India-Aus 2+2 - BRICS - Afghanistan Policy - Biden-Xi Call - US Trade Policy - State Media on 9/11 - Virtue Cultivation & Discourse Power - PLA's New Generals - Assurances & Regulatory Changes
Dear Subscribers,
Like last week, I am picking up two of the pieces from the Xi Thought series that I think you should check out; also I am offering a quick takeaway from People’s Daily commentaries based on Xi’s recent speech at the Party School.
First, do read my breakdown of Xi Thought: Socialist Art & Internet as ‘Battlefield’ and the one on virtue cultivation through education. The second one has an old quote from Xi, which goes:
“Our education must never produce socialist saboteurs and grave diggers, and must never produce people who have a Chinese face, but do not have a Chinese heart, or lack Chinese sentiment and Chinese flavour!” 我们的教育绝不能培养社会主义破坏者和掘墓人,绝不能培养出一些'长着中国脸,不是中国心,没有中国情,缺少中国味'的人!
Next, from the commentaries on the Party School speech, here’s what I’ve learned.
On the balance between reds and experts:
“the Party’s organizational line for the new era calls for upholding the principle of adhering to both ability and political integrity, putting virtue first and appointing people on their merits. In selecting cadres and employing talents, we should place emphasis on morality, but at the same time, we should not neglect competence.” 新时代党的组织路线提出坚持德才兼备、以德为先、任人唯贤的方针,就是强调选干部、用人才既要重品德,也不能忽视才干.
And on discipline:
“to carry out a great struggle, advance a great cause and realize a great dream, it is necessary to build a great project and cultivate a cadre team with iron-like strong conviction, iron-like strong beliefs, iron-like strong discipline and iron-like strong responsibility.” 进行伟大斗争、推进伟大事业、实现伟大梦想,必须建设伟大工程,培养造就一支具有铁一般信仰、铁一般信念、铁一般纪律、铁一般担当的干部队伍.
I. Indo-Pacific Vision & India-Australia 2+2
There were a couple of developments this week that weren’t directly about the India-China relationship but do impinge on them. I thought I’d begin with these.
Let’s begin with EAM Jaishankar’s speech at ANU. He talked about the “impressive growth of Chinese power” as a key driver of global changes. He talked about how China’s rise “is not just about the rise of another power, however major. We have entered a new phase in international relations and the full impact of China’s re-emergence will be felt more than those of major powers before it.” Jaishankar was also rather blunt in saying that “developments centring around the US and China are largely responsible for the concept of Indo-Pacific taking root so rapidly.” To him, “as the world globalized and various powers – especially China – started developing a footprint beyond their traditional areas of activities, the separation of the Indian and the Pacific Oceans was less and less tenable.”
On the Quad, he said: “The fact is that the days of unilateralism are over, bilateralism has its own limits, and as the Covid reminded us, multilateralism is simply not working well enough. The resistance to reforming international organizations compel us to look for more practical and immediate solutions. And that, ladies and gentlemen, is the case for the Quad.”
Some of the dynamics of the Quad that he outlined are:
“The Quad nations are all democratic polities, market economies and pluralistic societies. Apart from that natural understanding that it generates, similarity in the structural aspects of their relationships has helped to foster the platform.”
All Quad members “subscribe to the centrality of ASEAN in so far as the Indo-Pacific.”
The four countries are also “involved in multiple trilateral combinations with other partners. In the case of India and Australia, they include those with France, Indonesia and Japan.”
Maritime security coordination and a “shared commitment to UNCLOS 1982 as the constitution of the seas.”
Quad’s agenda so far has entailed: “maritime security, cyber security and disaster response to connectivity and infrastructure, climate action and counter-terrorism.” Along with this, he mentioned “vaccine production, student mobility, resilient supply chains and combating disinformation.”
Again, this is something relevant and clearly linked to China:
“It (the COVID-19 pandemic) has called into question the model of globalization that was practised till recently and makes a powerful case for a more de-centralized version. Many of us accept now that the establishment of resilient and reliable supply chains are essential to de-risking the world economy. Related to that, the value of trust and transparency has also gone up significantly. We have all been made much more sensitive to the implications of opacity. Risk aversion has heightened in a world that is now clearly more insecure.”
The last paragraph is also worth noting; again rather bluntly, Jaishankar states that
the “75-year old world order had run its course and was ripe for change. This was driven both by the national fortunes of major powers as well as the collective impact of greater rebalancing and multipolarity. To that was added the complexity of a more inter-dependent, tech-centric and borderless world, where the concepts of power and influence have acquired a new meaning. And this mix now experienced a once-in-a-century pandemic whose devastation is beyond imagination.” He doesn’t offer a clear vision for what the new order could be in the Indo-Pacific; rather he talks about the need for a “broad-based decision-making process.”
Next, we had the inaugural India-Australia 2+2 dialogue in New Delhi this week. The joint statement says that the two sides “reiterated the importance of advancing their shared objective of an open, free, prosperous and rules-based Indo-Pacific region.” India has also invited Australia to collaborate in co-production and co-development of defence equipment. The statement covers a number of areas; I am picking what I found relevant:
They talked about cooperation in “maritime domain awareness, and expand linkages between maritime agencies, build on existing commitments to combat challenges such as marine litter and single-use plastic waste, and target Illegal, Unreported and Unregulated (IUU) fishing.”
“The Ministers welcomed the presence of a Liaison Officer from Australia at the Information Fusion Centre – Indian Ocean Region near New Delhi.”
“They also emphasized that the Code of Conduct in the South China Sea should be fully consistent with international law, particularly UNCLOS, not prejudice the legitimate rights and interests of any nation in accordance with international law and reinforce existing inclusive regional architecture.”
They welcomed the EU’s Indo-Pacific strategy and emphasised ASEAN’s centrality.
They reaffirmed Quad-level cooperation. “The Quad has a shared vision for an Indo-Pacific region that is free, open, prosperous and inclusive, and based on respect for international law.”
“The Ministers welcomed the continued participation of Australia in Exercise Malabar. Australia invited India to participate in future Talisman Sabre exercises, to empower operational compatibility between their defence services.”
“Both countries also agreed to explore areas of cooperation in the area of defence industries including Unmanned Vehicles and other niche technologies.”
