China Change, September 30, 2018
Unsettling news from China emerges every week — 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
‘Public-private partnerships’ 2.0: la chasse à courre
Chinese officials have come out with a string of comments recently that have spooked private companies. The first was a “senior financial figure” Wu Xiaoping (吴小平), who advised that “the private sector in China has already completed its task of assisting state sector economic development, and it should now gradually diminish in importance.” This was shortly followed by vice-minister of the Ministry of Human Resources and Social Security, Qiu Xiaoping (邱小平), saying that private enterprises must implement the “democratization of management, with the participation of workers led by the Party organizations of private enterprises,” and that “workers and enterprises must work together to create mechanisms for co-creation of benefits, sharing of benefits, and sharing of risks.” This process appears to be already underway.
On September 26, The Economic Daily (《经济日报》) defended the practice of SOEs buying stakes in troubled private companies and becoming the controlling owners. The paper argued that private companies encountering difficulties should turn to SOEs to be rescued — and indeed there have been many private companies that have already “sold” control rights to SOEs or state capital to survive. “The introduction of new SOE shareholders in listed private enterprises and the reform of mixed ownership are very much in the same direction. Both are in order to stimulate enterprise vitality, improve production efficiency, and achieve mutual benefit and win-win results.” Yet the author neglected to delve into the institutional reasons as to why private enterprises in China are facing such peril. “According to the chief economist of China Merchant Bank, all 11,000 businesses that went bankrupt between 2016 and the first half of 2018 were private,” Huang Yasheng wrote in an op-ed in The New York Times.
In a September 27 article titled “Vigilance against new public-private partnerships under the banner of ‘sharing’”, Hu Deping (胡德平), the son of the former Party secretary Hu Yaobang (胡耀邦), voiced unease and opposition to the above prescriptions and maladies. He cited a certain ‘Document 15’ from 1991 meant to encourage the development of private enterprise. Hu concluded that, “At a time when the private sector is in such difficulty, I feel that what’s happening in some places differs starkly from what people thought they understood clearly yesterday. Problems that have been understood clearly and resolved previously are now being brought back in a new form. There’s still a wish to crush private enterprise and force them into public-private partnerships. If this becomes a trend, and none dare to criticize it, then the consequences will be frightening.”
Just a few days ago, an essay titled “Wandering in the land of one’s ancestors” began spreading on the Chinese internet, despite being repeatedly censored and deleted. Who is said to be wandering on the land of their ancestors? China’s private enterprises — because the country doesn’t belong to them. A 60 year-old businessman lamented, as the author explained it: “After so many years of doing business and experiencing so many trials and tribulations, this is the first time that death has felt so close to his business: he suddenly felt like a wanted fugitive and pursued by tax, environmental, industrial, and urban management authorities, even neighborhood committees. In order merely to survive, his enterprise debt has been levered up to a degree that would wake him in his dreams. His company is walking on a tightrope. If short sellers attack him in the market, or a bank tries to pull one of the loans, the company could collapse overnight.”
The author writes: “Chinese SOEs occupy over 70% of the resources, but generate less than 30% of GDP, whereas in the four decades of reform the private economy contributed at least 50% of China’s GDP, 60% of the tax base, 70% of the technological innovation, and more than 80% of urban employment. Even in 2017, the peak year of the targeted tightening of supply-side reforms, private industrial enterprises outperformed state-owned industrial enterprises, getting an overall return on net assets of 19.6%, versus less than 10% return on net assets by SOEs. If private enterprises can be liquidated and banished at any moment, is there any other outcome than a net loss for society?”
The author continued: “It is no accident that China’s economy has been on a downward spiral since 1956 when joint public-private operations came into effect. By 1978 China’s GDP’s accounted for only 1.8% of global GDP, and the national economy was on the verge of collapse.”
The article features numerous graphs and data points.
The reason private companies can be ‘beaten’ at a moment’s notice, the author writes, is because of their ‘identity,’ or the nature of their ownership. The fact that the enterprises are private means that they’ll always be outsiders and exiles in China. The author asks: “Why can’t we put aside the debate about the ‘identity’ of who owns the means of production? Why can’t all enterprises simply follow the law across the country, work hard, serve this country, and be equally treated, honored and praised? Why is that so hard?”
It’s very hard. Because it’s the equivalent to demanding that China changes its political nature, establish a functioning rule of law, protect private property rights, and enshrine liberty and equality before the law. For the Communist Party, this is a hard ask indeed.
123 Hong Kong-listed SOEs amend their charters to give the Communist Party sweeping control over companies
Hong Kong’s Apple Daily reported that, from March 2017 to today — a period of about 18 months — 123 Hong Kong-listed SOEs have amended their articles of association to expand the power of their Party committees without limit, including eight blue-chip companies: Commercial Bank of China (939), Industrial and Commercial Bank of China (1398), Bank of Communications (3328), Bank of China (3988), CITIC (267), Sinopec (386), PetroChina (857), and China National Petroleum Corporation (1088). The state-owned companies involved included Conch Cement (914), China Jiaotong Construction (1800), and China Huarong (2279), among others.
