SinoInsight 1
On the morning of Sept. 11, Chinese premier Li Keqiang presented incoming Macau head Ho Iat Seng with a leadership decree during a ceremony in Beijing. State Councilors Wang Yi, Xiao Jie, and Zhao Kezhi were among the senior PRC leaders present at the ceremony. In the afternoon, Chinese leader Xi Jinping received Ho to congratulate him on his appointment. Senior leaders who attended the afternoon reception include Politburo Standing Committee member Han Zheng and Politburo members Ding Xuexiang, Yang Jiechi, You Quan, Wang Yi, and Zhao Kezhi.
On Sept. 12, Zhang Xiaoming, director of the Hong Kong and Macau Affairs Office, held a work meeting with Ho Iat Seng at the HKMAO premises in Beijing.
OUR TAKE
1. Zhang Xiaoming’s absence from Ho Iat Seng’s Beijing reception is irregular when compared with how previous heads of Hong Kong and Macau were received.
In 2009, newly appointed Macau leader Fernando Chui was received by then HKMAO director Liao Hui and other senior PRC officials in Beijing. When Chui was re-elected as Macau leader in 2014, then HKMAO director Wang Guangya joined other senior PRC officials in receiving him in Beijing.
In 2012, then HKMAO director Wang was also in attendance for the reception of new Hong Kong leader Leung Chun-ying in Beijing, and the two later held a closed-door meeting. State media photos of the afternoon reception showed Wang Guangya lining up behind the third-ranked vice premier.
In 2017, then HKMAO director Wang Guangya and then Hong Kong Liaison Office director Zhang Xiaoming were among the senior PRC officials who received new Hong Kong leader Carrie Lam in Beijing.
2. Zhang Xiaoming’s public activities have noticeably lessened since the start of the Hong Kong anti-extradition bill protests in June.
According to announcements on the HKMAO website, Zhang attended two political study sessions in June, received a low-level Macau tourism delegation in July, and did not participate in any major activities in August. In September, Zhang has only met with incoming Macau leader Ho Iat Seng, with no upcoming major activities announced.
3. Based on our long-term research into the CCP factional struggle, Beijing’s latest moves to defuse the Hong Kong protests, Ho Iat Seng recent reception in Beijing, and Zhang Xiaoming’s reduced official activities, we believe that Zhang is being quietly marginalized. Zhang’s marginalization is in line with our Sept. 7 analysis of the Hong Kong situation.
Zhang faces very high levels of political risks and is in danger of being investigated.
4. We previously explained how the Jiang faction came to control Hong Kong and the role of the CCP factional struggle in the anti-extradition bill protests. Zhang Xiaoming is a Jiang faction member, and very likely contributed to the turmoil in Hong Kong.
Xi Jinping will likely take advantage of his needing to resolve the Hong Kong crisis to find an excuse to go after Jiang faction officials overseeing Hong Kong affairs such as Zhang Xiaoming and weaken the Jiang faction’s control over the city.
SinoInsight 2
The PRC and the United States appeared to dial down trade tensions in the week of September 9:
Sept. 11
- U.S. President Donald Trump tweeted: “At the request of the Vice Premier of China, Liu He, and due to the fact that the People’s Republic of China will be celebrating their 70th Anniversary on October 1st, we have agreed, as a gesture of ppgood will, to move the increased Tariffs on 250 Billion Dollars worth of goods (25% to 30%), from October 1st to October 15th.”
Sept. 12
- Trump tweeted: “It is expected that China will be buying large amounts of our agricultural products!”
- When asked by reporters about whether he is considering an interim deal with China, Trump said that he would “rather get the whole deal done” and “there’s a deal or there’s not a deal.” However, he added that an interim deal is “something we would consider, I guess.”
- According to Reuters, Chinese buyers had purchased over 600,000 tons of U.S. soybeans.
- The Wall Street Journal reported that Chinese officials are looking to “narrow the scope of its negotiations with the U.S. to only trade matters” while placing “thornier national-security issues on a separate track in a bid to break deadlocked talks with the U.S.” The Journal also reported that deputy-level Chinese trade officials will arrive in Washington this week to prepare for high-level trade talks.
Sept. 13
- The U.S. Agriculture Department confirmed that private exporters bought 204,000 tons of U.S. soybeans bound for China.
- PRC state mouthpiece Xinhua reported that China will exempt purchase of U.S. soybeans, pork, and other agricultural products from tariffs, as well as support the purchase of U.S. agricultural products by Chinese companies.
OUR TAKE
1. We believe that the PRC’s latest trade moves are aimed at creating a favorable, “all’s right under heaven” (天下一大好) environment for the CCP ahead of the celebrations for the 70th anniversary of the PRC’s founding on October 1. The trade moves also seem like an extension of the CCP’s “advancing to retreat” strategy which we identified in August.
2. We do not rule out the PRC and the U.S. reaching an interim trade deal. Both Xi Jinping and Trump need a “win” to boost their political prospects at home; Trump is likely eyeing a foreign policy achievement of some sort ahead of the 2020 U.S. presidential election, while Xi needs to rescue the Chinese economy and show the Communist Party that he can handle the Americans. An interim trade deal could see the PRC make more agricultural purchases, work to reduce the trade deficit, open up the Chinese markets and financial sector to a greater degree, and promise greater intellectual property protection on the mainland.
However, we believe that there is currently a very low probability of the U.S. reaching a “whole deal” with the PRC. The PRC’s recent trade gestures are very likely another attempt at delaying tactics aimed at dragging out Sino-U.S. trade negotiations to 2020; the CCP is looking to survive and outlast the Trump presidency.
The Sino-U.S. dynamic would undergo a dramatic shift if the CCP succeeds in shaping the outcome of the 2020 Taiwan presidential election and prolongs trade negotiations with the U.S. to 2020. In this scenario, the CCP will be able to pull off a “Pearl Harbor” against the Trump administration within months of the 2020 U.S. presidential election and survive the “new Cold War”; signing a complete trade deal will not be out of the question for the CCP since a deal reached under the aforementioned circumstances will instead give the CCP greater leverage over the Trump administration.
