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A Great Shift Unseen Over the Last Forty Years

Xiang Songzuo, December 28, 2018

On Dec. 16, Prof. Xiang Songzuo (向松祚) of Renmin University School of Finance and former chief economist of China Agriculture Bank, gave a 25-minute speech during a CEO class at Renmin Business School that was apparently applauded by the audience but immediately censored over the Chinese internet. Singling out 2018 as the year when China comes to a large shift unprecedented over the past 40 years, the speech can be seen as a landscape survey of Chinese economy, and obliquely, also of politics. Just as Tsinghua law professor Xu Zhangrun’s (许章润) broadside “Imminent Fears, Immediate Hopes”, which was superbly translated and widely talked about among China watchers, Prof. Xiang’s speech is another rare burst of Chinese intellectuals’ discontent with the direction the country is taking under Xi Jinping. With this unauthorized translation of the speech, China Change wishes our readers a happy New Year! — The Editors

I want to share two characters with my fellow alumni here. I hope that everyone present, every entrepreneur here, can reflect together with me. These two characters are fan si (反思, reflect). What do we reflect on?

China’s economy has been going downward this year, as everyone knows. The year 2018 is an extraordinary year for us, with so many things taking place. But the main thing is the economic slowdown.

How bad are things? The number that China’s National Bureau of Statistics (NBS) gives is 6.5 percent, but just yesterday, a research group of an important institution released an internal report. Can you take a guess on the GDP growth rate that they came up with using the NBS data?

They used two measurements. Going by the first estimate, China’s GDP growth this year was about 1.67 percent. And according to the other calculation, the growth rate was negative.

Of course, my main point here is not about the accuracy of these calculations, or which one is more credible. But this year, there have been three issues regarding China that we either failed to consider, or about which we have made serious misjudgments.

First, the trade war between China and the U.S.. Did we make some inaccurate assessment? Did we underestimate the severity of the situation? Let’s recall some slogans from the mainstream media at the beginning of the year: “In the trade war between U.S. and China, the Americans are lifting rocks only to smash them on their own feet, China is sure to win.” “China will win the trade war without a doubt, be the battles big or small.”

What’s behind this kind of thinking? To this day, we keep suffering from a cognitive dissonance between our understanding of the Sino-U.S. trade war and the international reality. This calls for deep reflection.

Second, what was the cause for the economic downturn? Why did private enterprises suffer setbacks in 2018? Looking at the data, investment by private businesses has dropped substantially, so what made private business owners lose confidence? On November 1, the national leaders convened a high-profile economic conference, which some interpreted as a signal that the government wants to win back the confidence of private businesses as the economy worsens.

Since the beginning of the year, though, all kinds of ideological statements have been thrown around: statements like “private property will be eliminated,” “private ownership will eventually be abolished if not now,” “it’s time for the private enterprises to fade away,” or “all private companies should be turned over to their workers.” Then there was this high-profile study of Marx and the Communist Manifesto. Remember that line in the Communist Manifesto? Abolition of private property. What kind of signal do you think this sends to private entrepreneurs?

This is why we need to reflect on China’s economic downturn, the pressure on Chinese economy, and the trade war between the U.S. and China that is escalating with every passing day. We need to reflect on what we did wrong, on how to revive the economy as we walk into the future, and what steps we should take to ensure that China’s economy maintains its steady rate of growth.

Xiang Songzuo, 民营企业家.png

You might not agree with what I say, and please feel free to give your opinions. But I hope that you can think in a sober manner after we finish today’s seminar. Why do I say this? Because the problems that we face are our own doing, and there are a lot of them. But many of them have been addressed in superficial terms only.

At the symposium on the private sector, General Secretary Xi Jinping talked about six issues. Among them I am most concerned about the sixth: the protection of personal safety and property. Think about it. In a country with robust rule of law, where everyone is equal before the law, shouldn’t these basic rights be properly guaranteed for everyone, entrepreneurs and  commoners alike?

It has been four decades since the reform and opening up, yet the General Secretary still feels a need to specifically promote entrepreneurs’ rights to personal safety and the security of their property. This reflects the gravity of the issues facing the governance of Chinese society and state. In my view, China’s economy will face six internal challenges that deserve our serious consideration. Due to time constraints, I won’t be able to get through all of them.

In addition to this, there are three major external challenges. The first is the trade war, which is in fact no longer a trade war but rather a clash between two opposed value systems. It can be said with certainty that the Sino-U.S. relationship has come to a crossroads right now and faces significant historic challenges. What are we to do? To be honest, I don’t think we have really found much of a solution.

You are aware that Huawei’s CFO Meng Wanzhou was recently detained in Vancouver. In the past two days, mainstream media such as BBC and CNN have been reporting on how the U.S. is going at Huawei on all fronts. What this tells us is that this issue is not simply about trade or economics.

We used to speak of “China’s period of strategic opportunity for economic growth.” Does this period of strategic opportunity still exist? Personally, looking at the international situation, I think this period of strategic opportunity is fading quick.

Xiang Songzuo, online.jpg

Let’s think about what “international period of strategic opportunity” means. It means that in the past, international regulations have been favorable to us; we had open access to technology, capital, talent, and markets. Because of the imminent changes we face on the domestic and international fronts, I have titled today’s speech “the great shift unseen over the last forty years.” (四十年未有之大变局)

Have we really given the problems due consideration? Of course the short-term problem we are looking at is economic decline; the preponderance of data demonstrating this point needs no introduction here. Data concerning performance in November hasn’t been released, but you can extrapolate based on the October figures: there’s been a decline across virtually all sectors, from consumption in retail, autos, or real estate. Just look at China’s exports. Who can say that the trade war didn’t impact China and that China is sure to win the war no matter how big it is? Why don’t the people who were saying this kind of thing in April and May stand by their words now?

Why did we made such mistakes in assessing the international circumstances?

Look at these numbers. That China faces a long-term economic downturn is not a problem by itself. But you may have noticed that the consumption and the service sectors now make up 78.5 percent of GDP. Going by the government’s logic, this should be a good thing, since it means the economic transition to a consumption economy has been successful: we used to rely on investment and export, now we rely on consumption and the service sector. This sounds reasonable, but think about it: in a country like China, as investment slows dramatically, how can we maintain economic stability by solely relying on consumption?

The fact that consumption and services comprise 78.5 percent of GDP may be good news to some extent, but is far eclipsed by the negative implications. Take a look at investment. More importantly, can consumption alone support faster economic growth?

In the four decades following the economic reform, we have undergone five phases of consumption. The first was to solve the food problem, the second was the “New Big Three” [新三大件, short for refrigerator, color TV, and washing machine], the third was the consumption of information, the fourth was automobiles, and fifth was real estate.

But these five waves have essentially all come to an end. Car sales have dropped sharply and real estate spending is also substantially decreasing, so we are facing serious problems. This is the crux of the six stabilities called for by the Politburo [stable employment, stable finance, stable foreign trade, stable foreign investment, stable investment and stable expectations], or as some internet users have joked, the six “tender kisses” [吻, kiss, is a homophone for 稳, stability].

Now, let me give you three more “kisses”: stable reserves, stable exchange rates, and stable housing prices.

It should be fairly obvious that these stabilities are difficult to achieve. For now it looks that “stable foreign investment” and “stable foreign exchange rates” shouldn’t be a problem. Foreign investment is basically stable. But how can you stabilize investment, exports, real estate market, and employment? The reason that I want to share the word “reflect” with everyone today is that we need to reflect on why this happened, and on how to find an appropriate solution.

As economy slows, financial risk escalates and shadow banking shrinks rapidly. Some say that the president of China’s central bank has come out to apologize, saying that their prior policy was not well thought out, lacked coordination, and wasn’t properly implemented, that these, coupled with the effects of overbearing regulations, caused credit to recede. This is certainly an important reason, but it’s not the fundamental issue.

We can see that the direct financing market, whether the bonds or stock market, has been cut in half in 2018 and that many companies have defaulted. Total debt due to default has exceeded 100 billion RMB ($14.5 billion) for the first three quarters.

