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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.
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.
China Change, November 6, 2018
Teng Biao interviewed Prof. Stein Ringen on August 2, 2018 and October 5 via Skype. Stein Ringen is Professor of Sociology and Social Policy at the University of Oxford and Professor of Political Economy at King’s College London. Teng Biao is a visiting scholar at the U.S.-Asia Law Institute, New York University and a Chinese human rights lawyer. – The Editors
Teng Biao (TB): I think your book, The Perfect Dictatorship: China in the 21st Century, is one of the best books on Chinese politics in recent years. Is this your first book on China? What inspired you to study China?
Stein Ringen (SR): First, I’m interested in governments and states and how they work. This is the biggest and most challenging one. So if you want to understand states you need to understand the Chinese state, and so there’s the challenge. The other reason is that I had already done a study of the South Korean state. And I thought that the developmental states’ experience of Korea might be a relevant background for looking into the Chinese story. I thought it might be rather similar. In fact, it turned out that the Chinese story is very, very different.
TB: Yes, and then you wrote the book The Perfect Dictatorship. Why did you choose this title?
SR: I found that it is a dictatorship that is, from its own point of view, functioning very well. It is a dictatorship that is in full control. So my idea with the title was not to praise the Chinese system but to give a warning that this is a dictatorship that is very hard, and very much in control.
TB: In your book you created some interesting concepts, like “controlocracy.” What do you want to suggest by creating this term?
SR: The idea was, on the one hand, to say that this is a regime that is dictatorial, but in a way that sometimes it doesn’t even look dictatorial. It is obsessed with being in control. It is not obsessed with dictating everyone in their daily lives. It’s not like under Mao that people have to dress in a certain way or like certain forms of entertainment. But, it is in control. So control is the commanding feature of this dictatorship and it is very good at keeping and staying in control. The party-state is everywhere. It sees everything and knows everything, and they are in their very big population in perfect control.
TB: Another thought-provoking term in your book is “sophisticated totalitarianism.” In a piece I wrote recently for ChinaFile, I cited your term and elaborated on it a bit. I wrote: “This totalitarianism is strict and refined without being brittle and dogmatic; it’s cruel and barbaric without being chaotic. China’s booming economy, social stability, and apparent popular support for Xi have fooled both the world and most Chinese citizens.” What’s your view on the difference between this “sophisticated totalitarianism” and Stalin or Mao Zedong-style total control system? Is this system more adaptable, flexible and resilient, than traditional totalitarianism? Is the CCP able to learn from the collapse of other party-state dictatorships and maintain its own monopoly on power for quite a long time, say 40 or 50 years?
SR: It’s not acceptable. It is a very hard dictatorship and is therefore an unacceptable form of government. But they are very clever in making themselves look acceptable. I think both within China, but also in the outside world. As you know, people keep travelling to China and when they come back they are starry-eyed in admiration of the delivery of the system. So they are very much able to control their own narrative both at home and abroad. And, of course, they have learned very much from the collapse of the Soviet Union, which in Beijing was studied very carefully. And they understood the weaknesses in the Soviet Union that they had to prevent at home. These are, for example, to never lose control of the narrative, to always consolidate the alliance between the Party and the military, to maintain surveillance and propaganda and censorship ruthlessly, and to never let go, and also to not allow factions in the Party system. This they learned from the collapse of the Soviet Union and they are determined that there shall not be a similar kind of collapse in the Chinese system.
TB: Former Singapore UN ambassador Kishore Mahbubani once said that every year tens of millions of Chinese people travel internationally and then they voluntarily go back to China. He used this as a strong example to praise the so-called “China Model.” What do you think are the reasons? Do you agree with that?
SR: Many Chinese are traveling. Mainly, I think, because they can afford it; they have enough money to be able to travel internationally. We know that very much in Europe, for example, that there are very many Chinese tourists who travel here. They go back. On the other hand, there are many people in China who leave the country either because they have to, you know something about that, or because they wish to send their children to education outside of China. They try to bring their own money out of China to invest it and secure it outside of China. So many of those who are able, are showing with their behavior that they do not have much confidence in the future of the Chinese regime. The idea that the Chinese regime is better, the Chinese model is better than a democratic model, for example, is a very powerful narrative from the regime’s side. But we need to keep priorities right here. It is not a system that is better just because it delivers development, because it does that at the cost of depriving all Chinese of freedom. We know about authoritarian, totalitarian regimes previously, and that is the main characteristic of this regime. It is to the benefit of some, but it deprives everyone of liberty and freedom.
TB: Relatedly, George Orwell’s 1984 was famously regarded as a perfect dictatorship, do you think China’s “controlocracy” is equal to 1984, or is it even an advanced version of 1984? And I also used the term “technical totalitarianism” to analyze the advanced version of totalitarianism in China, with such examples as networked “stability maintenance,” big data, street cameras, facial recognition, voiceprint recognition, artificial intelligence, DNA collection, strengthening of the secret police, the Great Firewall, etc. Are we exaggerating the ability of the dictators’ use of high-tech? Aren’t high-tech and new tools a double-edged sword that can be utilized by civil society or resisters as well?
SR: Yes, China is very much like Orwell’s warning, including in the control of language, control of history, control of the narrative. But they have moved on because they now have technologies that Orwell could not even imagine at the time. And these technologies, these modern technologies, are being used for control in a very sophisticated way by the Chinese authorities. They are in control of the Internet. It was long thought to be obvious that no dictatorship can control the Internet. But the Chinese dictatorship is in control of it. They are actively using the Internet by engineering the stories that circulate. They are using other technologies, big data systems, facial recognition. All of this in order to control what is happening in their country. I mean this is now very advanced, particularly in Xinjiang, which is a police state of the kind that has never been seen previously. In the last few years, as you well know, the security budgets in that province have doubled year by year. And the control, explicit control there, by old-fashioned means –– police and military forces –– and modern means –– electronic surveillance, is still a kind that has never been seen previously. There has never been control of this kind anywhere in any country before, like the way we see now. We now see it unrolling in China.