“Recognizing cooperation on cyber security, innovation, digital economy, cyber and critical technologies as an essential pillar of the India-Australia relationship, Ministers reiterated the importance of working together in these areas, as identified by the Framework Arrangement on Cyber and Cyber-Enabled Critical Technology Cooperation between India and Australia.”
II. New PLA Generals & WTC Chief
The Western Theatre Command, which covers China’s borders with India, Nepal and Bhutan, had another change in leadership this week. This is the fourth change in the command of the WTC since December last year. This came as Xi Jinping promoted five senior officers to the post of General. Among them was Wang Haijiang, who now heads the WTC.
The promoted officers are:
Commander of the Western Theater Command of the People’s Liberation Army Wang Haijiang (58)
Commander of the PLA Central Theater Command Lin Xiangyang (57)
Commander of the PLA Navy Dong Jun (Not sure)
Commander of the PLA Air Force Chang Dingqiu (54)
President of the PLA National Defence University Xu Xueqiang (58).
In this thread below, I’ve touched on the changes that have taken place in the WTC’s leadership since December.
Also Neil Thomas’ thread below offers useful details about the new Generals.
One final thought on all this. We in India are focussing on the WTC, which of course is understandable, and we are thinking of this from the perspective of developments in Eastern Ladakh, which again is understandable. But such an approach might be missing perhaps the most important dynamic behind these rapid changes and promotions. There has been tremendous upheaval within the PLA leadership ever since Xi took charge as General Secretary and CMC chair in 2012. There was a massive anti-corruption campaign, which targeted those at the very top of the military hierarchy. Some of the big names like Xu Caihou, Guo Boxiong and Zhang Yang are well know, but let’s look at broader data. For instance, of the 42 PLA members on the 18th Central Committee, only 6 were retained on the 19th Central Committee. A vast number were investigated or retired. At the same time, SCMP’s count tells us that “Xi has overseen the promotion of 58 full generals – the highest rank for officers in active service in China – since he came to power in 2012.” The report also quotes an unidentified source as saying that “There will be some vacancies in the CMC as a few senior members are expected to retire next year when the Communist Party holds its national congress.” The report also quotes Hong Kong-based military observer Liang Guoliang as saying that some of the new generals might be in line for further promotion to the CMC because two of the CMC vice-chairmen were over 70 years old. However, I would add to this that if you look at the ages of the generals, even the previous two commanders of the WTC, it’s clear that these changes are about beyond just the 20th Party Congress in October 2022. Xi is working to establish a power base in the PLA at least for the next decade if not beyond.
While on the vicinity of the PLA and the WTC, do note this HT report, which says that as per Chinese state media, senior officers there will soon be some 30 airports in Xinjiang and Tibet at the disposal of the region to facilitate the movement of army personnel. Also, Ajay Banerjee reports for The Tribune that India and China are now readying for another round of military talks in Eastern Ladakh. This round will focus on the Hot Springs area, the piece says.
Also Read:
China-India border: PLA troops, jets, artillery ‘send warning shot with Tibet drill’
Arunachal Pradesh MLAs Constitute Forum to Curb Indo-China Border Residents’ Migration
III. Xi @ BRICS Summit
Xi Jinping attended the 13th BRICS summit this week, with India being the chair. Xi’s speech emphasised the need to:
practice true multilateralism, i,e, adhere to the purposes and principles of the UN Charter, and safeguard the UN-centered international system and the international order underpinned by international law.
COVID-19 solidarity and cooperation, including upholding a science-based approach to tracing its origins, vaccine cooperation and opposing politicization and stigmatization.
promote openness and innovation-driven growth, including upholding the WTO-centered multilateral trading regime and pushing for an economic globalization that is more open, inclusive, balanced and beneficial for all.
promote common development, including sustainable development focus and climate change action based on the principle of common but differentiated responsibilities.
Xi also announced that “on top of the US$100 million donation to COVAX, China will donate an additional 100 million doses of vaccines to fellow developing countries within this year.” He also said that BRICS must deepen ties in “trade and investment, technology and innovation, and green and low-carbon development. China proposes to host a BRICS high-level meeting on climate change and a BRICS forum on big data for sustainable development.” He also called to “consolidate the BRICS strategic partnership, support each other on issues concerning our respective core interests, and jointly safeguard our sovereignty, security and development interests.” Finally, Xi said that “China will host the BRICS seminar on governance and the BRICS forum on people-to-people and cultural exchanges, and open an online training course for media professionals of our five countries. China will host the Beijing Olympic and Paralympic Winter Games early next year.”
Chinese media reports tell us that all BRICS members “reaffirmed their support for multilateralism and basic norms governing international relations, opposed unilateralism and hegemonism, and advocated that all countries respect each other's independence, sovereignty and equality. They will step up communication and coordination on major international and regional issues, work together to address climate change and build a community with a shared future for mankind.” It adds that they all backed the hosting of the 2022 Winter Olympics in China.
Staying with BRICS, it’s interesting to note the full declaration after the meeting. On multilateralism, the statement echoed an earlier statement adopted after the BRICS foreign ministers’ meeting earlier this year; here is my coverage of that document. The same was the case with regard to international conflicts:
“We endorse the position taken by our Foreign Ministers at their last meeting on the situation in Africa, the Middle East and North Africa, the Palestinian-Israeli issue, the Syrian Arab Republic, Yemen, Afghanistan, Korean Peninsula, the Iran nuclear issue and Myanmar. We reaffirm our commitment to the principles of non-interference in the internal affairs of States and reiterate that all conflicts must be resolved by peaceful means and through political and diplomatic efforts in line with international law, in particular the UN Charter.”
On Afghanistan, the statement said:
“We follow with concern the latest developments in Afghanistan. We call for refraining from violence and settling the situation by peaceful means. We stress the need to contribute to fostering an inclusive intra-Afghan dialogue so as to ensure stability, civil peace, law and order in the country. We condemn in the strongest terms the terrorist attacks near the Hamid Karzai Kabul International Airport that resulted in a large number of deaths and injuries. We underscore the priority of fighting terrorism, including preventing attempts by terrorist organisations to use Afghan territory as terrorist sanctuary and to carry out attacks against other countries, as well as drug trade within Afghanistan. We emphasise the need to address the humanitarian situation and to uphold human rights, including those of women, children and minorities.”