According to data provided by the government, the corporate debt default could exceed 120 billion RMB, and many businesses have gone bankrupt. As Cao Dewang (曹德旺) put it, companies are collapsing in droves; not even state-owned enterprises are spared this phenomenon. Bohai Steel, once listed in the Fortune Global 500, was 192 billion RMB in debt when it bankrupted; the real number could be as high as 280 billion RMB.

Local debt is a big problem in China’s financial market. As for the actual number, the National Audit Office claims it to be about 17.8 trillion RMB, while He Keng (贺铿), vice director of National People’s Congress Financial and Economic Affairs Committee, thinks it’s over 40 trillion RMB. Worse yet, not one local government intends to pay back its debts.

So this is the larger context. Then there’s also the stock market crash. My friend Mr. Jin Yanshi  (金岩石) will share with you shortly his thoughts about an impending stock market rebound, but in my opinion, it’s far from forthcoming. You can look at the history: only the Wall Street Crash of 1929 can compare to the steep decline that the Chinese stock has experienced this year. Many stocks are down 80 or even 90 percent.

So here’s a problem that we need to think about today: we know China’s stock market is feeling the pain, but what exactly is hurting?

Some people blame the securities regulators, Chairman Liu (刘主席), or this and that, but I think they are going after the wrong people. The problem lies in regulatory policy, which I fear may be lacking. The absence of comprehensive stock regulation might be an important issue, but it’s not the crucial one.

Look at our profit structure. To put it plainly, China’s listed companies don’t really make money. Then who has taken the few profits made by China’s more than 3,000 listed companies? Two-thirds have been taken by the banking sector and real estate. The profits earned by 1,444 listed companies on the SME board and growth enterprise board are not even equal to one and half times the profit of the Industrial and Commercial Bank of China. How can this kind of stock market become a bull market?

When we buy stocks, we are buying the profits of the company, not hype and rumors. I recently read a report comparing the profits of China’s listed companies with those in the U.S. There are many U.S. public companies with tens of billions dollars in profits. How many Chinese tech and manufacturing companies are there that have accomplished this? There is only one, but it’s not listed, and you all know which one that is. [Xiang is referring to Huawei, the Chinese tech company.] What does this tell us? As Yale professor Robert Shiller said: stock market performance may not work as a barometer of the economy in the short run, but it does for sure in the long run.

So I think that the terrible stock performance only demonstrates one thing, which is that the real economy in China is in quite a mess. Where is the stock market rebound? I think it’s obvious that investor confidence has yet to recover.

A number of policies came out on October 19 and 20, and Vice Premier Liu He (刘鹤) personally gave a speech to pledge results, but what of it now? The SSE Index fell to 2600 points by last Friday, and just stayed there, barely alive. When is the market rebound coming? Real estate is not showing much cause for optimism right now, but I won’t go into details for lack of time. You can take a picture of the data for your reference.

That’s why China wants to fight the three tough battles. China’s economic decline indicates that there is a major issue with the focus on expansion and growth:  It has deviated from the fundamental and moved to speculation. These are the words of former chief of China’s central bank, Zhou Xiaochuan (周小川).

What are our current financial risks? They are hidden, complex, acute, contagious, and malevolent. Structural imbalance are massive, and violations of law and regulations are rampant. There are black swans to prevent, and gray rhinos to stop. A reporter once asked Zhou, “Where are the black swans? Which ones?” Zhou smiled and did not answer.

The black swans are right next to you. The P2P lending, blockchain, Coin Circle, aren’t all these black swans? But you can’t see them. As for the gray rhinos, they can charge at any time. The biggest of them is real estate.

We have rampant speculations everywhere, in too many aspects. In short, it’s arbitrage.

During the national finance work conference last year, the General Secretary and the Premier strongly criticized the Chinese financial sector with a pile of literary-sounding polemics, saying that they were entertaining themselves without the slightest consideration for reality, and that the financial sector was in chaos and was a horrible sight to behold.

Apart from this financial arbitrage, what do most businesses do with their money? Forty percent of it goes to the stock market, speculation, and buying stocks of financial companies, but not investment into primary business. Then can this be considered a good situation for listed businesses? You can say goodbye to the equity pledges, game over. As an economist, I am opposed to the government bailing out the market. If stock pledges collapse, let it be: what’s the point in bailing them out? What are you doing using stock pledges for other purposes anyway? What did you do with the loans you get from stock pledges?

I’m acquainted with many bosses of listed companies. Frankly speaking, a large part of their equity pledge funds did not go into their primary business, but used on speculation. They have many tricks. They buy financial products; they buy housing. The government said listed companies have spent 1-2 trillions on speculative real estate. Basically China’s economy is all built on speculation, and everything is over leveraged.

Starting in 2009, China embarked on this path of no return. The leverage ratio has soared sharply. Our current leverage ratio is three times that of the United States and twice that of Japan. The debt ratio of non-financial companies is the highest in the world, not to mention real estate.

Having shared all this data with you, shouldn’t we be arriving at a conclusion now?

“The swallows come back every three years.” [This is a reference to the three years of RMB growth between 2005 and 2008.] Now they are back again. The economic decline has created a lot of pressure, so now the government brings back its old set of tricks: relaxed currency regulations, aggressive monetary policies, relaxed financial policies, and aggressive capital financing policy.

But now I want to ask a question. Everyone in the audience is an alumnae of Renda business school and capable of thinking independently, so give it some thought: Will these policies work? Can they solve China’s fundamental problems? It’s not that our currency regulation this year was not relaxed enough—we released 400 billion yuan in liquidity, 2.3 trillion yuan in hedging or medium-term lending facilities. 2.3 trillion times the money multiplier is about a dozen or so trillion.

Three monetary policy “arrows” have been fired, also known as “Bank Chief Yi’s three arrows.” The first is loans, the second is issuing debts, the third is to solve the problem of stock pledges. Even more mind-blowing was the “125 Target.” [Guo Shuqing (郭树清), CCP committee secretary of the People’s Bank of China and chairman of the China Banking and Insurance Regulatory Commission, said in November that banks’ lending to private companies need to meet the “125 Target,” which means that in new corporate loans, the big banks should issue no less than one-third of the loans to private firms, medium and small banks should issue no less than two-third of the loans to private firms, and in three years the goal is for banks to lend no less than 50 percent of its loans to private enterprises among their loans to new companies.]

We recently went to the Pearl River Delta and some other regions to conduct field research, and locals told us that the local officials invited the bank chiefs over to meetings and told them which banks to turn to for loans. What is this nonsense?

So we need to reflect on our current problems: can these policies of ours solve the deeper issues?

As for the debt-for-equity swap, the capital market has issued many policies but I don’t see any of them will really be useful. It’s been another two months since October 19, have they been effective? So we have to ask ourselves: What has really gone wrong with our economy?

My own reflection has reached its conclusion: The problem with the Chinese economy is no longer speed or quantity, but quality.

The official report of the 19th Party Congress is an excellent report. So is the report of the Third Plenum of the 18th Party Congress. All of these major decisions were beautifully written and made all the right points. Sadly, they have not been followed through. The structural problems we face as a country, the “Six Big Imbalances,” are not sufficiently addressed. Think about it, entrepreneurs and alumni of Renda business school in the audience, can any radical credit policy or monetary easing solve these problems?

Moreover, these credit and monetary policies can only make short-term adjustments that are incapable of fundamentally solving the “imbalances” I mentioned earlier. We are still trapped within the box of the old policy and the old way of thinking. The key to whether transformation will be successful is the vitality of private enterprises—that is, whether policy can stimulate corporate innovation.

We have been making a game of credit and monetary tools for so many years. Isn’t this the reason we are saddled with so many troubles today? Speculation has driven housing prices sky-high.

The problems that private business actually faces are not difficulties in financing. What is it then? They are afraid of unstable policy and the government not keeping its word.

The leader of the State Council said it clearly in a meeting of the Standing Committee: in China, the government is what can be least trusted. Therefore, in order to solve the debt problem, first, the government has to pay back debts it owes businesses, the state-owned enterprises have to pay back debts they owe private enterprises, and large private enterprises have to pay back debts they owe smaller ones. The three costs keep going up [production cost, transnational cost, and systematic cost], therefore tax cut and fee reduction is the primary appeal.

