions will not attempt to break the consensus if an opportunity presents itself for one side to decisively swing the balance in the “you die, I live” factional struggle. We have written on multiple occasions that the Jiang faction will be looking to create a Tiananmen-style incident in Hong Kong to compromise Xi Jinping and eventually use the fallout of a bloody crackdown to dethrone him.
SinoInsight 2
On Aug. 18, the PRC State Council issued a document which laid out a plan to “build the southern city of Shenzhen into a pilot demonstration area of socialism with Chinese characteristics,” according to state mouthpiece Xinhua.
According to the document, Shenzhen “will become one of the leading cities in the world in terms of economic strength and quality of development” by 2025. The southern Chinese city’s “research and development input, industrial innovation capacity, and the quality of its public services and ecological environment will be first-rate in the world,” the document continued.
Shenzhen would also become a model of “high-quality development, an example of law and order and civilization, as well as societal satisfaction and sustainability”.
The transformation of Shenzhen into a “pilot demonstration area of socialism” is also “conducive to the implementation of the Guangdong-Hong Kong-Macao Greater Bay Area plan and the fulfillment of the Chinese dream of national rejuvenation,” according to the document.
OUR TAKE
1. We believe that the PRC’s plan to develop Shenzhen is partly aimed at menacing Hong Kong. The central authorities is signaling that it can build up Shenzhen at the expense of Hong Kong, and eventually get Shenzhen to replace Hong Kong’s position of importance to the PRC. The CCP elites could also be thinking that Hong Kong will lose its economic advantage over time as Shenzhen develops, and the Hong Kong people will yield to the central government.
2. The PRC’s plan to develop Shenzhen also reveals the deficiencies of the CCP’s authoritarian system. While the authoritarian system seems to benefit efficient planning and execution of big state projects, the flipside is decision-making that is frequently out of touch with reality, as well as the piling up of mistakes as orders go down and feedback goes up. The end result is usually less-than-satisfactory results for grandiose plans; despite much fanfare about the Xiong’an New Area in Hebei (2017) and the establishment of a free trade port in Hainan (2018), the central government still does not have much to show for today.
The CCP is undoubtedly aware of the deficiencies of its system. The choice of developing Shenzhen, a region that has always been at the forefront of the PRC’s “reform and opening up” efforts, is likely intended to mitigate the problems that would arise from another big state development project.
3. We believe that the PRC’s grandiose plans for Shenzhen are ultimately unrealistic.
First, Shenzhen’s economy has been steadily weakening in recent years.
Second, innovation and research are best produced in an environment where there is freedom of thought, not a “pilot demonstration area of socialism.” Greater government control will only stifle innovation and Shenzhen cannot make breakthroughs.
Third, Hong Kong still retains an edge over Shenzhen despite turning increasingly “red” since the handover in 1997 because the rule of law and other freedoms are still largely preserved. No other city in mainland China can replicate the environment in Hong Kong as long as the CCP is in charge.
