China Change, September 22, 2018
Unsettling news from China emerges every week in a constant flow — on social media, in reports, and from our own sources in the country. Not every new development is suited to a fully fleshed-out analysis, and as with so much in China, many reports and developments cannot be immediately confirmed or properly evaluated. Nevertheless, while each individual brush stroke may not be decisive, upon stepping back a fuller picture begins to emerge. China Change catalogues and contextualizes these items so as to keep a growing awareness of changes in China. — The Editors
Local Government Debt: Going Bankrupt, or Raising More?
On September 13, the General Offices of both the Chinese Communist Party and the State Council jointly published a document giving ‘guiding opinions’ on limiting the debt that state-owned enterprises can take on. One line that attracted particular note said: “Local Government Financing Vehicles [LGFVs] whose assets are severely insufficient to collateralize their debts and have lost the ability to repay should engage in bankruptcy and restructuring, or liquidation proceedings, according to the law; resolutely guard against ‘Too Big to Fail,’ resolutely guard against the accumulation of risk becoming systemic risk.”
LGFVs are entities established by local governments around China, including fixed asset investment companies, real estate and urban development companies, and urban asset management companies. They invest in municipal construction and infrastructure projects, and are a de facto form of municipal debt (from 1995 to 2009 municipalities in China were forbidden from issuing bonds).
In early 2009 the People’s Bank of China (PBoC) and the China Banking Regulatory Commission (CBRC) issued the policy that gives the regulatory framework for this behavior, which “supports qualified local governments to organize infrastructure financing vehicles, issue debt, medium-term notes, and other financing instruments, in order to expand complementary financing channels for central government investment projects.”
Beijing economist Hu Xingdou (胡星斗) told Radio Free Asia (RFA) that the scale of LGFV debt in China has probably reached 40 trillion yuan, and the bankruptcy of LGFVs will likely cause serious losses among a very large investor base. “In particular, much municipal debt has been funded by Wealth Management Products [WMPs] sold through banks, and many people hold these products in their portfolios. A lot of people may lose their life savings.”
Chinese internet users remarked that bankruptcies in LGFVs equate to a default on the debt, and that a lot of people are going to lose their money. Some estimated that the number impacted in the coming LGFV bankruptcy wave will far outstrip, by an order of magnitude, the recent losses in the peer to peer investment sector, which saw thousands of angry investors protest in cities across China.
Yet even as municipal debt vehicles face bankruptcy, on August 14 the Ministry of Finance put out a circular demanding the rapid expansion of local government infrastructure bonds, which led to a massive rush of issuance. These bonds are the major way local governments finance their infrastructure expenditures. According to Xinhua, as of mid-September, around 200 billion yuan of new debt had been issued, which added to the August new issuance of 428 billion, making total new debt issuance in just 1.5 months over 600 billion yuan.
Why is so much new debt being issued even as the central government is warning against systemic risk and demanding the municipalities unable to support their debt initiative LGFV bankruptcy proceedings? We profess to have no clue.
The Government Wants Chinese to Spend, Spend, and Spend More
On September 20, the CCP and the State Council published a circular providing “a number of opinions” on encouraging more consumer spending: make the public increase their expenditures on food, clothing, accommodations, travel, and more; increase the quality and expand the number of things they spend money on (cultural products, travel, sports, health, retirement spending, housekeeping, education, training, children); create new consumer products, make them spend more online, consume more customized products, and also spend money on ‘smart’ technologies, fashion, and other popular trends. Rural residents are encouraged to up their consumption too.
Any economy is driven by investments, exports, and domestic consumption — but with the extraordinary growth of China’s fixed asset investment being largely exhausted, and exports facing tariffs from the Trump White House, the government seems desperate to boost consumption, even though it has been promoting it for some time now.
Someone in Zhongnanhai is evidently working overtime on these new opinions and demands, which are falling down like snowflakes.
Affirming for the 1001st Time That China’s Judiciary Is the Party’s Judiciary
Lawyer Liu Xiaoyuan noted the following piece of news: that on September 12 the Party Group of the Henan Higher People’s Court issued four circulars expelling from office 48 judges in the court. The circular attributed the decision to the provincial Party’s Organization Department. Liu Xiaoyuan notes that whether required by the provincial Party apparatus or decided upon by the court, going about it this way is against Chinese law. According to the Chinese constitution and the Law of the People’s Republic of China on the Organization of the People’s Courts, court presidents are elected by People’s Congresses at the same level; deputy court presidents, presiding judges, deputy presiding judges, and judges must be appointed and dismissed by the Standing Committee of People’s Congresses at their same level.