My basic assessment of the overall issue is that these short-term monetary credit schemes are wholly incapable of solving the problem. For the Chinese economy to continue growing in a truly stable fashion, and extricate itself from its present quagmire, it must implement the following three essential reforms: tax system, reform in the political structure, and reform in state governance.

How to reduce taxes and fees? The structure of the government must be streamlined by cutting large numbers of staff. Personnel must be let go and expenditures have to drop, which means that structural reforms have to be carried out.

Professor Zhou Qiren (周其仁) of Peking University is someone I respect and admire deeply. All these years, he has been saying: what is China’s biggest problem? The costs of societal administration are too high.

Then there are the matters of governmental  reform and reforms in the structure of state governance. Of course, there’s also reform of academia and research.

I hear that the day after tomorrow, there’s going to be a grand conference to mark the 40th anniversary of the “reform and opening up.” I sincerely hope that we’ll hear something about further deepening of reforms at that conference. Let’s wait and see if any real progress can be made on these reforms.

If this doesn’t happen, let me conclude on these words: the Chinese economy is going to be in for long-term and very difficult times.

More information about Prof. Xiang Songzuo can be found here


Related:

Economics Professor Expelled for ‘Politically Harmful’ Expressions, Including Estimate of Staggering Cost to Maintain the Communist Party Apparatus, China Change, August 21, 2018.

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At China Change, a few dedicated staff bring you information about human rights, rule of law, and civil society in China. We want to help you understand aspects of China’s political landscape that are the most censored and least understood. We are a 501(c)(3) organization, and your contribution is tax-deductible. For offline donation, or donor receipt policy, check our “Become a Benefactor” page. Thank you.

Signs of China (5): Tightening the Screws on China’s Foreign Reserves

Jeff Wang, November 8, 2018

 

The Chinese government has been gradually tightening its foreign exchange controls to the great detriment of enterprises and citizens, as well as the country’s economic vitality. What are the reasons for this heavy regulation, and what does it tells us about the economic and political state of China?

Over the last two years, members of the Chinese middle class have found it increasingly challenging to access foreign exchanges or make international remittances.

Ms. Zhang (张女士), a Chinese woman who had immigrated to the United States and who declined to disclose her full name, returned to Beijing this October to sell her apartment. However, the process of sending the money to the U. S. has proved a daunting experience.

“I’m still stuck here waiting,” she said. “I see exchange rates for the dollar get higher every day, and I think about how much I’m losing.”

The obstacles that Ms. Zhang faces have been commonplace in China after the authorities started tightening up on foreign exchanges in the second half of 2016.

In January 2017, the China Foreign Exchange Administration announced new rules that, in addition to maintaining the $50,000 per person limit on foreign exchanges, required purchasers to fill out a form, the “Application for Foreign Exchange Purchase” (个人购汇申请书). Additionally, purchases of foreign exchanges could not be used for buying real estate or making investments in securities overseas.

This January, the Foreign Exchange Administration also stipulated in its “Notice on Regulating Large-Scale Cash Withdrawal Using Bank Cards While Abroad” (《关于规范银行卡境外大额提取现金交易的通知》) a 100,000-yuan limit on overseas withdrawals when using a Chinese-issued bank card.

In June, the daily limit for Chinese citizens to withdraw foreign cash deposit from bank was reduced to $5,000 from $10,000. Many banks decline transaction requests by saying they lack sufficient foreign cash.

On October 10, the government issued its trial version of the “Anti-Money Laundering and Anti-Terrorism Financial Management Measures for Internet Financial Institutions” (《互联网金融从业机构反洗钱和反恐怖融资管理办法(试行)》). Per the Measures, customers who make trades with online financial institutions in excess of 50,000 yuan or foreign money worth more than $10,000 must have their transactions reported to the government.

As Beijing tightens the financial screws, Ms. Zhang has found herself being given the short end of the stick. “A lot of people, including me, are looking for relatives and friends we can give our renminbi (yuan) to, asking them to use their quota to exchange as many dollars as we can. But after making the exchanges, we run into a huge problem: how to remit the money overseas?”

She said that in order to bypass foreign exchange controls, ordinary Chinese use the “ant move” method to incrementally transfer their exchanges.

In addition to controlling foreign exchange transactions by individual citizens, the authorities also aim to limit capital movement on the part of private enterprises. Hu Liren (胡力任), a private entrepreneur living in the United States, said: “At present, China’s [private enterprises] foreign investment has basically stopped. Although there’s no law banning it, it has in fact stopped, because foreign investment requires a process, which in turn depends on government approval.”

Such policies started in 2017. In the first half of last year, China’s foreign direct investment fell by 40 percent, the first time since 2015 that it has decreased so sharply.

An extreme example is that in 2017, the Chinese government obstructed Wanda Group in the process of making a large-scale overseas merger and acquisition. The China Banking Regulatory Commission prohibited large state-owned banks from granting loans to Wanda for overseas M&A projects. At the same time, the authorities, making reference to private enterprise groups such as Wanda and Anbang, and forced them to sell their overseas assets and transfer the funds back to China.

The Chinese government has also used administrative measures to delay the withdrawal of foreign capital. In 2016, Deutsche Bank sold more than 3 billion euros of shares in China’s Huaxia Bank in China, but it took nearly a year before the money could be moved out of the country. In September of that year, when a large Japanese economic delegation visited China, its members made direct complaints about the procedural obstacles that Japanese companies faced when trying to withdraw capital.

The impetus for the rapidly tightening bureaucratic measures comes from the serious loss of foreign exchange capital in China in the past few years. According to the Chinese Academy of Social Sciences, during the two-year period from 2015 to 2016 — when losses of foreign exchanges reached a peak —  capital outflows recorded in China’s international balance sheet reached $1.28 trillion.

It is a market truism that private enterprises and individuals convert their renminbi assets into U.S. dollars and transfer them abroad. This is the main reason for China’s capital loss. Ye Zhao (叶昭), a former finance journalist who lives in the United States, described four grades of capital outflows:

“Once a family makes a few million, it first sends its children abroad; if they make tens of millions, the whole family will emigrate. The ones with hundreds of millions will set up business overseas. If billionaires are leaving China, that means their decisions have are political, and it has become too difficult for them to do business in China.”

It can be said that entrepreneurs and common people have concocted brilliant schemes to transfers their assets abroad. In addition to the aforementioned “ant move” adopted by members of the middle class, private enterprises have funneled large amounts of funds out of China chiefly by means of foreign investment and “underground money houses.” The two giants, Anbang and Wanda, took out loans from Chinese banks and used the money to buy up large amounts of overseas assets.

Ye Zhao said: “I have been in touch with these entrepreneurs. Speaking directly, they told me that one of their motivations is to explore business opportunities that might be available overseas, and the other is to have an escape route in case they are implicated during the investigation of some corrupt official.”

Ye Zhao’s words point to a fundamental dilemma among private enterprises operating in China. Since the marketization of the economy, China’s private enterprises have been carrying a so-called “original sin,” namely, that in order to flourish, they have no choice but to resort to illegal means including tax evasion and illicit collusion with officialdom. These illegal acts and their potential legal consequences have become the “Sword of Damocles” hanging over the heads of many entrepreneurs.

Recent changes in China’s political and economic situation have squeezed the private sector. Since 2011, China’s economy has been in a downward spiral, with domestic consumption sluggish and the market running out of space for expansion. Private enterprises face many obstacles such as high tax burdens and difficulty in acquiring loans.

Meanwhile, the trend of “the state advances, the private sector retreats” (国进民退) has become increasingly prominent, and the living space of private enterprises has been gradually eroded by state-owned enterprises. Earlier this year, someone even opined that private enterprises should be eradicated. The difficult environment has forced private companies to seek overseas investment.

The Chinese middle class is feeling likewise constrained. Kai Wen (凯文), who has long been engaged in business between China and the United States, believes that “whether in terms of education, clean air and clean water, and food safety, China cannot meet the demands of its emerging middle class, who want more security in their lives. So they have taken matters into their own hands.”