This was also interesting:
“We reaffirm the sole authority of the UN Security Council for imposing sanctions and stress further the imperative of refraining from any coercive measures not based on international law, in particular the UN Charter. We call for a further consolidation and strengthening of the working methods of the UN Security Council Sanctions Committees to ensure their effectiveness, responsiveness and transparency and look forward to continuing BRICS engagement on these issues.”
Also, there’s a BRICS Action Plan on Innovation Cooperation for 2021-2024 that’s in the works. I like how the plan is 2021-2024, but it is still being finalised as per the document.
Do note this:
“We agree to continue to treat all human rights, including the right to development, in a fair and equal manner, on the same footing and with the same emphasis. We agree to strengthen cooperation on issues of common interests both within BRICS and in multilateral fora including the United Nations Human Rights Council, taking into account the necessity to promote, protect and fulfil human rights in a non-selective, non-politicized and constructive manner, and without double standards.”
IV. Assurances amid Regulatory Changes, Gig Workers Rights - Gaming Cos Warned - Anti-Bribery Campaign - Breaking Walled Gardens
On Monday, speaking at a forum on the digital economy, Chinese Vice Premier Liu He sent a message of support to China’s private sector. SCMP reports:
“There are no changes in the principles and policies for supporting the development of the private economy; they have not changed now and will not change in the future…The private economy has contributed more than 50 percent of total tax revenue, more than 60 per cent of gross domestic product, more than 70 percent of China’s technological innovation, more than 80 percent of urban employment, and makes up more than 90 per cent of market entities.” Therefore, it is critical the central government continues to nurture the sector, while managing risks in areas such as property and intellectual property rights, Liu said.”
The SCMP report, it also quotes Mark Williams, chief Asia Economist at Capital Economics, writing in a note last Friday that what first looked like a tech crackdown by Beijing, broadened to a crackdown on large private firms, then to a wider regulatory push. “But it now resembles an ideological campaign aimed at fortifying the nation’s people and economy.”
Then on Wednesday, the front page of the People’s Daily carried an important commentary aiming to address worries related to the recent regulatory actions that have been taken across different sectors, i.e., specifically “platform economy, education and training, and information security.” The commentary said that these measures have been taken from a strategic perspective, with the aim of:
“standardizing market order, building the new development pattern and promoting high-quality development; they are pragmatic actions aimed at promoting the formation of a fair competitive market environment and better protecting consumers’ rights and interests, and are powerful measures to coordinate development and safety; efficiency and fairness; vitality and order; domestic and international; and improve the socialist market economic system in a complex and changeable situation.” 一段时间以来,有关部门陆续出台平台经济、教育培训、信息安全等多个领域监管举措。这一系列监管举措,是从规范市场秩序、构建新发展格局、推动高质量发展的战略高度出发,促进形成公平竞争的市场环境,更好保护消费者权益的务实行动,是在复杂多变局面下统筹发展和安全、效率和公平、活力和秩序、国内和国际,完善社会主义市场经济体制的有力举措.
The piece then talked about the work done since the 18th Party Congress to deal with monopolies and unfair practices. The aim, the piece says, has been the development of a “high-standard market system” and “the formation of a unified, open market system with orderly competition.”
“In response to the problems of barbaric growth and disorderly expansion of some platform enterprises, the relevant departments have resolutely implemented the decisions and deployments of the Party Central Committee, increased anti-monopoly supervision, investigated and dealt with monopolies and unfair competition of the the concerned platform enterprises in accordance with the law, and prevented the disorderly expansion of capital with initial results and steadily improved the order of fair competition in the market.” 党的十八大以来,党中央围绕反垄断、反不正当竞争,作出一系列重大决策部署,完善公平竞争制度,改革市场监管体制,加强反垄断监管,推进高标准市场体系建设,推动形成统一开放、竞争有序的市场体系。针对一些平台企业存在野蛮生长、无序扩张等突出问题,有关部门坚决贯彻落实党中央决策部署,加大反垄断监管力度,依法查处有关平台企业垄断和不正当竞争行为,防止资本无序扩张初见成效,市场公平竞争秩序稳步向好.
The next bit talks about developing a “multi-dimensional” regulatory and supervision system in fields of “platform economy, scientific and technological innovation, information security and people's livelihood security.” There should be equal focus on upholding regulatory norms and promoting development, the piece says. 坚持监管规范和促进发展两手并重、两手都要硬.
The objective is to “guide and urge enterprises to obey the leadership of the Party, obey and serve the overall interests of economic and social development” along with encouraging and supporting enterprises to play a positive role in promoting scientific and technological progress, developing a thriving market economy, making people’s lives better, and participating in international competition (目的是引导督促企业服从党的领导,服从和服务于经济社会发展大局,鼓励支持企业在促进科技进步、繁荣市场经济、便利人民生活、参与国际竞争中发挥积极作用)...The socialist market economy is essentially an economy ruled by law…” and the idea is that the current changes will “provide a more solid guarantee for the well-regulated and sound development of all types of capital and industries.”
The piece then commits to the “two unwaverings” 两个毫不动摇, which underscores support for the private sector. So since the 18th Party Congress, there have been a “series of reform measures to support the development of the private sector, thereby enabling the creation of a sound legal and business environment for the development of private enterprises, further enhancing their vitality and confidence.” It then says:
“The number of market players has increased from 55 million in 2012 to 146 million today, an increase of nearly 1.7 times. We stepped up assistance for market entities and introduced a series of policies and measures to help market entities tide over difficulties and build up strength in fiscal, taxation, social security, financial and market order. Facts fully prove that the position and role of the non-public sector in China's economic and social development has not changed. The principles and policies of unswervingly encouraging, supporting and guiding the development of the non-public sector have not changed. The policy of creating a favorable environment and providing more opportunities for the development of the non-public sector of the economy has not changed. Under the new circumstances, we must adhere to the two unwaverings, improve the legal environment supporting the development of private businesses and foreign-invested enterprises, improve the system supporting the development of small and medium-sized enterprises, and create a market environment in which entities with different ownership patterns have equal access to resources and factors in accordance with the law, participate in open, fair and impartial competition, and enjoy equal legal protection. The regulatory policies are non-discriminatory and target violations of laws and regulations, not specific industries or companies.” 我们党在坚持基本经济制度上的观点是明确的、一贯的,从来没有动摇。党的十八大以来,党中央坚持“两个毫不动摇”,出台一系列扶持民营经济发展的改革举措,为民营企业发展营造良好的法治环境和营商环境,进一步增强了民营企业发展活力、信心和底气。深入推进简政放权,促进形成公平竞争的市场环境,为各类市场主体特别是中小企业创造广阔的发展空间,保护和激发市场主体活力,市场主体由2012年的5500万户增长到目前的1.46亿户,增长了将近1.7倍;加大为市场主体纾困力度,从财税、社保、金融、市场秩序等多方面出台一系列帮扶政策措施,助力市场主体渡过难关、积蓄力量。事实充分证明,非公有制经济在我国经济社会发展中的地位和作用没有变!毫不动摇鼓励、支持、引导非公有制经济发展的方针政策没有变!致力于为非公有制经济发展营造良好环境和提供更多机会的方针政策没有变!新形势下,我们要坚持“两个毫不动摇”,健全支持民营经济、外商投资企业发展的法治环境,健全支持中小企业发展制度,营造各种所有制主体依法平等使用资源要素、公开公平公正参与竞争、同等受到法律保护的市场环境。出台的监管政策是一视同仁的,针对的是违法和违规行为,绝不是针对特定行业或企业.