The revised constitution stipulates that the companies must set up Party Committees: “The Party Committee will play a core leadership role, taking charge of the direction, managing the overall situation, safeguarding implementation, ensuring supervision of the implementation of Party and state policies in the company, and implement the major strategic decisions of the Party Central Committee and the State Council.”
The revised constitution also gives the Party Committee the power to override the board. “When the board makes major decisions, it must first listen to the opinions of the Party Committee.” Also, executive appointments and dismissals also fall into the hands of the Party.
Aren’t they just writing into articles of association what they already practice?
Xi embarked on a tour of northeast China this week. He visited the Heilongjiang Agricultural Reclamation and Construction Jiansanjiang Administration (黑龙江农垦建三江管理局), an important grain production base; in Qiqihar, he visited China First Heavy Group (中国一重集团), the old industrial base of China’s planned economy; he went to Chagan Lake in Jilin and the oil fields in Liaoning; he also went to Lei Feng Memorial Hall.
One may as well say that Xi was on a trip strengthening the symbolism of the Maoist era.
He also visited the Zhongwang Group (忠旺集团), a private enterprise in Liaoning, and said that the Party has always encouraged private economic development, and has promoted policies supportive of the private sector. Huh? Does China’s Chairman-of-Everything not know that private companies in China are falling off the cliff?
Of the 30 minutes of CCTV’s Evening News (新闻联播) on September 30, 25 minutes were dedicated to Xi Jinping’s inspection tour of the three northeastern provinces. One of the recurring watchwords was ‘self-reliance.’ Chinese must be self-reliant on grain, self-reliant in industry, etc.
Observers noted that whenever the Party was faced with serious political and economic challenges on the one hand, and become isolated internationally, it called for ‘self-reliance.’ The phrase first appeared in 1941, when the Party mobilized its people to grow opium in Nanniwan, near Yan’an, in the Party’s Shaanxi-Gansu-Ningxia base. The second time it was used was in 1960 during the great famine, and the third time in 1975 during the Cultural Revolution. This is the fourth occasion. Those who study China can reflect for themselves on the meaning of those four occasions.
Throughout his trip in the three provinces, Xi Jinping talked about ‘rejuvenating the Northeast.’ In the course of his visit, he even held a seminar on the very topic. The fact is that the economies of the three provinces — Liaoning, Jilin, and Heilongjiang — have been deteriorating for a long time now (read more), exhibiting the weakest economic growth numbers in China, and likely exhibiting decline over the last few years.
Less discussed is the bureaucracy, corruption, and mafiazation of the northeastern political sphere. In 2016 Sina Finance published an article titled ‘How bureaucratism has destroyed the northeastern economy,’ which was quickly deleted. The article however is still visible on some discussion forums.
None of these hard facts has made into Xi Jinping’s photo ops and the state media verbiage.
On the other hand, China’s grain crisis has been a major topic of public discussion recently, and research indicates that China is headed for serious food supply problems in the years ahead. On September 21, Xi led the Politburo in its ‘eighth collective study session’ to discuss the implementation of his rural revitalization strategy.
On September 26, the State Council issued the ‘Strategic Plan for Rural Revitalization’ (2018-2022), the first basic principle of which is to “adhere to the Party’s control over rural work,” and “ensure that the Party always assumes full control of the overall situation in rural work, coordinates all parties, and provides a strong political guarantee for rural revitalization.”
No reporting bad economic news
Chinese regulators in recent days have demanded that online finance websites like Sina Finance and Phoenix Finance be suspended and rectified. ‘Big V’ financial commentators on Weibo have also been commanded one-by-one to stop posting. Media reporters revealed that almost every web portal received notice from the Central Propaganda Department to cease reporting in six categories of news: 1) Disclosure of declining economic data, 2) Local government debt risks, 3) The adverse effects of Sino-US economic and trade frictions, 4) Data showing a decline in consumer spending, 5) Inflation and economic stagnation, and 6) Hot social trends. All such reports are to be strictly censored, the notice said.
The New York Times has a detailed report on this.
Once again, a campaign against ‘bourgeois liberalization’
Global Times said CCP has new rules that will “expel members who express support for bourgeois liberalization online.” We ran through the article twice trying to find out just what ‘bourgeois liberalization’ is. We didn’t find a definition but we did learn what behaviors can lead to expulsion under the label: “opposing the Party’s decisions on reforms and opening-up through online platforms,” “speaking out against the Party’s major principles online,” and betraying faith in the Party without discarding Party membership.
Also, criticizing problems like corruption, or the gap between rich and poor is also ‘bourgeois liberalization.’
Beijing-based historian Zhang Lifan (章立凡) said that the bourgeois liberalization being talked about now appears to be referring to freedom of thought outside the scope of the regime. “The ruling party has become the biggest landlord and the biggest capitalist in China; the crony capitalists are the real bourgeoisie, and they treat those who think and speak critically of them as ‘bourgeois liberalists.’” Zhang continued: “Raising once again the idea of anti-bourgeois liberalization is due to the Sino-US trade war of late, which brought out a lot of divergent views from within the party, and so now they’re clamping down on public opinion.”