As companies and individuals flock to transfer their assets overseas, the PoBC intervened in the foreign exchange market in order to hedge capital outflows and maintain the exchange rate, which caused China’s foreign exchange reserves to fall from their peak of nearly $4 trillion in June 2014 to less than $3 trillion in January 2017. The sharp drop in foreign exchange reserves has set off alarms bells in the Chinese government.

Foreign exchange reserves are seen in China as a financial buffer for turbulent times. Although Beijing’s foreign reserves dropping below $3 trillion has little real impact on the Chinese economy, Cheng Xiaonong (程晓农), a U.S.-based commentator, believes that it will cause the government a host of other problems. “Part of China’s economic security is the demand for foreign imports. If China loses the reserves it needs to import goods, oil and food prices will present a massive dilemma. Therefore, retention of these three trillions is something the Chinese government keeps a close watch on.”

The loss of foreign exchange reserves would also lead to an accelerated depreciation of the renminbi and an increase in the chances of triggering a financial crisis.

Xia Ming (夏明), a professor of political science at the City University of New York, believes that, “the Chinese government is very worried that if there are insufficient foreign exchange reserves to serve as a protective firewall, the national currency might come under attack, the economy may experience turbulence, and that this could even lead to regime collapse.”

The decline in China’s foreign exchange reserves has directed public attention to their real composition. According to the China Administration of Foreign Exchange, as of March 2018, China’s foreign exchange reserves were worth $3.11 trillion US dollars, while China’s balance of foreign debt was $1.84 trillion. This means that more than half of China’s foreign exchange reserves must be reserved for repaying foreign debts, and are not true assets.

At the same time, about half of China’s foreign exchange reserves exist in the form of US dollar bonds, which are not easily realized at any time. This kind of bad composition has added to public concerns about Chinese foreign reserves.

Along with the decline of foreign exchanges, there is also the risk of brain drain, said Hu Liren. “China has reached a period of great risk in terms of human resources, and many people have emigrated. There are still many [talented] people in the country, but their children have emigrated. The Chinese government does not want these thoughtful and intelligent people to leave, but it is difficult to change the current political status in China.”

The Chinese government’s moves to exercise stricter control over its foreign reserves have greatly slowed the momentum of capital loss. According to a report released this February by the Washington-based International Finance Association, the net outflow of China’s capital in 2017 was 60 billion US dollars, just a tenth of the $640 in outflows recorded in 2016.

Chinese financial scholar He Jiangbing (贺江兵) has applied the Mundellian impossible trinity, of Nobel Prize fame, to explain China’s foreign exchange controls:

“Among the three ‘impossibles,’ the first is the independence of monetary policy, the second is the relative stability of the currency exchange rate, and the third is the free flow of capital. Of these, you can only choose two.”

In other words, China has no choice but to impose strong controls on foreign exchange if it wants to maintain independent monetary policy and a relatively stable currency exchange rate.

This kind of foreign exchange control is useful for settling financial balances, as well as keeping the exchange rate and domestic prices stable. But at the same time, the burden it places on some classes is considerable. “Who is to bear the consequences?,” said a rather emotional Ms. Zhang. “I feel it’s us members of the middle class who are being hit hardest by these strict foreign exchange controls.”

Foreign exchange control not only puts unreasonable pressures on enterprises and citizens: the Chinese government’s restrictions on foreign companies remitting profits to their parent firms have done tremendous damage to the country’s credit.

Jacob Parker, vice president and head of China Operations at the US-China Business Council, said last year that as the United States lowered its corporate tax rates, some members of the Council expressed their desire to quickly bring back the profits they received in China, so as to minimize the risk of capital controls.

The serious loss of foreign exchange reserves and the urgency of foreign exchange control reflect a tandem battle between the Chinese government and civil society being fought in the context of economic downturn and political totalitarianism. When the people lack trust in the government and want to avoid political and economic crisis, they vote with their feet. At the same time, the stubbornness of the political system manifests itself in high-pressure policies that grab civil liberties by the throat in order to maintain control.

Beijing’s foreign exchange controls give us but a glimpse of the reality in China, where political and economic pressures have been compounded by the U.S.-China trade war. Whispers of the “China collapse theory” are getting louder as the struggle between the Chinese state and the people heats up in different arenas and on different levels.

 

Jeff Wang is a journalist with Radio Free Asia’s Mandarin Service. The article was first published in Chinese on October 31, 2018. Follow him on Twitter @NeverlandWang0 

 


Related:

Signs of China (1), September 16, 2018.

Signs of China (2), September 22, 2018.

Signs of China (3), September 30, 2018.

Signs of China (4), October 8, 2018.

 

 

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At China Change, a few dedicated staff bring you information about human rights, rule of law, and civil society in China. We want to help you understand aspects of China’s political landscape that are the most censored and least understood. We are a 501(c)(3) organization, and your contribution is tax-deductible. For offline donation, or donor receipt policy, check our “Become a Benefactor” page. Thank you.

 

The Danger of AI Collaboration With China

Matthew Robertson, October 11, 2018

 

AI, Cambricon-1A.png

 

China’s rapidly expanding interest in researching and applying artificial intelligence has been widely noted. Last year, the Chinese government published a plan to become a world leader in the field by the end of the next decade; billions of dollars are being funnelled into AI startups; and China is competing head-to-head with industry in the United States on the cutting edge of the field.

What makes AI developments in China so different from those in the United States, however, is that as with any technology, if it can be used by the Chinese Communist Party to strengthen its grip on power or further its panoptistate, it will.

This is almost a truism, of course, and military adoption of new technologies applies just as well to the U.S.

The real difference is that in China, exploitation of new technologies is almost always attendant with human rights abuses. The area of AI may end up becoming a particularly grim demonstration of this principle, if current trajectories continue.

And researchers from the West may have already given China a significant helping hand. Witness the case of the French research institute Inria’s (French Institute for Research in Computer Science and Automation) collaboration with the Chinese Academy of Sciences, and in particular its assistance in developing the technology underpinning one of China’s AI ‘unicorns,’ Cambricon (寒武纪).

Cambricon, the company featured in Science’s February 2018 profile of the burgeoning AI sector in China, was supported and spun out of the Chinese Academy of Sciences’ Institute of Computing Technology (中科院计算所). Their flagship AI chip, the Cambricon-1A, hit the market last year and has been incorporated into Huawei smartphones, among other products.

It was one of Inria’s researchers, Olivier Temam, who was instrumental in helping to lay the technical foundations of Cambricon’s breakthroughs.

“Cambricon’s founding team came from academia, and I myself was a professor and doctoral tutor at the Computing Institute of Chinese Academy of Sciences,” writes Chen Tianshi (陈天石), Cambricon’s co-founder and CEO. He goes on to thank Inria and and long-time academic collaborators Chen Yunji (陈云霁) and Olivier Temam.

Temam’s LinkedIn profile describes him as a senior research scientist at Inria from September 2004 to May 2014.

The three — Chen Tianshi, Chen Yunji, and Olivier Temam — have collaborated on a dozen journal and conference papers, including many that won best paper awards. With names like “DianNao: A Small-Footprint High-Throughput Accelerator for Ubiquitous Machine-Learning” and “ShiDianNao: Shifting Vision Processing Closer to the Sensor.”

It is papers like this that underlie innovations in AI chip development that Cambrion built its company on.

The chip architecture has another highly useful feature for China’s security authorities: use in image recognition systems for filtering and processing the bucketloads of data collected by the Communist Party’s pervasive surveillance apparatus.

VOA quoted a Cambricon employee in June 2018 commenting on a provider of surveillance cameras to the Party, Hikvision:

“A staff member at Cambricon, another Chinese company that provides the government technical support for security needs, told VOA that major video surveillance companies in the Chinese market are working with the government and that government authorities can access the information from any company at any time.”

The engineer remarked that surveillance technology, in attempting to identify ethnic minorities, might “consider beards, facial, and head accessories.”

There is as yet, at least as far as China Change could discover, no public evidence that Cambricon’s chips have been used to drive surveillance technologies.

Its chips, however, have been listed as among those that Hikvision could make easy recourse to.

Chinese tech websites have also listed “public security surveillance” (安防监控) as among the capabilities of the Cambricon-1A and 1H8 chips.