The next bit talked about unwavering adherence to opening up. The data points mentioned are the foreign investment law, opening of Shenzhen, Hainan and Pudong, China’s FDI inflow, etc. In the new era now,
“China will unswervingly promote high-level opening to the outside world, protect the legitimate rights and interests of foreign capital, promote fair competition between domestic and foreign-funded enterprises, protect property rights and intellectual property rights, enhance policy transparency and predictability, and form a new pattern of all-round, multi-level and wide-ranging opening.” 面向未来,中国将坚定不移推进高水平对外开放,保护外资合法权益,促进内外资企业公平竞争,保护产权和知识产权,增强政策透明度和可预期性,形成全方位、多层次、宽领域的全面开放新格局.
Finally, the piece ends by telling us that “China's long-term economic policy remains unchanged” and that current measures are aimed at “stimulating the development of market entities” and to “fully generate all sources of strength conducive to the development of social productive forces.”
My quick take: The fact that we got this on the front page tells us that there is an acknowledgement that it’s not all hunky dory. The commentary seeks to assure the private sector while making the case for regulation to further the development of a socialist market economy. Of course, in doing so, it does not address the opaqueness and abruptness in the manner in which these steps were announced and implemented. There is an effort to tell us that specific industries or enterprises have not been the target of the effort; rather this is about creating a sound overall environment. The fact that this is mentioned is an acknowledgement that this is how the steps have been perceived. The commentary also seeks to soothe the nerves of foreign investors and firms, telling them that China’s basic economic policy has not changed. But at the same time, the commentary also tells us very clearly that while the private sector has a role in the economy, enterprises must remain subservient to the Party and to what the Party believes are the country’s strategic interests. Whatever the rhetoric, this is a shift in practice, and we should expect more regulatory action. What’s been achieved so far are merely “initial results.” Finally, while the piece mentions enhancing policy transparency and predictability, there are structural reasons for regulators and ministries to act the way they do, as HKU’s Angela Zhang explains when talking about “regulatory intensity” in this episode of The Little Red Podcast.
Despite the commentary, we have seen the regulatory shake-up of different sectors continue, and there is a new campaign to target bribe-givers.
First, several major gaming companies, game account rental platforms and video game live streaming platforms were summoned for a meeting held by the Propaganda Department and the National Press and Publication Administration. Officials from the Cyberspace Administration of China and the Ministry of Culture and Tourism also attended.
The PD report says that all these enterprises “should improve their political standing, strengthen their sense of responsibility, deeply understand the importance and urgency of strict management and prevention of addiction among minors, resolutely implement relevant requirements, and effectively protect the physical and mental health of minors.” 各网络游戏企业、游戏账号租售平台、游戏直播平台要提高政治站位、强化责任担当,深刻认识严格管理、防止未成年人沉迷网络游戏的重要性紧迫性,坚决将有关要求落到实处,切实保护未成年人身心健康.
SCMP has a detailed report on the statement, which PD is carrying. In addition, the meeting called on all gaming companies “to strictly enforce the orders of the notice and thoroughly implement the play-time restrictions on minors when they are providing online games to them, and must not provide any online game account rental and transaction services to minors in any shape or form.”
The report also tells us that games with a “wrong set of values.” This covers pornographic and obscene content, blood and gore, money worship, “sissy” 娘炮 (niáng pào) content and “gay love” 耽美 (dānměi). The report also talks about curbing monopolies, restricting “traffic” motive efforts, and strict regulation and restrictions on celebrities endorsing games. The authorities also promise “special inspections” and have warned that they will “seriously deal with violations.”
Second, on Friday, the Ministry of Human Resources and Social Security, Ministry of Transport, the State Administration of Market Supervision, and the All-China Federation of Trade Unions summoned some of the country’s biggest internet platform operators – including Alibaba Group Holding, Tencent Holdings, Meituan and Didi Chuxing – to a meeting to discuss their efforts to protect the basic rights of gig economy workers, following new guidelines issued by the government in July.
The 10 internet companies called to the meeting were directed to “play a leading role” and “set an example” in caring for these workers and shouldering the social responsibilities for employing them, according to a statement on Friday released by the Ministry of Human Resources and Social Security. The ministry also told the companies to each draw up their timetable and road map to comply with the guidelines, including signing up gig workers to contracts. The meeting also promised the establishment of an appeals mechanism for workers to ensure that their complaints are responded to promptly and handled objectively and fairly.
Third, a joint document issued this week by the CCDI, the National Supervision Commission, the Organisation Department, the United Front Work Department, the Central Political and Legal Affairs Commission, the Supreme People’s Court and the Supreme People’s Procuratorate provides a guideline on intensifying probes into offering and taking bribes. - Useful reports on this from SCMP, Global Times, and Xinhua English.
We are told that it is important to “grasp the political harm of bribery, take multiple measures to improve the precision and effectiveness of combating bribery, and promote the realization of addressing both the symptoms and root causes of corruption.” The document promises “zero tolerance.”
It specifies that “the investigation will focus on those committing multiple bribery, huge bribery or bribery to many people; party members and state employees offering bribes; bribery in key areas and fields; and major commercial bribery.” Xinhua’s report adds that the “focus should also be put on bribe-offering involving CPC members or state employees, major projects, food and medicine, among others.”