TB: You know I was a human rights lawyer for 14 years in mainland China. Harshly speaking, during Hu Jintao’s era, we had some space to develop our human rights movement. And we felt that the Internet-related technology were more in favor of the civil society than the government, even though we knew both the human rights communities and the rulers made use of high tech. Now it seems that we should not be that optimistic.
SR: You know better than I do. The community of human rights lawyers has suffered very badly in China in the last several years. What was at one time, you say, a movement is now really crushed, and it has become very much more difficult for your brave colleagues to continue their work in China. Many have their businesses shut down. Many have been imprisoned, persecuted in other ways, and their ability to stay in touch with each other has been reduced very strongly. So it’s a very sad story what’s happened to that brave community. This is a story you know better than I do, but it is very hard to watch from the outside. There was a vibrant, brave community of lawyers, and they have really been taken down.
TB: Yes. The 709 crackdown on rights lawyers is the worst crackdown on lawyers since the legal system was reconstructed in 1978 after the Cultural Revolution.
TB: Most people know that China is one of the most unfree countries, but forget China is also one of the most unequal countries. How does this inequality affect the CCP’s political legitimacy? Or is it a necessity of the one-party rule of the Communist Party?
SR: Well, in my book about China, I looked at both inequality, poverty and public services. And I looked at taxes. I found that the tax burden of the Chinese people is very, very high. What is returned to the people in the form of services is minimal. Inequality has been increasing very rapidly. So now China is one of the most unequal societies in the world. And I think this is part of the reason for the dictatorship, because these are realities that could not be maintained under a democratic system ––the combination of very heavy taxes and very inferior services. It just doesn’t always look like that to observers, but that is the way it is. So the system, the political economy, extracts enormous resources from households and returns to the household sector a system of rising inequality. That is explosive in any society and is part of the reason why this regime needs to maintain such draconian controls as they do.
TB: The ideology of Marxism-Communism-Maoism has gradually declined in China. The CCP, and most Chinese people believe in money and power. How does this shift influence the CCP’s rule? Is this the reason why Xi Jinping tried to resort to a return to ideology and a cult of personality?
SR: Yes, among the innovations of Xi Jinping is the reintroduction of ideology, but now not Marxist ideology, but a strongly nationalistic ideology. His slogan of the “China Dream” and all that is a nationalistic narrative. So here we have a regime that is very strong, very dictatorial that is giving itself guidance by an ideology of nationalism and chauvinism. These are Xi Jinping’s innovations, the heart of his relentless movements of the regime into a heavier and heavier dictatorship.
TB: You mentioned nationalism. You know when the Chinese Communist Party founded the People’s Republic of China, they strongly — and successfully — utilized nationalism. Theoretically, nationalism is in conflict with Marxist theory—i.e., communism and internationalism. So, from the beginning, paradoxically, the CCP employed a mix of Marxism and nationalism, and now maybe they feel they need more nationalism. Do you agree with that?
SR: Yes I do. I think that part of the regime’s efforts to control the narrative is that they need an ideological superstructure. They need a story of purpose for the regime, and for the nation. And that they are now finding not in Marxist internationalism but in Chinese nationalism. And that story of nationalism has been notched up very strongly and very explicitly by Xi Jinping. This is again part of the control system. This is a regime that gives itself the praise that they have the support of the people, but at the same time, it never ever trusts in the support of the people. So they never relax controls even though they say that they are governing in such a way that they have the support of the people. They do not for one moment trust that that support is genuine. So they rely on controls.
TB::Some scholars noticed the similarity between the current Xi Jinping regime and Hitler’s Third Reich. The one-party rule and the total control of society. Ideology, propaganda, brainwashing, nationalism. What happened in Xinjiang is race discrimination, mass detention and cultural elimination, secret police and the cult of personality. So in your opinion, how possible is it that China’s political system goes toward fascism in the future?
SR: Well it’s a system that has very many characteristics of fascism in it now. Important in that statement is the use of ideology. Deng Xiaoping and his followers presented themselves as non-ideological, just pragmatists, engineers of economic progress. That is all gone, and the regime is back to ideology. So it is a dictatorship that is very hard. I now call it a totalitarian system. It is a totalitarian system that is informed by ideology and that ideology is nationalistic. These are characteristics of fascist rule. Now, I think, we should always be aware that the Chinese system is very much of its own kind. It’s very different from anything else, but it is a system that has taken very clear likenesses with the characteristics of fascism under the rule of Xi Jinping.
This regime does not present itself to the world as a bully in the way, for example, Putin’s Russia does. It is a bullying state. Ask democracy activists, who routinely get beaten up. Ask human rights lawyers, who are now pretty much forbidden from practicing. Ask the people of Xinjiang, now a horrific police state, complete with a vast network of concentration camps. Ask international corporations that are forced to humiliate themselves and pay tribute if they want to do business, or governments in smaller countries if they want collaboration. Or ask neighboring countries around the South China Sea. But it is also a state with the clout and skill to disguise its bullying side and make itself look sophisticatedly elegant.
TB: In a recent letter, you were publicly calling for China analysts to describe China as a totalitarian, not an authoritarian state. It aroused interesting debates. In your opinion, what are the academic and non-academic reasons behind the reluctance to categorize China as totalitarian?