Deng Xiaoping was the one who invented the term “anti-bourgeois liberalization,” because he was afraid that the opening up and reform he had championed would lead to the erosion of the Party’s ideology. In 1987, there was a national “anti-bourgeois liberalization” campaign in response to vibrant discussions of democratic values on university campuses.
Mass trials in Xinjiang; Uighurs are being shipped to other provinces
Many thanks are due to Twitter user @uyghurspeaker who has been translating reports from RFA’s Uighur service into both English and Chinese. We post below some of his tweets edited for clarity:
Kunes County, Ili, is reported to be holding mass trials in internment camps, sentencing around 500 prisoners on each occasion. Officials asked the inmates: “Will you eat halal or non-halal foods?” Those who answered “halal” were sentenced to 3-5 years. (link)
Mass trials are also taking place in camps in Tokkuzak, Kashgar. At least 50 people per day have been sentenced for 3-15 years. Nejmidin, the political commissar at the Bulaksu police station, said that he escorted a group of convicts to prison in Chinese provinces three weeks ago. (link)
These RFA reports about mass sentences in internment camps are consistent with recent news of railways closed-off in Urumqi, Gansu, and Qinghai for the purpose of dispatching Uighurs throughout prisons in China. That is, it appears the authorities are handing down sentences, then sending Uighurs to prisoners around the country. We first noted The Epoch Times’ reports of such news in Signs of China (2).
A RFA Chinese report, citing a Uighur service report on September 28, says that in a township in Kashgar, policemen were taking local Uighurs in internment camps to other provinces in China. They said the transfer started early this month.
The Chinese railway and Urumqi tourist bureau announced that “due to adjustment to the operation schedule of passenger trains,” starting October 22, the railway will not sell train tickets going to or leaving Xinjiang. It didn’t say when service will resume.
The Uighur writer and activist Ilshat Kokbore writes: “We’ve already heard some things about this. The farthest they’ve transferred Uighurs is to prisons in Heilongjiang.” Heilongjiang is China’s northernmost province, bordering Siberia.
More Uighur elites sentenced or sent to camps
According to an RFA report, Halmurat Ghopur, president of the Xinjiang Food and Drug Administration’s Department of Inspection and Supervision in the regional capital Urumqi, was taken into custody in November 2017 and is being held in an unknown location for “acts against the state,” sources in exile told RFA’s Uighur Service earlier this year. He was recently given a two-year suspended death sentence for exhibiting “separatist tendencies,” according to an official source.
According to a RFA Uighur-language service report, Sattar Savut, chief in the education bureau, and Yalkun Rozi, a writer, critic, and editor, as well as three others, were charged with separatism for teaching children about Uighur cultural figures. Sattar’s sentence was given with two years of reprieve, while Yalkun was reported to receive a life sentence.
‘Where are my family members?’
Member of the Uighur diaspora initiated a YouTube series in which overseas Uighurs tell stories of their loved ones who have gone missing, been tortured, or died in internment camps.
How much money do Chinese officials have in the United States?
The United States recently announced sanctions on PLA lieutenant general and director of the military’s Equipment Development Department, Li Shangfu (李尚福), because the department he led violated American sanctions by buying military equipment from Russia. The sanctions on Li include a visa ban that restricts him, and his agency, from U.S. financial transactions and access to any assets in the jurisdiction of the United States.
Some have asked: is there any evidence of the much-talked-about notion that high-level Party officials and relatives have assets in the United States? The Weibo account ‘Los Angeles Landlord’ (“洛杉矶房东”) recently reminded everyone of a case as a way of answering this question: “A shocking case took place in the San Francisco Bay Area last year, where a certain Tiffany Li (李凡妮) was charged with murder of a man. Bail of $70 million was put up. Tiffany’s Li’s mother, Li Jihong (李继红), traveled from China to the United States and submitted to the court real estate assets of $62 million, as well as $4 million in cash for the bail. This was the eighth largest bail amount in the history of the U.S. court system.”
According to the reporting of Apple Daily last year, a California property insurance company’s investigation revealed that Tiffany Li and her mother, personally and in a trust, had multiple properties in San Mateo and the elite areas of Hillsborough and Burlingame.
Internet users are adamant that Tiffany Li’s mother, Li Jihong, is the younger sister to Li Jinai (李继耐), former director of the General Political Department of the PLA.
The example of the Li family highlights why sanctions against characters like Li Shangfu might cause unease and panic among senior Communist Party officials who have family and vast wealth in the United States.
Men in Black on Tiananmen Square
PRC National Day is upon us (it falls on October 1), and security officers are now out in force on Tiananmen Square. The following video clip was posted online, showing the conspicuous ‘undercover’ officers in black suits, with black umbrellas. What is the purpose of the latter? So that if anything happens on the square, they can quickly open their umbrellas, cover the scene and prevent it from being seen or photographed.
Signs of China (1), September 16, 2018.
Signs of China (2), September 22, 2018.