Some of the other key areas for bribery mentioned are “organization and personnel, discipline enforcement and justice, ecological and environmental protection, finance, production safety, food and drug, disaster relief, pension and social security, education and medical care…”
In addition, the document says that:
“[We] must be conscientiously aware that a major reason corruption has continued to happen is because bribers have resorted to whatever means to ‘entrap’ our party members and cadres.” In addition, the document calls to “carry out research on market access and qualification restrictions for those found to be offering bribes, and explore the implementation of a ‘blacklist’ for them.” This blacklist mechanism will require coordination among different agencies, of course.
Finally, on Saturday, the 21st Century Business Herald reported that the Ministry of Industry and Information Technology has demanded that tech giants Alibaba, Tencent, ByteDance, Baidu, Huawei, Xiaomi, Momo, 360, NetEase among others must unblock their platforms within a specified time. Failure to do so would lead to rectification measures. The report says that the ministry proposed compliance standards related to instant messaging services. These standards the ministry reportedly said are to foster an “open, inclusive, and fair competition” environment.
Anyway, amid all of this, we’ve seen a trend of Chinese tech entrepreneurs retreating from running their companies. SCMP reports that this week, JD.com founder Richard Liu Qiangdong became the latest tech tycoon to give up day-to-day management responsibilities at his company, following 38-year-old Zhang Yiming, founder of TikTok owner ByteDance, and 41-year-old Pinduoduo founder Collin Huang Zheng, who made similar announcements earlier this year. Each of these founders are part of a new generation of Chinese billionaires who built their fortunes during the rise of the country’s internet economy over the past two decades.
Also Read:
China’s Red New Deal: A guide to all the different crackdowns on companies going on right now
China’s cultural crackdown: few areas untouched as Xi reshapes society
The Chinese control revolution: the Maoist echoes of Xi’s power play
China’s Xi Jinping faces off against fan armies in crackdown on celebrity culture
While you read the above pieces, I thought this was an interesting perspective; I tend to agree with a lot here, as you’ve probably read through the newsletters.
V. New Zones, Business Environment, Trade & Evergrande’s Woes
We had two detailed plans released regarding cooperation zones in Hengqin and Qianhai. I’ve linked my coverage of these from my daily People’s Daily tracker above. Instead, let’s look at some other key economic stories.
First, the State Council’s weekly meeting (Xinhua English story) focussed on rolling out “pilot programs on the business environment in several selected cities in support of local reform effort in better benefitting firms and individuals.”
The selected cities are Beijing, Shanghai, Chongqing, Hangzhou, Guangzhou and Shenzhen. “The goal,” the report says “is to better meet the needs of market entities and the public and align with advanced international standards, by deepening the reform of government functions.”
There six broad points that are outlined in the report:
First, greater efforts to break regional compartmentalization and local protectionism. The aim is “the development of a unified, open, and orderly competitive market system” by removing “unreasonable restrictions” on enterprises’ operating across regions.
Second, making market entry and exit more convenient. This refers to reducing and streamlining licenses and permits and putting things online. Procedures for opening bank accounts will be simplified and the time needed cut. Annual reports for market regulation, social security and tax will be integrated into one.
Third, enhancing the convenience of investment and construction. “package assessment covering geological disasters and soil and water conservation before approving land use as part of their fulfilling due responsibilities. Enterprises may start construction right away once obtaining the land-use permit, without the need for duplicate assessments.” They also promise integrated online processing for water, electricity, gas and heating, etc.
Fourth, more digitisation of trade-related documents and streamlined business registration procedures for HK and Macao investors.
Fifth, “in areas concerning people's life and health such as food, medicine, vaccine and safety, a punitive compensation system will be implemented. Long-term mechanisms against arbitrary charge, fine and apportion will be established. Intermediary monopoly and compulsory services will be rectified, and differential treatment of enterprises in the acquisition of qualifications, tendering and bidding, protection of rights and other areas overhauled, to ensure fair competition.”
Sixth, data sharing between departments and localities will be expanded, and a compensation and relief mechanism for any damage to “the lawful rights and interests of enterprises” due to policy change and planning adjustment will be established.
Moving on, WSJ reports that China’s exports unexpectedly expanded at a faster clip in August, shrugging off the impact of a global resurgence of the coronavirus pandemic, port congestion and supply bottlenecks. China’s outbound shipments rose 25.6% in August from a year earlier, higher than the 19.3% increase in July, the General Administration of Customs said on Tuesday. The result also comfortably topped the 17% increase expected by economists polled by The Wall Street Journal.
Shipments to each of China’s major trading partners increased at a faster year-over-year pace in August than in the prior month, according to calculations based on the official data. Exports to the European Union, China’s No. 2 trading partner, jumped 29.4% in August from a year earlier, accelerating from July’s 17.2% rise, while shipments to the Association of Southeast Asian Nations and the U.S.—China’s No. 1 and No. 3 trading partners, respectively—rose by 16.6% and 15.5%.
Also note that imports too did better than expected, lifting by 33.1 per cent in August from a year earlier to US$235.98 billion. In total, between January and August, Chinese exports rose 33.7 per cent year on year to US$2.1 trillion, while imports rose 34.8 per cent to US$1.73 trillion.
Moving on, Chinese property giant Evergrande continues to be mired in troubles. On Wednesday, Fitch said that the developer faces “high default risk,” as it downgraded its long-term debt rating to “CC,” which is four levels below what is considered investment-grade debt. A day prior to this, Moody’s Investors Service had cut Evergrande’s corporate family rating late to its lowest level of “C”, which indicates its debt obligations are “typically in default, with little prospect for recovery of principal or interest”. Evergrande owes around $305 billion in liabilities to banks, shadow lenders, companies, investors, vendors and home buyers. AFP reports that analysts at Capital Economics in a recent note argued that “China's property developers -- and their creditors -- appear to be approaching a reckoning.” They warned Evergrande is “close to collapse” with large losses looming for banks, bondholders and home buyers. Of course, a collapse would have serious consequences for not just the economy but also social stability. So it’s worth watching how this plays out. This NYT report offers a good explanation of what’s been happening.
Why is the company in so much trouble now?