SR: I think there are now very few academic reasons for not categorizing the PRC as a totalitarian regime. I go by Hannah Arendt’s pioneering work and I think the PRC under Xi now fits the bill. The final straw has been the imposition of outright terror in Xinjiang.
In the debate following that open letter, there was much support for my position, but also, as you note, reluctance. Some of that reluctance is simple self-censorship. Many China scholars have invested their careers in work that requires being in China, having access to Chinese universities, archives and so on, and they cannot risk this being refused. That is understandable and I do not find it particularly upsetting. Another reason is what I have called “China fascination.” China, with its long history and rich culture, has an uncanny ability to fascinate. I think some academics in the field really wish for the best for China and the Chinese people and are for that reason reluctant to accept so negative a label as “totalitarian.” I think this kind of reluctance is misplaced, but also understandable. Related is a view that China is unique and that it is, therefore, too crude to apply a categorization that puts the Chinese regime in the same class as various other unpalatable regimes.
I should add that when I speak about totalitarianism in China it is of course the regime I am talking about and not the country, the culture or the people.
TB: You had analyzed the Chinese state as “trivial”. How “trivial”–– in your context, it means having no purpose beyond itself ––is the Chinese state? F.A. Hayek emphasized the “purposelessness” of a state. How should we understand the difference between purposelessness and triviality?
SR: I thought that one kind of dictatorship could be called “trivial” in the sense that it is nothing but control for the sake of control. There is no mission, no idea. I do not think that applies to the Chinese system, certainly not now. There is now a mission; there is an ideology, a vision of what this is for, and that vision is for China to regain its position as the Middle Kingdom in the world. This is a very ambitious idea that gives the dictatorship a purpose that makes it–– in my terminology––more than trivial. It makes it an ideological system, a system with a strong purpose of its own definition.
TB: So you mean Deng Xiaoping had no big ideology, and his successors Jiang Zemin and Hu Jintao, had less ideology, and Xi Jinping has more ambition to “make China great again?”
SR: I mean that may have been the ambition all along. Deng Xiaoping perhaps understood that it would take time before China had the economic and other powers to really accept the ambition of making itself the central power in the world. Now, they have the economic and other powers. And they are hard at work in making China the dominant power in the world.
TB: Some people argue that Xi Jinping’s personal dictatorship is a collective choice of the Communist Party, when it is facing comprehensive crises –– political, financial, and ideological crises. Do you agree?
SR: There’s always one branch of thinking about the Chinese system that says that it is in crisis. As you know, people have been predicting that it would collapse for a long time, but that hasn’t happened. I think it’s a system with many tensions in it. And I think Xi Jinping made his first mistake from his own point of view, his first mistake, when he had the time limits on the presidency abolished earlier this year. That was a mistake, because it wasn’t necessary. It was a display of power that was demonstrative; it pulled aside the curtain for the rest of the world to see that this is a ruthless dictatorship where the top man can change the constitution by flicking his fingers, and it exposed the inner conflicts in the regime. Of course, there are disagreements and conflicts within that regime. And this step by Xi Jinping was demonstrative towards anyone who is not firmly within his camp, and he gives those others a motivation for organizing factional activity. We see some signs of that now, so I think this was a mistake on the part of Xi Jinping. He undermined, to some degree, his own position. And he let himself become the victim of the hubris of too much power.
So he committed a great mistake, in my opinion, and that mistake has followed through to some tensions within the system. Those tensions are now being stimulated by what is seen as not strong enough economic growth, and so on. So there are now visible signs of tension. That tension has been stimulated by Xi Jinping’s mistake. I think this was really the first mistake he did in his first five years. Otherwise, he has been consolidating power and cohesion within the system. And suddenly he took a step that undermined some of the “achievements” that he had made in his first years. However, I do not think this is a system on its own terms that is in any way in crisis. The control is very, very strong, and the strengthening of control that has happened under Xi Jinping is in anticipation of difficulties with economic growth, for example.
TB: Relatedly, will Xi Jinping’s anti-corruption campaigns hurt the dynamic or motivation of the CCP cadres? As to the totalitarian dynamic, like interest, ideology, nationalism, brainwashing, violence, or fear, will they be exhausted in China or elsewhere?
SR: The anti-corruption campaign has had two intended results, I think. One is to make the regime look more attractive in the eyes of many Chinese people. There have been improvements in the corruption environment. So most Chinese are now less exposed to arbitrary corruption than they have been previously, or at least, they have seen improvements in that respect. The other result is that it has been a powerful weapon of power, control within the system. When everyone is corrupt, anyone who needs to be taken down can be taken down in the name of corruption. So under the auspices of the corruption campaign, Xi Jinping and the other leaders have been able to eliminate anyone within the system whom they’ve seen as not approving of them, or are seen as in anyway threatening. These “achievements,” dictatorial achievements, have been notable in the anti-corruption campaign. It has worked in both respects. It’s a remarkable system in the way it gives itself credit for liberating the people from the miseries that it, itself, has imposed on them.
TB: Some Chinese people, I think, are unhappy with the anti-corruption campaigns, even though they feel good once some corrupt government officials are arrested or sentenced, or even executed. But first, some privileged families are not affected. Most of the privileged families, those very high-level families, are not affected, like Deng Xiaoping or Li Peng’s families. And second, more and more Chinese people realize that this kind of corruption is embedded in the political system. It exists everywhere and is systematic. So what’s the next step of Xi Jinping’s anti-corruption campaign? Will the anti-corruption campaign influence Xi Jinping’s political agenda?