Meanwhile on September 17, the Ministry of Justice held a meeting in Yunnan for the promotion of “Party Building Work” among lawyers. Minister of Justice Fu Zhenghua (傅政华) spoke at the convocation, demanding that “the Party must assume comprehensive leadership in lawyer work; implement total coverage of Party Organization and Party Work across the legal field before the end of this year; guarantee the three year goal of Party building having achieved total coverage, total conformity, and total leadership by 2020.”
Is China Moving Muslim Internees to Other Parts of China in the Face of International Outcry?
The Chinese edition of The Epoch Times, a Falun Gong-associated newspaper, recently reported the following: “An official source in China recently obtained information from an associate in the police that over the last few days Uighurs in internment camps in Xinjiang have been distributed to different areas around the country. This work is being conducted with a high level of secrecy, and the travel routes used are all under police and military control. The source told The Epoch Times that 1,500 people were sent to the area he is in, and the police involved were all made to sign confidentiality agreements. The source speculated that, because the government plans to spread the 1-2 millions of Uighurs detainees, they would be sent to different prisons and detention centers, and he expressed the fear that the Uighurs might be killed.”
This reminds us that, in mid-August, there were rumors that internees from Xinjiang were being sent to Jiuquan (酒泉), Wuwei (武威) in Gansu province and Delhi (德令哈) and Golmud (格尔木) in Qinghai. A screenshot of a WeChat conversation describes an unusually heavy presence of security forces at train stations, and the understanding was that Uighurs were being transported.
Uighurs: More Professors Sent to Internment Camps; One Literary Editor Jumped to His Death; Highest Ranking Uighur Cadre So Far Sacked for ‘Corruption’
At least four senior Uighur officials from Kashgar University in Xinjiang have been removed from their posts for “two-faced” activities [i.e. disloyal to the CCP, critical of Party policies, or showing sympathy to targeted ethnic groups]. They include President Erkin Omer, vice president Muhter Abdughopur, and professors Qurban Osman and Gulnar Obul; information about them has been scrubbed from the university’s website. Read more.
According to a report by RFA’s Uighur service: Professor Azat Sultan, former President of Xinjiang Normal University and former chairman of Xinjiang chapter of China Federation of Literary and Art Circles, has been arrested for being a ‘double faced person.’ His whereabouts are unknown.
RFA Uighur service also reported that Keyser Keyum, the editor-in-chief of Literary Translation magazine, jumped from the 8th floor of his office building. It is said that he had received a call from police that day about sending him to ‘re-education’ camp.
On September 21 Xinhua reported that the deputy director of the National Develop and Reform Commission and director of the National Energy Administration, Nur Bekri, was suspected of severe violations of Party discipline and is being investigated by the Central Commission for Discipline Inspection. Hu Ping, a U.S.-based dissident, expressed horror at the news: “Nur Bekri was the chairman of the Xinjiang Uighur Autonomous Region in 2009 during the July 5 incident. In Xinjiang, the only other Uighur to be secretary of the region’s Party Committee was Saifuddin Azizi, and subsequently all Party Secretaries were Han, and the highest ranking Uighurs were only chairmen of the region [not chairmen of the Party Committee of the region]. And now, Bekri himself has been toppled. From this it can be seen how serious the situation is in Xinjiang, and how horrific the plight of Uighurs in China.”
Hu Ping noted that “according to Bekri’s official curriculum vitae, he received a Han education since he was a child and joined the Party in his early 20s. Following the July 5 incident he was promoted to the Central Committee during the 18th Party Congress, but didn’t remain in the Central Committee during the 19th Party Congress, nor become a deputy in the 13th National People’s Congress. It’s clear therefore that he had not been trusted by the Party center for some years already.”
On the second day of the riots in Xinjiang in July 2009, Bekri went on television to criticize Uighurbiz.net, a Chinese-language website run by Professor Ilham Tohti and his students, accusing it of “inciting violence and spreading rumors.” In March 2014 during the ‘Two Meetings’ in Beijing, Bekri told a press conference that the evidence showing that Ilham—arrested in January of 2014—had engaged in splittist activities was conclusive and unquestionable.
Ilham Tohti was sentenced to life imprisonment in 2014 and is currently being held in the Xinjiang No. 1 Prison. There has been almost no word about Ilham circumstances for the last two years, and many now worry about his health.