Evergrande might have been able to keep going if it weren’t for two problems. First, Chinese regulators are cracking down on the reckless borrowing habits of property developers. This has forced Evergrande to start selling off some of its sprawling business empire. That’s not going so well. It has yet to sell its electric vehicle business, despite talks with prospective buyers. Some experts say buyers are waiting for a fire sale. Second, China’s property market is slowing and there is less demand for new apartments. This week the National Institution for Finance and Development, a prominent Beijing think tank, declared the property market boom “has shown signs of a turning point,” citing weak demand and slowing sales data. Much of the cash that Evergrande has been able to drum up has come from presold apartments that aren’t yet completed. Evergrande has nearly 800 projects across China that are unfinished, and as many as 1.2 million people who are still waiting to move into their new homes, according to research from REDD Intelligence. Evergrande has slashed prices on new apartments but even that has failed to entice new buyers. In August it made one-quarter fewer sales in than it did a year ago.
Meanwhile, Bloomberg reports that:
“China’s Financial Stability and Development Committee, the nation’s top financial regulator, gave its blessing to Evergrande’s plan last month after the property giant missed interest and principal payments on some loans, a person familiar with the matter said, asking not to be identified discussing private information. Evergrande has already contacted some banks and trusts to request deadline extensions, four people said. It’s unclear how many of those discussions have led to agreements and whether the company intends to delay payments to bondholders. The development suggests Evergrande has regulatory backing to negotiate with creditors on a piecemeal basis, as it tries to ease a cash crunch that has unnerved investors in China’s $12 trillion bond market. While the company’s main banks had discussed setting up a creditor committee as recently as last week to consolidate repayment decisions, lenders and regulators have decided to give Evergrande more time to solve its liquidity crisis before taking more drastic measures, people familiar with the matter said.
Also Read:
Clock Ticks for Evergrande as $7.4 Billion of Bonds Due 2022
China warns of ‘malicious’ capital outflows as financial markets brace for US tapering
VI. Region Watch
This week’s edition of Region Watch examines the CPEC and how the China-Pakistan-Afghanistan dynamic is likely to influence it.
Last week, Zabiullah Mujahid, Taliban spokesperson expressed the group’s ‘desire’ to join the China-Pakistan Economic Corridor (CPEC). This is in line with the Taliban’s earlier position of welcoming foreign investment for mutual economic benefit. Can this prove to be a game-changing move? Perhaps. The CPEC has been the target of several violent attacks by groups such as the Balochistan Liberation Army (BLA) and Tehreek-e Taliban Pakistan (TTP). The Afghan Taliban seems to have leverage over some of these groups, particularly the TTP.
Beijing had also shown its wish to develop the multi-billion-dollar Belt and Road Initiative (BRI), to which the CPEC is central, into Afghanistan. China had planned to extend the CPEC under a tripartite diplomatic initiative, linking China, Pakistan, and Afghanistan. But the idea did not progress much owing to political differences between the former Ashraf Ghani-led government in Kabul. But with a new government in place, China's hope may be revived. For instance, Chinese Foreign Ministry spokesman Wang Wenbin told the media that Beijing has acknowledged the Taliban's commitment towards a stable climate for foreign investors, and maintains that the BRI will bring tangible gains for the China-Afghanistan partnership.
Afghanistan until now has been an attractive but absent piece of the BRI puzzle. If China can extend the BRI from Pakistan through Afghanistan, it would clear a shorter land route to markets in the Middle East.
Meanwhile, Afghanistan also stands to profit. Writing about opportunities for China and Afghanistan following the US withdrawal, Zhou Bo, a senior fellow at the Center for International Security and Strategy at Tsinghua University, commented:
‘...Beijing can offer what Kabul needs most: political impartiality and economic investment. Afghanistan, in turn, has what China most prizes: opportunities in infrastructure and industry building — areas in which China’s capabilities are arguably unmatched — and access to $1 trillion in untapped mineral deposits.’
These developments take place as reports suggest that Pakistan’s Inter-Services Intelligence (ISI) supported the Taliban’s takeover of Afghanistan. General Faiz Hameed of the ISI held a meeting with the intelligence heads of multiple nations, including China. Pakistan has been seeking an active hand in the evolving situation and would prefer to have China in its corner. Additionally, for a Pakistan that is heavily dependent on Chinese investment for economic prosperity, the success of CPEC (and by extension the BRI) depends on the Taliban government and its role in managing extremist elements. Reacting to news of the Taliban’s interest in the CPEC, Pakistan’s interior minister Sheikh Rashid said:
‘Pakistan is proud of its friendship with China and if the Taliban hold similar views, then it is really good,’.
VII. Afghanistan’s Neighbours Meet
Staying with the situation in Afghanistan. Wang Yi met with foreign ministers from neighbouring countries (English report). The meeting was chaired by Pakistan’s Foreign Minister Shah Mahmood Qureshi. Others who attended were foreign ministers from Iran, Tajikistan, Uzbekistan and Deputy FM of Turkmenistan.
Wang said that Afghanistan “is still facing severe challenges, such as humanitarian issues, people’s livelihoods and the COVID-19 pandemic. Some international forces may also use political, economic and financial means to create new troubles for Afghanistan.” He wants the neighbours to “guide and urge the Afghan Taliban to unite with all ethnic groups and factions, build a broad and inclusive political structure, pursue moderate and prudent domestic and foreign policies, draw a clear line with terrorist forces, and establish and develop friendly relations with other countries, especially neighboring countries.”
While welcoming Taliban’s “positive statements,” Wang said, “the key is to transform them into concrete action.”
Wang also took shots at the US.
“The common view of the international community is that the end of military intervention by the United States and its allies should be the beginning of them assuming their responsibilities...They are more obligated than any other country to provide economic, livelihood and humanitarian assistance to the Afghan people, and help Afghanistan maintain stability, prevent chaos and move toward sound development on the premise of respecting the sovereignty and independence of Afghanistan.”
Specifically, Wang spoke about six aspects for coordination and cooperation at the current stage:
COVID-19 control in Afghanistan
keeping port gates open
strengthening management of refugees and emigrants
providing humanitarian assistance
deepening anti-terrorism cooperation
carrying out anti-drug cooperation.
He announced China’s 200 million yuan ($30.96 million) worth of grain, winter supplies, vaccines and medicines to Afghanistan, and a donation of 3 million vaccine doses. He added that China is also ready to provide more anti-epidemic and emergency materials to Afghanistan under the China-South Asian Countries Emergency Supplies Reserve.
Xinhua also says that the participants “agreed to institutionalize the meeting of foreign ministers of Afghanistan's neighboring countries.”