When the subject is reported in the Chinese media, surveillance technology is just another one of the potentially lucrative uses that Cambricon can exploit, alongside self-driving cars and cloud computing.

Along with Inria, MIT has also begun collaborating with iFlytek, a Chinese company whose AI technologies are being deployed by the security apparatus.

“Authorities are collaborating with iFlytek, a Chinese company that produces 80 percent of all speech recognition technology in the country, to develop a pilot surveillance system that can automatically identify targeted voices in phone conversations,” Human Rights Watch wrote in an October 2017 report.

HRW shows clearly how iFlytek has marketed the security uses of its technology, including deep relationships with official entities that have helped the authorities build the Golden Shield Project, one of the key components of China’s surveillance apparatus.

The MIT relationship with iFlytek was announced in June 2018.

Olivier Temam did not respond to an email requesting comment. Since July 2018 he has worked at Google — a somewhat ironic move given the context.

Under the guidance of Google’s former AI chief, Fei-Fei Li (李飞飞), the company opened an AI lab in China. Aside from meeting Google’s own research needs, the institution will without doubt also help fertilize China’s own AI ambitions and talent.

Li, born in Beijing in 1976, immigrated to the United States at 16 and went on to gain a BS from Princeton and a PhD from Caltech. She was appointed as AI leader and Chief Scientist at Google while on sabbatical from Stanford where she was a full professor, and while there became among the most outspoken opponents of Google cooperating with the Pentagon.

“Weaponized AI is probably one of the most sensitized topics of AI — if not THE most. This is red meat to the media to find all ways to damage Google,” Li wrote in an internal email seen by The New York Times.

But Silicon Valley, for one reason or another, does not seem to be as intent on opposing all forms of cooperation with the Chinese Communist Party and its appurtenances.

Google recently discontinued its contract with a Pentagon artificial intelligence program, saying that “we couldn’t be assured that it would align with our AI Principles,” but it has shown no qualms developing the Dragonfly search engine, in cooperation with the Chinese government, which would aid the official internet censorship regime. Meanwhile, Google has been recommending security keys manufactured by a Chinese company that has deep ties with the PLA and government.

 

 

Matthew Robertson is a Research Fellow in China Studies at the Victims of Communism Memorial Foundation. He was previously a translator and editor with China Change.

 


Related:

Google Recommends Product From a Chinese Company with Communist Party and Military Ties for its ‘Advanced Protection Program’, Matthew Robertson, August 23, 2018.

 


Support Our Work

cropped-China-Change-Logo.jpg

At China Change, a few dedicated staff bring you information about human rights, rule of law, and civil society in China. We want to help you understand aspects of China’s political landscape that are the most censored and least understood. We are a 501(c)(3) organization, and your contribution is tax-deductible. For offline donation, or donor receipt policy, check our “Become a Benefactor” page. Thank you.

 

Signs of China (4)

China Change, October 8, 2018

 

This weekly bulletin is NOT a news summary of the week, but a reading of ‘signs’: signs of quickening changes and shifting ground. Not every new development is suited to a fully fleshed-out analysis, and as with so much in China, many reports cannot be immediately confirmed or properly evaluated. Nevertheless, while each individual brush stroke may not be decisive, we hope that upon stepping back a fuller picture would emerge. Sign of China catalogues and contextualizes these items so as to grow an awareness and keep a record of sort. As incomplete as it is destined to be, we hope the series is edifying and useful. — The Editors

 

IMG_3181

Organized college students waiting in the underground passage to go to Tiananmen Square on the Chinese National Day.

 

Pence’s Speech and Two Emblematic Chinese Responses

On October 4th, during the ‘golden week’ of the National Day of the People’s Republic of China, the U. S. Vice President Mike Pence delivered a speech that laid out in full the Trump administration’s views of China and the Chinese communist regime. You should watch it in full, but the editor of China Change has offered a crude summary of the speech: “Pence’s speech in a few words: the United States has done nothing to hurt China for more than 100 years. If it weren’t for America’s help, where would China be today? Not only do China’s leaders seem ignorant of what’s good for them, but they repay these favors with low and despicable acts in order to walk all over us and squeeze us dry. This is just asking for a good beating.”

One academic tweeted: “This one is going down in the history books. Not because of any soaring feats of oration or anything like that. But this marks a fundamental shift. Four decades of American policy has been overturned. Today is the end of an era.”

We will not regurgitate the Chinese government’s formulaic outrage. However, the remarks, by one nationalism-minded Comrade Zhang Qing (张清同志), later erased by Weibo censors, caught our attention:

“The Sino-U.S. trade war has gotten to the point where America’s president and vice president have both stepped out to speak. All the while, the Chinese side has left the matter to just three spokesmen from the departments of defense, trade, and foreign affairs.”

“In the past, whenever the U.S. and China had some conflict, Chairman Mao himself would confront the other side. Today the American vice president Pence has come knocking at our door; can’t we find a leader of our own, someone a bit higher in rank than a spokesman [to come out and say something]?”

“Comrade Zhang” had observed the conspicuous absence of his country’s leaders in the diplomatic arena and felt something amiss. It’s a feeling the censors didn’t want him to have.

A Chinese human rights lawyer, disbarred by the authorities earlier this year, said after Pence’s speech, “Our prevailing attitude is silence. Going back a few years, you may have been able to find throngs of people filled with indignation at America’s actions. Such is the change.”

The Curious Case of Meng Hongwei 

Sometimes in late September, Meng Hongwei (孟宏伟), president of Interpol and the Deputy Minister of Public Security, boarded a plane in Stockholm and returned China. Three days ago his wife reported him missing to French authorities. She had been receiving threats via phone and other venues. On Sunday, within an hour after Grace Wang gave a press conference in Lyon, the Chinese authorities announced that Meng was “under investigation by the National Supervision Commission for alleged violation of the law.”

Meng’s Interpol presidency was a cherished prize for China, representing China’s attempt to use the international organization for its own political purpose.

 

Signs of China 4, Xi Jinping, Interpol

Meng’s term as Interpol chief expires in November 2020. The fact that the Chinese leaders were compelled to take down Meng at the steep price of ruining their credibility indicates the emergent nature of the matter involving Meng. It’s clear that Meng knew his trip back to China was an ominous one, and made arrangements with his wife that deviated the Party’s protocols: to publicize his disappearance and appeal to international help, instead of staying silent and “trusting the Party” (相信党). What Meng did is no less than to betray the Party. Maybe it is a matter of problematic loyalty. A Deputy Minister of Public Security knows too much and is involved in too many high-stake issues. His allegiance became questionable, and therefore he had to be pulled back at all costs. This is the only reasonable explanation we at China Change can come up with.

We will refrain from wallowing in the rich irony and absurdity of the event, but there are a few points to register:

  1. People who hold positions in international organizations, regardless of their position or nationality, should perform their duties as independent individuals, rather than as representatives of their respective countries. But the Chinese Communist Party (CCP) affords none of its members such independence, Meng Hongwei among them. As far as the CCP is concerned, he is the Party’s man above all, and the Party can sanction him at any time as it sees fit, even during his Interpol term.
  1. It follows that Meng Hongwei, in his capacity as Interpol chief, was inevitably subject to the Party’s directives and control.
  1. Meng Hongwei’s mafia-style abduction sends a stark message to the international community: totalitarian China does not conform to international procedures and is incapable of participating in world affairs as a normal country.
  1. Almost exactly a year ago, Xi Jinping attended the 86th Interpol general assembly in Beijing and delivers a keynote speech emphasizing “cooperation, innovation, the rule of law and win-win results and build a universal and secure community of shared future for mankind.”

The next time Xi Jinping, or any Chinese leader, speaks at any international event, whether at the UN, the Davos Forum, or at international and regional summits, about globalization, climate change, free trade, world peace, think of what the Meng Hongwei episode says about China and just laugh .

In another report, RFI quoted the Japanese-language edition of Business Journal, which on Oct. 1 said it had found via CCP diplomatic channels that the Party elite had given up on resolving the Sino-U.S. trade frictions in the short term. From internal documents it was revealed that the children of senior Communist Party officials have been ordered not to study in the United States, and those already in the U.S. will be called back to China.