SR: As I see it, I think the anti-corruption campaign has done its work. You know, we hear much less about it now than previously. I think there is less ordinary workday corruption. So it’s done its work, cleaning up a bit, in the daily lives of many people. Many potential opponents of the regime have been eliminated, so I think it’s really done its work. As I understand it, it goes on, but now it’s more of a routine. It’s not a big show anymore. I think it’s mainly had its time; it has run its course. And it does not have the prominence in the regime’s self-presentation as it did for a while. I’ve no doubt it will continue, but it is not the central instrument that it once was.
TB: Samuel Huntington distinguished performance legitimacy from procedural legitimacy; and A. John Simmons made an even clearer theoretical distinction between legitimacy and justification, arguing that recognition, through free elections, is the only source of modern legitimacy. In the context of post-Mao Chinese politics, is “performance legitimacy” enough for the regime’s political legitimacy?
SR: Well, not in the opinion of the leaders themselves. They do not trust that they are seen as legitimate, so this is why they never relax controls. They praise themselves for the delivery to the people. They praise themselves for the gratitude that they are getting back from the people. But they never trust that they are seen genuinely to be legitimate, so they always fall back on control — never relaxing controls and always maintaining controls. No genuine trust that there is genuine legitimacy.
TB: Has the world had second thoughts about China after Xi Jinping removed the presidential term limit from the Constitution? Is the image of China changing in light of the facts of the deteriorating human rights situation, failure to abide by WTO rules and UN norms, even the CCP’s abduction of dissidents on foreign soil? You know the Gui Minhai case, a Chinese publisher with a Swedish passport who was kidnapped in Thailand and sent back to China and detained. So can we say that the presumption many people accepted, that is, that a market economy and globalization would lead China to become a democratic, open society, has been proven wrong?
SR: Yes, I think so. It is now very difficult for anyone in the world to escape the recognition that in China there is a hard dictatorship. It’s a dictatorship that in many ways is good for business. Many people are fascinated with China and want to see the good in the system. But the development under Xi Jinping clarified to the rest of the world that this is a hard dictatorship. This is not a mild, benevolent autocracy; this is a hard dictatorship. I think the regime has brought upon itself a more difficult evaluation from the outside world.
TB: Have you seen many scholars, Beijing watchers, start to rethink the assumption that the market economy and globalization will guide China to become a liberal democracy?
SR: I mean this was a strong theory for a while. But it is not a theory that anyone subscribes to anymore. In the long run, we do not know. In the immediate future, it’s clear that this is not a system that is on a path towards a more open society. It’s a system that, for the last five or six years under Xi Jinping, has been on a very clear road towards tighter dictatorial controls. In a way, it is moving politically in the opposite direction than was previously assumed because of its economic development. Economic progress, and political regression –– this was not thought to be possible previously. We are seeing in China that this is possible. It’s possible for the country to modernize economically and to regress politically towards an increasingly hard dictatorship.
TB: For the past two decades or so, there has been a return to totalitarianism, the expansion of authoritarian influence, in Russia, Turkey, the Philippines and, of course, China, and some countries in South America. What’s behind this phenomenon?
SR: I think that there are, at least, some very clever dictators out there. Vladmir Putin in Russia is from his own point of view a clever operator. I think also there is a problem on the democratic side that democracies have been functioning quite poorly in many ways in recent years after the global crash. In 2007-2008, the democracies had not really managed to govern in a way that seemed to be beneficial to most people. And to be fair, I think we are seeing a revolt against what is perceived to be inadequate governance in the democratic countries, in particular, in the United States and in Britain. So that is weakening the democratic side. Why the autocratic side is strengthening, for someone like myself, that is a source of great concern and sadness in the world. And, I think, we on the democratic side really need to get our own house in order and to step up and to see that there have been real shortcomings in the way we are managing our affairs. That’s true in much of Europe and the European Union. It’s true in America. We really need to step up and do better than we have been doing.
TB: What’s your view about Francis Fukuyama’s claim (deepening a tradition of Hegel and Kojève) that liberal democracy is the end of history?
SR: Well, the history of democracy is not a very encouraging one; it was invented 2500 years ago but we have had very little democracy since then, so it’s possible that democracy will not survive. And right now, there is, for my tastes, too much admiration of autocratic strength and not enough appreciation of democratic liberty. And what I’m, in modest ways, trying to do is to encourage the understanding of the importance for our way of life of democratic governance. I think again, we need to step up and to do better in the democratic world.
TB: When Liu Xiaobo was awarded the Nobel Peace Prize, the Chinese government tried to punish Norway with “Salmon politics.” My personal experience is that the American Bar Association rescinded my book proposal for fear of angering the Chinese government, and some universities canceled my scheduled talks to avoid the risk of infuriating Beijing. In Hong Kong, China has torn up the “one country, two systems” commitment and the Sino-British Declaration. Hong Kong’s freedom is in danger and the UK has remained silent to a great extent. From your point of view as a Norwegian scholar living in the UK, is the policy of “buying silence” successful? What should the world do to fight the growing aggressiveness of the CCP?
SR: Yes, the policy of buying silence is successful. This is sad to say, but it’s the case. You see that in my own country, as you mentioned, in Norway, they have normalized relations with China on the condition, in writing on paper, that the Norwegian government shall do nothing to disturb the new normal relations between the two countries–– a commitment to silence. And in Britain, the authorities here want Chinese investments for various purposes. They are silent. So severe human rights abuses that occur in China, they go on without much mention in the rest of the world. What we should do, I think, is to continue to be in contact and collaboration with Chinese people and Chinese authorities. For example, in the academic world where I operate, we should continue to be in contact. But, we, and our governments, should at the same time speak, in clear language, about the Chinese regime’s transgressions against human rights and the regime’s aggression in international politics. This happens to some degree but it does not happen as clearly and straightforwardly as I think it should, given the harshness of the Chinese dictatorship. And I think the democratic countries should collaborate and find some kind of common voice against the excesses in dictatorship and aggression from the Chinese side; we should speak with clear language.