Also, the Chinese Foreign Ministry was asked about the new interim Taliban government in Afghanistan. Here’s what Wang Wenbin said:
China attaches importance to the Afghan Taliban’s announcement of the formation of an interim government and some key roles. This has put an end to the anarchy in Afghanistan that lasted for over three weeks, and is a necessary step for Afghanistan to restore domestic order and pursue post-war reconstruction. We noticed that the Afghan Taliban said that the interim government is formed to restore social and economic order as soon as possible. China’s position on the Afghan issue is consistent and clear. We always respect the sovereignty, independence and territorial integrity of Afghanistan, adhere to non-interference in Afghanistan’s internal affairs, and support the Afghan people in independently choosing a development path suited to the country’s conditions. We hope Afghanistan will establish a broadly based and inclusive political structure, follow moderate and prudent domestic and foreign policies, resolutely combat all types of terrorist forces, and live on friendly terms with other countries, especially its neighbors.
Another question that was asked was this by PTI:
On the Taliban's formation of the interim government, the criticism is that it is not an inclusive government. ‘An open and inclusive government’ is what China has been asking for. So will China be recognizing this government?
The response was:
The Chinese Embassy in Afghanistan is operating normally. We stand ready to maintain communication with the new Afghan government and leaders. We hope the new Afghan administration in the capacity of interim government will broadly solicit the opinions of all ethnic groups and factions, and live up to the expectation of the Afghan people and aspiration of the international community. We noted that the Afghan Taliban stressed that all people will benefit from the new administration.
Meanwhile, the meeting also resulted in a joint statement, which I’ve broken down here.
While we are on the subject, Xi Jinping also spoke to Tajik President Emomali Rahmon this week. Afghanistan was part of the discussion, of course. Reports suggest that Tajikistan has clear concerns with regard to the nature of the Taliban’s rule. For instance, Edward Lemon writes for Jamestown that Rahmon “has increasingly positioned himself as the protector of Afghanistan’s Tajik community…Tajikistan’s government still classifies the Taliban as an extremist organization, with the state media referring to it, even after the fall of Kabul, as ‘radical’…In another signal that it aims to support ethnic Tajiks in Afghanistan, on September 2 the government of Tajikistan posthumously awarded Northern Alliance commander Ahmad Shah Massoud and former Afghan president Burhanuddin Rabbani, both of whom were ethnic Tajiks, with the country’s third-highest honor, the Order of Ismoili Somoni.”
Also note this:
VIII. Biden-Xi Call & Trade Policy Shift?
US President Joe Biden spoke to Xi Jinping on Friday. This was their first call since February. The US readout of the call said that:
“The two leaders had a broad, strategic discussion in which they discussed areas where our interests converge, and areas where our interests, values, and perspectives diverge. They agreed to engage on both sets of issues openly and straightforwardly. This discussion, as President Biden made clear, was part of the United States’ ongoing effort to responsibly manage the competition between the United States and the PRC. President Biden underscored the United States’ enduring interest in peace, stability, and prosperity in the Indo-Pacific and the world and the two leaders discussed the responsibility of both nations to ensure competition does not veer into conflict.”
Xinhua reported that “the two leaders had candid, in-depth and extensive strategic communication and exchanges on China-U.S. relations and relevant issues of mutual interest.” Xi said that managing the China-US relationship “is a question of the century to which the two countries must provide a good answer.” With the international community facing many common challenges, China and the United States need to show broad vision and shoulder great responsibilities...demonstrate strategic courage and political resolve, and bring China-U.S. relations back to the right track of stable development…” This, for Xi, must be done “on the basis of respecting each other’s core concerns and properly managing differences.” He said that on this basis, the relevant departments of the two countries may continue their engagement and dialogue to advance coordination and cooperation on climate change, COVID-19 response and economic recovery as well as on major international and regional issues.
As per Xinhua, Biden said that he was “prepared to have more candid exchanges and constructive discussions with China to identify key and priority areas where cooperation is possible, avoid miscommunication, miscalculation and unintended conflict, and get U.S.-China relations back on track.”
The Chinese embassy in the US has shared more details than the Xinhua report. It says that Xi “pointed out that for some time, due to the U.S. policy on China, the China-U.S. relationship has run into serious difficulty.” And then after talking about the need to provide a good answer to the question of ties, he said: “Getting the relationship right is not an option, but something we must do and must do well.”
The readout also tells us that “Xi Jinping elaborated on China’s position on climate change and other issues. He stressed that China continues to prioritize ecological conservation and pursues a green and low-carbon path to development, and has taken the initiative to actively shoulder international responsibilities befitting China's national conditions.” This was followed by the bit on relevant departments cooperating. So I guess this is a direct reaction to the friction that was reported after John Kerry’s recent talks with Chinese leaders.
The readout also says that “the U.S. side has no intention to change the one-China policy.” And this:
“Both presidents agreed that in-depth communication between them on China-U.S. relations and major international issues is very important for steering the bilateral ties in the right direction. They agreed to maintain frequent contact by multiple means and instruct officials at the working level to intensify the work, conduct extensive dialogue and create conditions for the further development of China-U.S. relations.”
Some of the reportage around the call tells us that it lasted for 90 minutes. Biden pushed China to agree to a set of guardrails for policymaking while also emphasizing the need to mitigate climate change. NYT’s report says that “senior administration officials said the conversation became necessary after previous discussions had erupted in criticism and ended with few commitments to collaborate.” Axios reports that “Biden had requested the call with Xi, ‘not seeking specific outcomes or agreements’ but to ‘have a broad and strategic discussion about how to manage the competition between the United States and China,’ said a senior administration official shortly before the call.” The report adds that “Biden wanted to ‘test the proposition’ that having these conversations at ‘the leader level will be more effective than what we have found below him,’ the official added.”
Amid all this, we have a WSJ report, which tells us that the US “officials are considering launching an investigation into Chinese subsidies under Section 301 of the U.S. trade law, which could lead to new tariffs, according to people familiar with their plans. The White House is also looking to team up with the European Union, Japan and other allies in Asia, and rally support within the World Trade Organization to take on Chinese subsidies. The administration ‘wants it to be a full-court press’, said one of the people familiar with the discussions. No final decisions have been made, the people said. Some details were earlier reported by Bloomberg News. The planned actions come as the U.S. Trade Representative’s office winds up its monthslong review of China policy, amid rising criticism by U.S. business leaders that the White House is taking too long to address key issues dividing the world’s two largest economies.”