One analysis offered by the Business Journal of the order is that the Chinese government is worried that the high-ranking children could be held hostage by Washington. Another speculation is that the CCP has recalled its cadres’ children to shore up their loyalty — officials whose offspring and assets are in the territory of the United States may not have the Party-state’s best interests in mind. The CCP may wish to avoid the Three Kingdoms-era conundrum of “being present in the Cao camp while serving the Han at heart.” (身在曹营心在汉)

Former President of Xinjiang University Sentenced to Death

According to Radio Free Asia Uighur service, former president of Xinjiang University, Professor Tashpolat Tiyip has been sentenced to death with two year reprieve for ‘separatism.’ The two sources cited by the RFA report, one was the political director of the Federation of Literary and Art Circles in Xinjiang and the other from a police station in Kashgar Prefecture, learned the sentence of Professor Tashpolat Tiyip from a 90-minute internal, ‘cautionary’ film.

According to Baidu encyclopedia, Professor Tashpolat Tiyip was born in 1958, a scientist in geoscience and remote sensing, and enjoyed a special allowance for experts by the State Council. He was dismissed in March 31, 2017, and that probably was also the time when he was arrested.

Signs of China 4, Prof Tiyip

Professor Tashpolat Tiyip.

Another report has it that Kurban Mamut, the 68-year-old retired editor-in-chief of Xinjiang Culture magazine, was taken to a “re-education camp” in February 2018.

In a 4-minute video, Torchlight Uyghur Group compiled an incomplete list of Uighur public figures who have been given staggering sentences or sent to camps, including scholars, scientists, intellectuals, writers, artists, educators, and businessmen.

News from Xinjiang continue to roll in daily: grim, bleak, and desperate. Journalists noted (here and here) that, on government websites, officials’ resumes have been altered to remove their positions at “vocational schools.” By inference, the city of Atush alone, with a population of 200,000, has at least seven such “schools.”

Two weeks ago, we wrote in the second issue of Signs of China that the Uighurs detained in concentration camps were being transferred to other parts of China. There were only bits and pieces of information available at that point, but now the news has been confirmed via various sources.

The situation is developing on a large scale and with shocking speed. Radio Free Asia reported that since the beginning of September, the Xinjiang authorities started deporting Muslims held in so-called “deradicalization education centers” and “vocational schools” to other regions. According to a number of Muslims in Xinjiang who spoke on condition of anonymity, the transfer has targeted Uighurs in Kashgar, Hotan and other places in southern Xinjiang, as well as Kazakh communities in the Ili Kazakh Autonomous Prefecture in the northern part of the province. The number of people being moved could be as high as 200,000 or 300,000.

Police Given Authorization for Unlimited Access to Internet Privacy

China’s Ministry of Public Security recently released its “Public Security provisions on public Security organs  internet security, supervision, and inspection,” effective Nov. 11.
According to the Provisions, the public security organs are cleared to inspect companies that provide internet access, internet data centers, content distribution, domain name services, online information, and the like.

Reasons for inspection include looking into whether or not the company has taken measures to follow laws pertaining to the recording and retention of user registration and login information; whether it is taking relevant preventative measures to control the publishing and transmission of information prohibited by law or administration regulations; or whether they have recorded the user data in hosting or virtual space leasing.
In other words, Chinese police are now authorized by government regulation to walk into any internet firm and copy everything on their servers at will. They have had such unfettered access to domestic internet companies already; now it’s every company without exception. Even foreign companies like Apple and Amazon have handed over server access to their Chinese partners after China’s Internet Security Law was promulgated June 1, 2017. 

Growing Industrial Pepper: For Hot Pot or for Pepper Spray

Starting in the spring of 2018, in dozens of towns and villages across Guizhou Province, farmer started receiving instructions and training from commercial technicians teaching them how to plant a new kind of industrial pepper, RS-3. It is currently the hottest pepper that can be produced as a crop, and it is reportedly best cultivated in Yunnan and Guizhou, where there is dry soil and ample sunlight.

Sings of China 4, 工业辣椒1The county of Zhenning (镇宁) has planted about 10,000 mu (about 1,500 acres) of RS-3 with assistance from the Guizhou Red Star Development Company (贵州红星开发公司). A total of 100,000 mu are planned. The county’s Party secretary personally inspected a number of planting “bases” to ensure that the crop had reached or exceeded the issued quota.

In the city of Panzhou, the Guizhou Huikangyuan Agricultural Technology Co., Ltd. (贵州汇康源农业科技有限公司) reached an agreement with farmers in several townships to cultivate 21,000 mu of the industrial pepper. It is also being grown in Puding.

One mu of land can produce 3,000 to 4,000 kg of RS-3 pepper. The developers are covering initial investment costs for the farmers, and will also purchase the crop at a fixed price. Agriculture materials such as seedlings, fertilizer, fluorescent films, and pesticides are being provided by county governments.

The neighboring province of Yunnan is also growing a variety of industrial pepper — 150,000 mu and still expanding, per one report. The province first began growing them in spring 2017.

These peppers are too hot to be consumed by people or animals. Farmers picking the crop must wear protection to avoid touching the pepper directly and causing damage to their hands. If the fruit is broken and the juice comes into contact with skin, it will cause burning that lasts four to six hours.

Speaking with the Chinese state media, one technician claimed that industrial peppers are widely used in the food industry. But netizens were quick to point out one particular usage: “More importantly, industrial peppers are of great use in military and defense application, such as counter-terrorism and riot prevention.”

According to one report, China “gets almost all of its red pepper, chili oleoresin, and capsaicin from India. India is the world’s largest pepper producer, and is at the forefront in industrial pepper extraction technology.” 

Signs of China 4, 粮食收购减少Chinese Staple Crop Production Takes a Sharp Dip 

According to the Weibo account of the China National Grain and Material Reserve Bureau, as of Sept. 25, total purchases of grain in major producing areas — Hebei, Jiangsu, Anhui, Shandong, Henan, and Hubei — amounted to 48.139 million tons, a year-on-year decrease of 22.406 million tons.

Major rice producers of Zhejiang, Anhui, Fujian, Jiangxi, Hubei, Hunan, and Guangdong reported total acquisitions of 7.689 million tons of long-grained rice, a 1.155-million ton decrease compared with the same period last year. Total production of rapeseed was 1.104 million tons, a 137,000-ton decrease. (Thanks to Tian Beiming [田北铭] for providing this information on Twitter.)

In July, the General Office of the State Council issued a notice to deploy a nationwide inspection of the quantity and quality of policy food stocks. The scope of the inventory includes central reserve grain, minimum purchase price grain, national temporary storage grain, national one-time reserve grain, local grain reserve, and the quantity and quality of commodity grain stored in policy food enterprises. The purpose is to verify “the true reliability of these stocks.” March 2019 will be the statistical reporting date of the food inventory inspection.

Disgruntled PLA Veterans Clash With Military Police in Shandong 

During the National Day celebrations, hundreds of veterans waving flags of the PRC and the Party gathered in Pingdu, Shandong Province, to protest the police brutality and the blockage of their attempts at appeal. They prepared wooden sticks in advance for each man to defend himself with.

On Oct. 5, the veterans occupied the Pingdu Agricultural Technology Market and spent the night there. On the 6th, their representatives met with government officials. Negotiations apparently failed, since in the afternoon, the police violently clashed with the protesters. The police used tear gas and pepper spray to disperse the crowd, while the veterans fought back with fire extinguishers and their sticks. Over a thousand more special policemen were deployed, and the veterans were effectively routed that evening. Only about a dozen of them remained in the square. Surrounded by large numbers of police, they too were forced to leave as darkness set in.

On Oct. 7, veterans from other regions arrived in Pingdu. News reports indicate that Shandong Province has mobilized police and even contracted security personnel from all over the country to confront them. Newly shipped riot gear, such as batons and helmets, have been unpacked and put into use on the streets. The situation is still in progress.
On Oct. 11, 2016, nearly 10,000 veterans surrounded the Central Military Commission building in Beijing, demanding the government give them fair benefits and treatment, shocking the Party elite. This incident led directly to the establishment of the Ministry of Veterans Affairs on April 16, 2018. The Chinese government’s response seems to be a combination of placating them with money and arranging for a number of them to receive public employment.