TB: China is playing a more and more active and aggressive role on the international stage, and shapes the international order. How far will China go on the way to influencing the international order? Or how possible is it for the West to give up its appeasement policy toward China, before it is too late?
SR: I’m very pessimistic about all of this. I think that the Chinese regime is, by and large, able to control the narrative, and they are widely regarded to be a positive influence in the world as they present themselves. This is for many reasons; partly it is for reasons of self-censorship. Many of us have interests in China, economic interests, interests in being able to do research, for example, and we exercise self-censorship. So there is no common voice from the democratic side in response to Chinese totalitarianism.
TB: To what extent does the CCP in foreign affairs, represent the interests of China and the Chinese people, and to what extent does it represent only the Party itself, every diplomatic choice is aiming to maintain its one-party rule and the interest of the privileged?
SR: I always start from the basic premise that the PRC is a political project. Policies, domestic and foreign, are always designed to the perpetuation of the party-state. In foreign policy, that includes making this party-state ever more influential and dominant on the world stage. Is it in the interest of the Chinese people that the party-state gains in strength? I would say no, since it is not in the interest of the Chinese people that the dictatorship becomes stronger and more invincible. However, the nationalistic narrative of “national rejuvenation” no doubt has resonance in much of the population. This dictatorship, as many others, finds nationalism a strategically useful card.
TB: So these are my questions, do you have other comments before we wrap up?
SR: I know that many China observers always see signs that things are cracking in the Chinese regime. The economics are not performing well enough. There is disagreement within the regime, and so on. Personally, I think that the right description is to see this as a regime that is in control and that we can expect very little improvement in that respect in the foreseeable future. So I’m deeply pessimistic about any movement on the Chinese side towards a more open society, and a more collaborative profile in international relations. I think, on the contrary, it’s increasing control domestically and increasing its quest for domination internationally.
TB: Thank you very much, Professor Ringen.
Also by Teng Biao on China Change:
Politics of the Death Penalty in China, January 16, 2014.
The Confessions of a Reactionary, August 27, 2013.
Matthew Robertson, October 11, 2018
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.
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.
Google Recommends Product From a Chinese Company with Communist Party and Military Ties for its ‘Advanced Protection Program’, Matthew Robertson, August 23, 2018.
China Change, September 30, 2018
Unsettling news from China emerges every week — on social media, in reports, and from our own sources in the country. Not every new development is suited to a fully fleshed-out analysis, and as with so much in China, many reports and developments cannot be immediately confirmed or properly evaluated. Nevertheless, while each individual brush stroke may not be decisive, upon stepping back a fuller picture begins to emerge. China Change catalogues and contextualizes these items so as to keep a growing awareness of changes in China. — The Editors
‘Public-private partnerships’ 2.0: la chasse à courre
Chinese officials have come out with a string of comments recently that have spooked private companies. The first was a “senior financial figure” Wu Xiaoping (吴小平), who advised that “the private sector in China has already completed its task of assisting state sector economic development, and it should now gradually diminish in importance.” This was shortly followed by vice-minister of the Ministry of Human Resources and Social Security, Qiu Xiaoping (邱小平), saying that private enterprises must implement the “democratization of management, with the participation of workers led by the Party organizations of private enterprises,” and that “workers and enterprises must work together to create mechanisms for co-creation of benefits, sharing of benefits, and sharing of risks.” This process appears to be already underway.
On September 26, The Economic Daily (《经济日报》) defended the practice of SOEs buying stakes in troubled private companies and becoming the controlling owners. The paper argued that private companies encountering difficulties should turn to SOEs to be rescued — and indeed there have been many private companies that have already “sold” control rights to SOEs or state capital to survive. “The introduction of new SOE shareholders in listed private enterprises and the reform of mixed ownership are very much in the same direction. Both are in order to stimulate enterprise vitality, improve production efficiency, and achieve mutual benefit and win-win results.” Yet the author neglected to delve into the institutional reasons as to why private enterprises in China are facing such peril. “According to the chief economist of China Merchant Bank, all 11,000 businesses that went bankrupt between 2016 and the first half of 2018 were private,” Huang Yasheng wrote in an op-ed in The New York Times.
In a September 27 article titled “Vigilance against new public-private partnerships under the banner of ‘sharing’”, Hu Deping (胡德平), the son of the former Party secretary Hu Yaobang (胡耀邦), voiced unease and opposition to the above prescriptions and maladies. He cited a certain ‘Document 15’ from 1991 meant to encourage the development of private enterprise. Hu concluded that, “At a time when the private sector is in such difficulty, I feel that what’s happening in some places differs starkly from what people thought they understood clearly yesterday. Problems that have been understood clearly and resolved previously are now being brought back in a new form. There’s still a wish to crush private enterprise and force them into public-private partnerships. If this becomes a trend, and none dare to criticize it, then the consequences will be frightening.”
Just a few days ago, an essay titled “Wandering in the land of one’s ancestors” began spreading on the Chinese internet, despite being repeatedly censored and deleted. Who is said to be wandering on the land of their ancestors? China’s private enterprises — because the country doesn’t belong to them. A 60 year-old businessman lamented, as the author explained it: “After so many years of doing business and experiencing so many trials and tribulations, this is the first time that death has felt so close to his business: he suddenly felt like a wanted fugitive and pursued by tax, environmental, industrial, and urban management authorities, even neighborhood committees. In order merely to survive, his enterprise debt has been levered up to a degree that would wake him in his dreams. His company is walking on a tightrope. If short sellers attack him in the market, or a bank tries to pull one of the loans, the company could collapse overnight.”