Discussing the Phase-1 deal between the US and China signed in January 2020, the piece informs that “China fell short of those targets (purchase targets) by about 40% in 2020 and is now 30% behind its scheduled purchases for 2021, according to calculations by Chad Bown, an economist at the Peterson Institute for International Economics. A push on subsidies would follow talks on the purchase commitments, which expire at the end of this year.”
But do also note this. The USTR “has been conducting exercises to see which tariffs are hurting the U.S. economy or could substantially raise the costs of other parts of the Biden agenda…Aside from cutting some of those tariffs, U.S. officials are looking at granting exclusions from tariffs for some products…” — Basically, expect some tariff easing too, as per this.
Meanwhile, here’s what US firms want as per the lasts flash AmCham survey.
Finally, FT reports that the Biden administration is moving towards allowing Taipei to change the name of its representative office in Washington to include the word ‘Taiwan’, a move likely to trigger an angry response from Beijing. Multiple people briefed on internal US discussions said Washington was seriously considering a request from Taiwan to change the name of its mission in the US capital from ‘Taipei Economic and Cultural Representative Office’ (Tecro) to “Taiwan Representative Office”. Kurt Campbell, White House Asia adviser, has backed the change, according to two people with knowledge of the discussions. One said the request had wide support inside the National Security Council and from state department Asia officials. A final decision has not been made and would require President Joe Biden to sign an executive order…”
While on Taiwan and the US, do note this survey:
Also Read:
IX. Universities Rectification
Let’s look at the report this week about the 7th round of inspections of the 19th Central Committee. If you recall, this looked at Party units in the Ministry of Education and 31 universities across the country. And let me tell you, this wasn’t a glowing report card; in fact, if this is anything to go by, the times are only going to get tougher for universities in China.
Politburo member and Deputy Secretary of the Central Commission for Discipline Inspection, Yang Xiaodu, spoke at the meeting. The report tells us that from September 2 to 4, the Ministry of Education and the universities were provided individual feedback. The key person in charge and leading groups were given feedback about “the important problems found in the inspection.”
The next paragraph offers some praise.
The Party Group of the Ministry of Education and the Party Committees of the centrally administered universities have “improved their sense of responsibility for governing the Party, and have achieved new results in running schools and making positive contributions to serving the national strategy and economic and social development.” 教育部党组和中等管理大学党委明显提高了管党治党的责任感,办学取得新成效,为服务国家战略和经济社会发展作出了积极贡献.
But, there are serious, outstanding problems too. These relate to:
Shortcomings in strengthening political development; there is a gap between the implementation of the Party’s educational policy and the decision-making and deployment of the CPC Central Committee on educational work.
The new development concept has not been accurately and comprehensively implemented, and there are shortcomings in terms of grasping the laws (don’t think these laws relate to regulations but rather much more abstract principles from a Marxist viewpoint) related to education work.
The report criticises moral cultivation, the need to strengthen teachers’ moral development and says that “the “ideological and political education is relatively weak.”
Party committees come in for criticism for not taking enough initiative with weaknesses in leadership being highlighted.
While some do a good job of ideological work in the new era, there remain varying degrees of “risks and hidden dangers.”有的做好新时代思想工作,不同程度存在隐患.
The report talks about the need for stricter management and top-down control; it points to corruption in scientific research and infrastructure construction, integrity issues related to university-run enterprises, partner institutions and affiliated hospitals, and violations of the eight central regulations.
So what should folks do now?
Well, they should thoroughly study and implement Xi Jinping Thought, specifically his requirements with regard to the education sector. They need to “further strengthen political construction, improve the political position, accurately grasp the requirements of “国之大者” for education, strengthen and improve the Party’s overall leadership over colleges and universities, implement the Party's educational policy, adhere to the socialist direction of running schools, and unswervingly follow the development path of higher education with Chinese characteristics.” ...进一步加强政治建设,提高政治地位,准确把握“大国”对教育的要求,加强和改进党对高校的全面领导,贯彻党的教育方针,坚持社会主义办学方向,坚定不移走中国特色高等教育发展道路.
The emphasis is on moral development; the main task is to “strengthen ideological and political work” improve teachers’ moral development and conduct of the institutions, with the aim being to train and develop “socialist builders and successors.” 要围绕立德树人、主责主业,加强思想政治工作和师德师风学风建设,着力培养德智体美劳全面发展的社会主义建设者和接班人.
“It is necessary to implement the Regulations on the Work of Grass-roots Organizations in Colleges and Universities, conscientiously implement the principal responsibility system under the leadership of the Party Committees, and strengthen the construction of leading bodies, cadres and talents and grassroots party organizations in colleges and universities.” 要贯彻落实《中国共产党高等学校基层组织工作条例》,认真落实党委领导下的校长负责制,加强高校领导班子、干部人才和基层党组织建设
The last couple of paragraphs warn of tougher action ahead. It says that the inspected party organizations should take the inspection and rectification as “a powerful starting point for managing the party and running the school.” The emphasis for responsibility here is on the Party Secretary. It also warns that discipline inspection and supervision organs should strengthen daily supervision of rectification efforts, focus on the leading bodies and key few, focus on the key issues that have been highlighted in the feedback...Those who are ineffective in rectification, perfunctory, or resort to deceit shall be held accountable. 纪检监察机关要加强整改日常监督,聚焦领导班子和“关键少数”,重点对重点问题进行巡视反馈,对问题线索进行分类处置,积极督促、依靠靠前、精准督促。对整改不力、敷衍塞责、弄虚作假的,依法追究责任.
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While Sisyphus, the king of Ephyra, is condemned to ever-lasting labor of pushing a huge boulder uphill only to have it roll back down, America’s ‘war on terror’, despite costing a colossal amount of money and lives, only resulted in a loss of U.S. credibility and likely a larger breeding ground for terrorism. Yet, as intractable as terrorism is, China has made remarkable achievements in reining in the scourge. Within its borders, the country has recorded no terror attack since 2017. In the global arena, the country participates actively in both bilateral and multilateral counter-terrorism efforts. Recognizing terrorism as a transnational threat and ‘a common enemy of mankind,’ China, with President Xi Jinping at the helm, highlights the need to address both its symptoms and root causes, and calls for building ‘a global united front’ with a new vision for security.”