Many observers believe that these PLA veterans are defenders of the system. Provided their immediate wishes are satisfied, they wouldn’t hesitate to become the regime’s thugs.

Live video footage of the protests are currently available on WeChat and other video sharing platforms. While having confirmed the authenticity of the events from other sources, we appreciate the comprehensive reportage provided by Twitter user @lifang072.

A Reality Check on October 5 

Lest we forget the nature of political life in China, this WeChat post directs our attention to two events, both of which occurred decades ago on the 5th of October.

The first were the famous “five regulations” issued in a document by the CCP Central Committee and the State Council on October 5, 1993. These regulations stipulated that Party and government leaders at or above the county (division) level were not allowed to operate business enterprises or use their powers to benefit spouses, children, or other relatives and friends; in addition, officials were not allowed to work part-time and receive any remuneration in economic entities, buy or sell stocks, receive monetary gifts or securities at official events; or use public funding for entertainment.

Today, 25 years later, there are no officials in China who are not corrupt, and the country has all but set the curve for corruption worldwide.

Second, the People’s Republic of China signed the International Covenant on Civil and Political Rights at the United Nations on October 5, 1998. Today, 20 years later, a Nobel Peace Prize laureate has died after a long period of languishing in prison; political dissidents have been jailed and sentenced to severe punishment; human rights lawyers are disappeared and tortured; civil society organizations’ public welfare activities have been brought under strict control. Millions of Uighurs and other Muslims have been locked up in concentration camps; house churches have been suppressed or forced to disperse. The words and actions of virtually every citizen are subject to the eyes and ears of an omnipresent panopticon.

As with the case of Meng Hongwei, we are seeing increasing use of enforced disappearance, torture, and unnatural death as means of solving internal power entanglement.

There are those who are, ostensibly, trying to determine whether the problem lies with Xi Jinping or the system itself. We think they’ve had more than enough time to reach a conclusion.

 

 


Related:

Signs of China (1), September 16, 2018.

Signs of China (2), September 22, 2018.

Signs of China (3), September 30, 2018.

 


Support Our Work

cropped-China-Change-Logo.jpg

At China Change, a few dedicated staff bring you information about human rights, rule of law, and civil society in China. We want to help you understand aspects of China’s political landscape that are the most censored and least understood. We are a 501(c)(3) organization, and your contribution is tax-deductible. For offline donation, or donor receipt policy, check our “Become a Benefactor” page. Thank you.

 

Signs of China (3)

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

 

Sign 3, wanke, 活下去

‘Survive’ is the theme of real-estate company Wanke’s annual conference in Shenzhen, September 28-29.

 

 

‘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?

‘Self-reliance’ 

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.

Rural revitalization 

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. 

 

Signs of china 3, umbrella menMen 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.

 


Related:

Signs of China (1), September 16, 2018.

Signs of China (2), September 22, 2018.

 


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At China Change, a few dedicated staff bring you information about human rights, rule of law, and civil society in China. We want to help you understand aspects of China’s political landscape that are the most censored and least understood. We are a 501(c)(3) organization, and your contribution is tax-deductible. For offline donation, or donor receipt policy, check our “Become a Benefactor” page. Thank you.

Signs of China (1)

China Change, September 16, 2018

 

Unsettling news from China has been emerging in a constant stream for some time now, in news, on social media 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 to do with 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 today inaugurates a new, regular series titled ‘Signs of China,’ where we catalogue and contextualize what might otherwise have been forgotten as ephemera. What are these signs pointing to? Our discerning readers will know. — The Editors

 

Sign series 1, 卸磨杀驴

Kill the donkey once it’s finished pulling the stone mill (卸磨杀驴).

 

Urgent Call to Watch ‘Operation Thunder 2018’

According to a variety of sources brought to social media by netizens, Chinese authorities sent out an urgent notice on September 14 to work units, companies, government departments, universities and more, across the country, demanding people to watch the September 15 nightly Network News Broadcast (《新闻联播》) on CCTV, as well as CCTV’s September 15 and 16 “Focus Talk” (《焦点访谈》) programs, and also the detailed reports due to be published on September 16 on Global Times online, as well as its the September 17 print edition. This hurried propaganda scramble is called ‘Operation Thunder 2018’ (2018-雷霆行动), and is an anti-espionage operation focused on ‘exposing Taiwanese spies.’ As state media reports, it’s about “increasing the anti-traitor and spy-prevention consciousness of the entire population, preventing online phishing and other harms to national interests and security,” as well as “firming up… the national security People’s Line of Defense.” At the same time, a similar Weibo announcement by Yibin Cable Television in Sichuan Province was censored. (More links on the operation are available here.)

Those familiar with the workings of Chinese Communist Party propaganda will recognize that yet another mass terror campaign is likely in the offing. 

Is the Private Sector Still Safe? 

Recently, a certain Wu Xiaoping (吴小平), self-identified as a “senior finance figure,” published a mere five paragraph article that has attracted significant attention. In it, Wu writes that “private companies would be ill-advised to continue blindly expanding; a completely new state of public-private mixed economic control — more centralized, more united, at a larger scale — will become an increasingly important part of the economy in the future,” and also 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.” His article argues that “in a battle between superpowers, China must concentrate its financial, material, and human resources, and must follow a planned development strategy.”

As might be expected, the article caused an uproar. Some observers suspected that it represented a trial balloon by Party Central; others thought the author was a nobody attempting to guess at what the higher-ups in the regime would like to hear, and curry favor by making the suggestion; while still others thought he was communicating the coded message that private enterprise should try to save themselves while they still had the chance. The independent historian Zhang Lifan (章立凡), based in Beijing, posed the question on Twitter as to whether the authorities were going to “kill the donkey once it’s finished pulling the stone mill.” The original essay was subsequently refuted by the People’s Daily, and appears to have been purged from domestic Chinese websites.

Whatever the case, the CCP’s plans of asserting control over private companies are already well underway. According to economist He Qinglian’s (何清涟) analysis of a key set of ‘Guiding Opinions’ about state-owned enterprise reform promulgated in 2015, private enterprises in China are going to be the main target for SOE reform. She wrote that the Chinese authorities hope to roll out a ‘mixed ownership system,’ in which “private companies can make cash purchases of shares in SOEs and become shareholders. But since the equity allocation ratio is based on the state-owned capital being the controlling party, private companies can only remain in a subordinate role, without any decision-making power or right to a say in matters.”

On September 16, the Chairman of the National Laboratory for Finance & Development (中国国家金融与发展实验室) Li Yang (李扬), speaking at an academic forum commemorating the beginning of reform and opening up in China, pointed out that as the economy declines, private companies will come under enormous pressure. Their “way to save themselves is to find a state-owned company as an ‘umbrella,’ and if they don’t do that they can’t get financing, and they can’t lower their costs. If they do that, the enterprise will survive, profits will be there, and employment will be maintained. It’s an outcome that should leave everyone satisfied.” Li Yang thinks that such a scenario would be an opportunity for state companies to buy out their private enterprise counterparts.

Over the past few years the CCP has already been hard at work establishing Party cells in private companies in order to exert control. If anything, the outsize reaction this short article received is a telling indication of how anxious and insecure the Chinese public feels about this trend intensifying.

Xinjiang University Professors Sent to Concentration Camps

sign series 1, uighur professors

Left, Professor Arslan Abdulla; right, Professor Abdukerim Rahman.

News continues to emerge of Uighur academics in Xinjiang being sent to the re-education camps. Twitter user @Uyghurspeaker tweeted in both English and Chinese from a Radio Free Asia report that “Personnel from Xinjiang University’s Overall Management Command have verified that the dean of the humanities department, Professor Arslan Abdulla (the former director of the consultative office of the government of the Xinjiang Uighur Autonomous Region) as well as Professor Abdukerim Rahman have been sent to re-education camps ‘for the same reason’ that Rahile Dawut (a folklore scholar) was. Rumors say that at least 56 professors and teachers at the university have been taken away.”

Professor Duwat, the scholar of Uighur folklore at Xinjiang University, disappeared last December and has not been heard from since. No one knows why.