The author writes: “Chinese SOEs occupy over 70% of the resources, but generate less than 30% of GDP, whereas in the four decades of reform the private economy contributed at least 50% of China’s GDP, 60% of the tax base, 70% of the technological innovation, and more than 80% of urban employment. Even in 2017, the peak year of the targeted tightening of supply-side reforms, private industrial enterprises outperformed state-owned industrial enterprises, getting an overall return on net assets of 19.6%, versus less than 10% return on net assets by SOEs. If private enterprises can be liquidated and banished at any moment, is there any other outcome than a net loss for society?”
The author continued: “It is no accident that China’s economy has been on a downward spiral since 1956 when joint public-private operations came into effect. By 1978 China’s GDP’s accounted for only 1.8% of global GDP, and the national economy was on the verge of collapse.”
The article features numerous graphs and data points.
The reason private companies can be ‘beaten’ at a moment’s notice, the author writes, is because of their ‘identity,’ or the nature of their ownership. The fact that the enterprises are private means that they’ll always be outsiders and exiles in China. The author asks: “Why can’t we put aside the debate about the ‘identity’ of who owns the means of production? Why can’t all enterprises simply follow the law across the country, work hard, serve this country, and be equally treated, honored and praised? Why is that so hard?”
It’s very hard. Because it’s the equivalent to demanding that China changes its political nature, establish a functioning rule of law, protect private property rights, and enshrine liberty and equality before the law. For the Communist Party, this is a hard ask indeed.
123 Hong Kong-listed SOEs amend their charters to give the Communist Party sweeping control over companies
Hong Kong’s Apple Daily reported that, from March 2017 to today — a period of about 18 months — 123 Hong Kong-listed SOEs have amended their articles of association to expand the power of their Party committees without limit, including eight blue-chip companies: Commercial Bank of China (939), Industrial and Commercial Bank of China (1398), Bank of Communications (3328), Bank of China (3988), CITIC (267), Sinopec (386), PetroChina (857), and China National Petroleum Corporation (1088). The state-owned companies involved included Conch Cement (914), China Jiaotong Construction (1800), and China Huarong (2279), among others.
The revised constitution stipulates that the companies must set up Party Committees: “The Party Committee will play a core leadership role, taking charge of the direction, managing the overall situation, safeguarding implementation, ensuring supervision of the implementation of Party and state policies in the company, and implement the major strategic decisions of the Party Central Committee and the State Council.”
The revised constitution also gives the Party Committee the power to override the board. “When the board makes major decisions, it must first listen to the opinions of the Party Committee.” Also, executive appointments and dismissals also fall into the hands of the Party.
Aren’t they just writing into articles of association what they already practice?
Xi embarked on a tour of northeast China this week. He visited the Heilongjiang Agricultural Reclamation and Construction Jiansanjiang Administration (黑龙江农垦建三江管理局), an important grain production base; in Qiqihar, he visited China First Heavy Group (中国一重集团), the old industrial base of China’s planned economy; he went to Chagan Lake in Jilin and the oil fields in Liaoning; he also went to Lei Feng Memorial Hall.
One may as well say that Xi was on a trip strengthening the symbolism of the Maoist era.
He also visited the Zhongwang Group (忠旺集团), a private enterprise in Liaoning, and said that the Party has always encouraged private economic development, and has promoted policies supportive of the private sector. Huh? Does China’s Chairman-of-Everything not know that private companies in China are falling off the cliff?
Of the 30 minutes of CCTV’s Evening News (新闻联播) on September 30, 25 minutes were dedicated to Xi Jinping’s inspection tour of the three northeastern provinces. One of the recurring watchwords was ‘self-reliance.’ Chinese must be self-reliant on grain, self-reliant in industry, etc.
Observers noted that whenever the Party was faced with serious political and economic challenges on the one hand, and become isolated internationally, it called for ‘self-reliance.’ The phrase first appeared in 1941, when the Party mobilized its people to grow opium in Nanniwan, near Yan’an, in the Party’s Shaanxi-Gansu-Ningxia base. The second time it was used was in 1960 during the great famine, and the third time in 1975 during the Cultural Revolution. This is the fourth occasion. Those who study China can reflect for themselves on the meaning of those four occasions.
Throughout his trip in the three provinces, Xi Jinping talked about ‘rejuvenating the Northeast.’ In the course of his visit, he even held a seminar on the very topic. The fact is that the economies of the three provinces — Liaoning, Jilin, and Heilongjiang — have been deteriorating for a long time now (read more), exhibiting the weakest economic growth numbers in China, and likely exhibiting decline over the last few years.
Less discussed is the bureaucracy, corruption, and mafiazation of the northeastern political sphere. In 2016 Sina Finance published an article titled ‘How bureaucratism has destroyed the northeastern economy,’ which was quickly deleted. The article however is still visible on some discussion forums.
None of these hard facts has made into Xi Jinping’s photo ops and the state media verbiage.
On the other hand, China’s grain crisis has been a major topic of public discussion recently, and research indicates that China is headed for serious food supply problems in the years ahead. On September 21, Xi led the Politburo in its ‘eighth collective study session’ to discuss the implementation of his rural revitalization strategy.
On September 26, the State Council issued the ‘Strategic Plan for Rural Revitalization’ (2018-2022), the first basic principle of which is to “adhere to the Party’s control over rural work,” and “ensure that the Party always assumes full control of the overall situation in rural work, coordinates all parties, and provides a strong political guarantee for rural revitalization.”