Moving Ordinary Residents out of Heart of Beijing
A social media post recently noted that following the expulsion of residents and demolition of buildings along Fuyou Street (府右街, the street along the west side of Zhongnanhai) and Xihuangcheng street (西皇城根, adjacent to Fuyou Street), a similar operation on the east side of Zhongnanhai has taken place, expelling residents along Nanchang and Beichang streets (南长街和北长街). The eviction and demolition notices stipulate that state leaders who live on these streets are not the targets of eviction. The post also said: “In the future, Nanchang street, Beichang street, and Fuyou street have all been closed off for regular traffic. According to the plan, in the next one to two years there will be a gradual eviction and demolition of residences on both sides on Jingshan (景山公园), the east of the Forbidden City, along Nanchizi and Beichizi streets (南池子和北池子), around Beihai park (北海公园), and around Shichahai (什刹海), in order to expand the living space for central Party leaders.” The elementary school on Beichang street, as well as Beijing 161 Middle School not far from Tiananmen, will both be relocated and incorporated into other schools.
We drew a rough outline of the area affected by the project based on the social media post:
Twitter User Detained for 10 Days for “Attacking Leaders of the Party and Country”
On September 11, a 42-year old Twitter user in Beijing, Quan Shixin (全世欣), went to the Haidian Public Security Bureau to request permission to demonstrate, and was administratively detained. He was released on September 21. The notice of administrative detention given to her said: “Quan Shixin used internet circumvention methods to attack the Party and state leaders on Twitter, the circumstances being severe. Thus she was administratively detained for 10 days.”
No Foreign Programs in Prime Time, and Foreigners Not Allowed in Key Positions on Chinese TV
On September 20, the National Radio and Television Administration published a draft version (for public comment) of a set of regulations regarding non-Chinese citizen involvement in television, broadcasting, and shows. The regulations apply to those from Hong Kong, Macau, Taiwan, and the rest of the world. The basic content is as follows: without the approval of the NRTA, TV outlets may not broadcast overseas programs from 7:00 p.m. to 10:00 p.m.; television stations may not spend more than 30% of their daily broadcast time on foreign films, shows, cartoons, documentaries, or other programs; the screenwriter and director of a program cannot both be foreign persons; male and female lead roles cannot both be played by foreigners; television and film producers who employ foreigners as creative staff must register the contract with the NRTA within five days of its signing.
Foreign television programs are popular in China, and it appears rules of this nature are meant to curb the availability of imported programs and the enthusiasm for them.
When a band in China named Fangu (反骨) [Rebels] applied for a permit to perform in Suzhou and Shanghai, the authorities told them to change their name before they could be approved. The band announced on social media that “due to force majeure, the band has temporarily changed its name to zhenggu (正骨) [Bone Correction], and we ask for your understanding.”
The Berlin Schaubuehne theatrical troupe’s performance of Henrik Ibsen’s An Enemy of the People has received a warm welcome in Chinese drama circles, but after three performances in Beijing the original plan to put on another two performances in Nanjing were cancelled. The authorities said that this was due to “technical reasons,” but is it possible that the drama’s storyline and theme felt a little too close to home for the Chinese authorities?
On September 15, the city of Jinan, Shandong Province, held a Rocket Music Festival (火箭音乐节); at one point during the event, when the audience felt particularly moved by the music, they began swaying their bodies together (as often happens at music festivals). At that moment, a police officer dashed onto the stage, stood at the microphone, stopped the music, and delivered a stern warning about public safety. “If you don’t cooperate, we’ll have to stop this performance [this elicited loud laughter]. Everything is subordinate to safety! If everyone is like you just were, then it absolutely cannot proceed. Everyone knows that our country is currently engaged in a special struggle in Sweeping the Black and Eliminating Evil… I’m watching everyone’s behavior from the stage. If there is danger, the performance could be stopped at any moment.”
‘Totalitarian’ Is the Word
Stein Ringen, Professor of Political Economy at King’s College in London, wrote a letter to fellow China analysts, asking that “we set our work straight in language.” “The People’s Republic of China is a totalitarian state,” he wrote. “Of its own kind, to be sure, hence neo-totalitarian, but totalitarian it is. No clarity of analysis is possible without clarity of language. The PRC is not ‘an authoritarian system,’ it is ‘a totalitarian state.’”
At China Change, we began to use the term “totalitarian,” “neo-totalitarian” and “market-totalitarian” in as early as 2013.
Signs of China (1), China Change, September 16, 2018.