Apple Hurts the Feelings of the 1.4 Billion Chinese People

Apple held its new product launch in California on Wednesday (September 12), with Phil Schiller, senior vice president of Worldwide Marketing, unveiling the new model of iPhones as well as when and where they’d first be sold. The background screen prepared for the event showed the individual flags of Hong Kong and Taiwan, and used the flag of the Republic of China for the latter.

Predictably, the China Youth League and Global Times immediately began expressing their displeasure, accusing Apple of having a double standard: “Apple, what are you trying to say here in your press event?” and “Given that you can put ‘United States’ before ‘Virgin Islands’ in order to differentiate it from the British Virgin Islands, why don’t you put ‘China’ before ‘Hong Kong’ and ‘Taiwan’?” Some Chinese netizens have called for a boycott of Apple phones and other products.

Following the public displays of contrition from Marriott and Mercedes Benz for similar grave insults, will Apple also apologize for hurting the feelings of the 1.4 billion Chinese people?

Uneasy Disappearance of a Popular Website

Letscorp.net, going by the Chinese name 墙外楼, which translates literally as ‘Over the Wall,’ is a popular Chinese news aggregation website, primarily focused on maintaining an archive of the news, posts, and commentaries that are censored inside China. The website uses RSS and mail subscriptions to propagate its content. Its Twitter handle, @letscorp, has been around for nearly eight years, and it boasts over 70,000 followers. Most of the time the Twitter handle has simply pushed out new content from the letscorp website automatically, but over the last year or so, the actual person behind the account has also become opinionated. He or she appears to be an astute observer of Chinese politics and society. Because of the website’s name (‘Over the Wall’), most everyone (including China Change editors) took it for granted that whoever runs the site lives outside of China.

Beginning on September 5, however, Chinese Twitter users noticed that the @letscorp account had stopped tweeting, that the website was down, and newsletters were no longer going out, and concerned users now feared that the website operator, likely based in China, had been identified by the authorities. “In the future, it will be more and more difficult to get valuable Chinese-language content even outside of China,” one Twitter user lamented.

We at China Change can’t help imagining the scene of that person being taken away, probably from his or her home, though we may never know, in the end, what has happened. Many Chinese Twitter accounts have similarly disappeared over the past few years. We recently subtitled and re-published a video of six police in Shenzhen forcing their way into the home of a young woman in the middle of the night simply for what she’d posted on social media.

Activist Barred From Traveling by Train

Ms. He Peirong, from Nanjing, is a Chinese activist who became very well-known during the Free Chen Guangcheng movement in 2012. Over the last few years she has been working on various public interest projects. On September 13 she tweeted out: “My liberty has been severely restricted; I can’t go out to buy train tickets, I can’t travel where I want in China. No department has officially notified me as to why I’ve been restricted and who is punishing me. I was preparing to travel to Shanghai yesterday, but only at the train station did I find out that I couldn’t purchase a ticket. I want to know which level of government made this decision. What is the legal basis for it?”

The ‘legal basis,’ it turned out, is likely China Railway’s May 1, 2018 policy of restricting the travel rights of individuals who have ‘seriously breached trust’ (《限制铁路旅客运输领域严重失信人购买车票管理办法》). It seems that Ms. He is now also marked as such an individual.

This and other incidents of the like are yet another indication of how the Chinese authorities appear to be planning to impose sweeping limitations on personal liberty as they deploy the national ‘social credit system.’

Cellphone Inspections in Hangzhou 

We made a mention of this elsewhere before but would like to draw your attention to it again: a Twitter user witnessed police in a Hangzhou subway station checking citizens’ cellphones. Similar incidents were reported in Beijing too. It looks like the Chinese government is conducting a trial of this practice in cities. The amended Police Law expected to pass during the Two Sessions in March 2019 will make such searches legal and therefore a common practice.

Date and time: August 23, 2018, 3:55 p.m.;

Location: Safety check at the entrance of the No. 1 Line subway at the Fengqi Road station, Hangzhou (杭州地铁1号线凤起路站); [the police were] checking the phone of every passenger waiting in line to enter the station;

Apparatus: They were using handheld scanning equipment;

The number of police: 6 to 7.

Crackdown on Christians

In Henan, the government has been conducting an intense crackdown on Christians, burning/removing crosses and dispersing congregations, forcing believers to sign pledges to quit the church, or closing down churches altogether (here, here, here, here). On September 9, the largest house church in Beijing, Beijing Zion Church, was shut down by the authorities who said it was not registered and “disrupted the order of civil organization management.”

Zion Church’s pastor, Jin Mingri (金明日), told Voice of America that religious repression has intensified since the 19th Party Congress. After the Congress (held in October 2017), the government has gone about strengthening both ideological and managerial control in all sectors of society. Then again after the ‘Two Meetings’ in Beijing in March of this year, there were further changes, in particular in religious policy.

Overall, the new policies indicate a shift from tolerating some non-official denominations of Christianity to heavily restricting them, as a greater number of religious populations are seen as ideological competitors to the Party, or even hostile forces.

Xu Zhiyong, in response to a video of burning cross, wrote on Twitter addressing the Party: “What wrong has Christianity done to you? You’ll suffer retribution for this! In this life, in this world, it will come to pass. On many occasions making a curse is the only weapon of the weak. If the curses are sufficient in number and people lose heart, the retribution will then arrive.”

10th National Assembly of Representatives of Overseas Chinese and Relatives is Held

A major convocation of overseas Chinese, overseas Chinese returnees and their families, was held in Beijing from August 29 to September 1. It must have been a significant event for all seven members of the Politburo Standing Committee to attend the opening ceremony. State media highlighted the fact that nearly 1,300 returnees from over 110 countries, as well as 700 (still) overseas Chinese, attended. Zhao Leji (赵乐际, China’s anti-corruption chief) made remarks that included this memorable exhortation for overseas Chinese: “Always remember [how] the Party and the People have entrusted you; spread good news about China; assist the development of the fatherland; safeguard the virtue of the Chinese people; promulgate Chinese culture; make new contributions to the realization of the China Dream of the Great Rejuvenation of the Chinese people and promote the construction of a Community of Shared Human Destiny.”

Observers should not think of statements like this as mere empty rhetoric — the Chinese government’s ability and readiness to organize, mobilize, and use overseas Chinese has reached an impressive level of scale and sophistication. For instance, following the CCP’s 19th Party Congress, the Chinese Embassy-controlled Chinese Student and Scholars Association (CSSA) at Harvard University, as well as a number of Hometown Associations on both coasts, organized discussion forums. In 2016, when the ethnically-Chinese police officer Peter Liang was being sentenced in New York City, the mass protest of Chinese and Chinese-Americans was suspected of having been at least in part mobilized by Communist Party agents, according to WeChat communications. And the Party’s Federation of Overseas Chinese, which operates on all levels of the government, regularly award membership in its “Overseas Chinese Committee” (海外委员会) to overseas Chinese who are in important positions in Western society, including many American university professors and scientists. China Change previously reported on the case of the Wellesley professor Charles Bu serving on one such commission.

Professor Xu Zhangrun, Author of Famous Lament, Forced to Return to China Early 

The author of the widely celebrated, lengthy reflection on the parlous state of affairs in contemporary Chinese political life published in July, Tsinghua University law professor Xu Zhangrun (许章润), was recently called back to China early from his visiting professorship in Japan. Rong Jian (荣剑), another Chinese scholar, saw Xu in Japan on September 7 and reported that Xu told him that “he was forced to go back on the 14th of the month.”

Xu’s essay, ‘Imminent Fears, Immediate Hopes,’ a portion of which was translated by China Change, and translated in its entirety by Geremie Barmé, was the subject of widespread public discussion in China and abroad, and was featured in a New York Times article for capturing the essence of concerns about China’s current political direction.

 

 


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At China Change, a few dedicated staff on a shoe string budget bring you information and produce videos about human rights, rule of law, and civil society in China. We want to help you understand aspects of China’s political landscape that are the most censored and least understood. We are a 501(c)(3) organization, and your contribution is tax-deductible. For offline donation, or donor receipt policy, check our “Become a Benefactor” page. Thank you.