No reporting bad economic news
Chinese regulators in recent days have demanded that online finance websites like Sina Finance and Phoenix Finance be suspended and rectified. ‘Big V’ financial commentators on Weibo have also been commanded one-by-one to stop posting. Media reporters revealed that almost every web portal received notice from the Central Propaganda Department to cease reporting in six categories of news: 1) Disclosure of declining economic data, 2) Local government debt risks, 3) The adverse effects of Sino-US economic and trade frictions, 4) Data showing a decline in consumer spending, 5) Inflation and economic stagnation, and 6) Hot social trends. All such reports are to be strictly censored, the notice said.
The New York Times has a detailed report on this.
Once again, a campaign against ‘bourgeois liberalization’
Global Times said CCP has new rules that will “expel members who express support for bourgeois liberalization online.” We ran through the article twice trying to find out just what ‘bourgeois liberalization’ is. We didn’t find a definition but we did learn what behaviors can lead to expulsion under the label: “opposing the Party’s decisions on reforms and opening-up through online platforms,” “speaking out against the Party’s major principles online,” and betraying faith in the Party without discarding Party membership.
Also, criticizing problems like corruption, or the gap between rich and poor is also ‘bourgeois liberalization.’
Beijing-based historian Zhang Lifan (章立凡) said that the bourgeois liberalization being talked about now appears to be referring to freedom of thought outside the scope of the regime. “The ruling party has become the biggest landlord and the biggest capitalist in China; the crony capitalists are the real bourgeoisie, and they treat those who think and speak critically of them as ‘bourgeois liberalists.’” Zhang continued: “Raising once again the idea of anti-bourgeois liberalization is due to the Sino-US trade war of late, which brought out a lot of divergent views from within the party, and so now they’re clamping down on public opinion.”
Deng Xiaoping was the one who invented the term “anti-bourgeois liberalization,” because he was afraid that the opening up and reform he had championed would lead to the erosion of the Party’s ideology. In 1987, there was a national “anti-bourgeois liberalization” campaign in response to vibrant discussions of democratic values on university campuses.
Mass trials in Xinjiang; Uighurs are being shipped to other provinces
Many thanks are due to Twitter user @uyghurspeaker who has been translating reports from RFA’s Uighur service into both English and Chinese. We post below some of his tweets edited for clarity:
Kunes County, Ili, is reported to be holding mass trials in internment camps, sentencing around 500 prisoners on each occasion. Officials asked the inmates: “Will you eat halal or non-halal foods?” Those who answered “halal” were sentenced to 3-5 years. (link)
Mass trials are also taking place in camps in Tokkuzak, Kashgar. At least 50 people per day have been sentenced for 3-15 years. Nejmidin, the political commissar at the Bulaksu police station, said that he escorted a group of convicts to prison in Chinese provinces three weeks ago. (link)
These RFA reports about mass sentences in internment camps are consistent with recent news of railways closed-off in Urumqi, Gansu, and Qinghai for the purpose of dispatching Uighurs throughout prisons in China. That is, it appears the authorities are handing down sentences, then sending Uighurs to prisoners around the country. We first noted The Epoch Times’ reports of such news in Signs of China (2).
A RFA Chinese report, citing a Uighur service report on September 28, says that in a township in Kashgar, policemen were taking local Uighurs in internment camps to other provinces in China. They said the transfer started early this month.
The Chinese railway and Urumqi tourist bureau announced that “due to adjustment to the operation schedule of passenger trains,” starting October 22, the railway will not sell train tickets going to or leaving Xinjiang. It didn’t say when service will resume.
The Uighur writer and activist Ilshat Kokbore writes: “We’ve already heard some things about this. The farthest they’ve transferred Uighurs is to prisons in Heilongjiang.” Heilongjiang is China’s northernmost province, bordering Siberia.
More Uighur elites sentenced or sent to camps
According to an RFA report, Halmurat Ghopur, president of the Xinjiang Food and Drug Administration’s Department of Inspection and Supervision in the regional capital Urumqi, was taken into custody in November 2017 and is being held in an unknown location for “acts against the state,” sources in exile told RFA’s Uighur Service earlier this year. He was recently given a two-year suspended death sentence for exhibiting “separatist tendencies,” according to an official source.
According to a RFA Uighur-language service report, Sattar Savut, chief in the education bureau, and Yalkun Rozi, a writer, critic, and editor, as well as three others, were charged with separatism for teaching children about Uighur cultural figures. Sattar’s sentence was given with two years of reprieve, while Yalkun was reported to receive a life sentence.
‘Where are my family members?’
Member of the Uighur diaspora initiated a YouTube series in which overseas Uighurs tell stories of their loved ones who have gone missing, been tortured, or died in internment camps.
How much money do Chinese officials have in the United States?
The United States recently announced sanctions on PLA lieutenant general and director of the military’s Equipment Development Department, Li Shangfu (李尚福), because the department he led violated American sanctions by buying military equipment from Russia. The sanctions on Li include a visa ban that restricts him, and his agency, from U.S. financial transactions and access to any assets in the jurisdiction of the United States.
Some have asked: is there any evidence of the much-talked-about notion that high-level Party officials and relatives have assets in the United States? The Weibo account ‘Los Angeles Landlord’ (“洛杉矶房东”) recently reminded everyone of a case as a way of answering this question: “A shocking case took place in the San Francisco Bay Area last year, where a certain Tiffany Li (李凡妮) was charged with murder of a man. Bail of $70 million was put up. Tiffany’s Li’s mother, Li Jihong (李继红), traveled from China to the United States and submitted to the court real estate assets of $62 million, as well as $4 million in cash for the bail. This was the eighth largest bail amount in the history of the U.S. court system.”
According to the reporting of Apple Daily last year, a California property insurance company’s investigation revealed that Tiffany Li and her mother, personally and in a trust, had multiple properties in San Mateo and the elite areas of Hillsborough and Burlingame.
Internet users are adamant that Tiffany Li’s mother, Li Jihong, is the younger sister to Li Jinai (李继耐), former director of the General Political Department of the PLA.
The example of the Li family highlights why sanctions against characters like Li Shangfu might cause unease and panic among senior Communist Party officials who have family and vast wealth in the United States.
Men in Black on Tiananmen Square
PRC National Day is upon us (it falls on October 1), and security officers are now out in force on Tiananmen Square. The following video clip was posted online, showing the conspicuous ‘undercover’ officers in black suits, with black umbrellas. What is the purpose of the latter? So that if anything happens on the square, they can quickly open their umbrellas, cover the scene and prevent it from being seen or photographed.
Signs of China (1), September 16, 2018.
Signs of China (2), September 22, 2018.
China Change, September 22, 2018
Unsettling news from China emerges every week in a constant flow — on social media, in reports, and from our own sources in the country. Not every new development is suited to a fully fleshed-out analysis, and as with so much in China, many reports and developments cannot be immediately confirmed or properly evaluated. Nevertheless, while each individual brush stroke may not be decisive, upon stepping back a fuller picture begins to emerge. China Change catalogues and contextualizes these items so as to keep a growing awareness of changes in China. — The Editors
Local Government Debt: Going Bankrupt, or Raising More?
On September 13, the General Offices of both the Chinese Communist Party and the State Council jointly published a document giving ‘guiding opinions’ on limiting the debt that state-owned enterprises can take on. One line that attracted particular note said: “Local Government Financing Vehicles [LGFVs] whose assets are severely insufficient to collateralize their debts and have lost the ability to repay should engage in bankruptcy and restructuring, or liquidation proceedings, according to the law; resolutely guard against ‘Too Big to Fail,’ resolutely guard against the accumulation of risk becoming systemic risk.”
LGFVs are entities established by local governments around China, including fixed asset investment companies, real estate and urban development companies, and urban asset management companies. They invest in municipal construction and infrastructure projects, and are a de facto form of municipal debt (from 1995 to 2009 municipalities in China were forbidden from issuing bonds).
In early 2009 the People’s Bank of China (PBoC) and the China Banking Regulatory Commission (CBRC) issued the policy that gives the regulatory framework for this behavior, which “supports qualified local governments to organize infrastructure financing vehicles, issue debt, medium-term notes, and other financing instruments, in order to expand complementary financing channels for central government investment projects.”
Beijing economist Hu Xingdou (胡星斗) told Radio Free Asia (RFA) that the scale of LGFV debt in China has probably reached 40 trillion yuan, and the bankruptcy of LGFVs will likely cause serious losses among a very large investor base. “In particular, much municipal debt has been funded by Wealth Management Products [WMPs] sold through banks, and many people hold these products in their portfolios. A lot of people may lose their life savings.”
Chinese internet users remarked that bankruptcies in LGFVs equate to a default on the debt, and that a lot of people are going to lose their money. Some estimated that the number impacted in the coming LGFV bankruptcy wave will far outstrip, by an order of magnitude, the recent losses in the peer to peer investment sector, which saw thousands of angry investors protest in cities across China.
Yet even as municipal debt vehicles face bankruptcy, on August 14 the Ministry of Finance put out a circular demanding the rapid expansion of local government infrastructure bonds, which led to a massive rush of issuance. These bonds are the major way local governments finance their infrastructure expenditures. According to Xinhua, as of mid-September, around 200 billion yuan of new debt had been issued, which added to the August new issuance of 428 billion, making total new debt issuance in just 1.5 months over 600 billion yuan.
Why is so much new debt being issued even as the central government is warning against systemic risk and demanding the municipalities unable to support their debt initiative LGFV bankruptcy proceedings? We profess to have no clue.
The Government Wants Chinese to Spend, Spend, and Spend More
On September 20, the CCP and the State Council published a circular providing “a number of opinions” on encouraging more consumer spending: make the public increase their expenditures on food, clothing, accommodations, travel, and more; increase the quality and expand the number of things they spend money on (cultural products, travel, sports, health, retirement spending, housekeeping, education, training, children); create new consumer products, make them spend more online, consume more customized products, and also spend money on ‘smart’ technologies, fashion, and other popular trends. Rural residents are encouraged to up their consumption too.
Any economy is driven by investments, exports, and domestic consumption — but with the extraordinary growth of China’s fixed asset investment being largely exhausted, and exports facing tariffs from the Trump White House, the government seems desperate to boost consumption, even though it has been promoting it for some time now.
Someone in Zhongnanhai is evidently working overtime on these new opinions and demands, which are falling down like snowflakes.
Affirming for the 1001st Time That China’s Judiciary Is the Party’s Judiciary
Lawyer Liu Xiaoyuan noted the following piece of news: that on September 12 the Party Group of the Henan Higher People’s Court issued four circulars expelling from office 48 judges in the court. The circular attributed the decision to the provincial Party’s Organization Department. Liu Xiaoyuan notes that whether required by the provincial Party apparatus or decided upon by the court, going about it this way is against Chinese law. According to the Chinese constitution and the Law of the People’s Republic of China on the Organization of the People’s Courts, court presidents are elected by People’s Congresses at the same level; deputy court presidents, presiding judges, deputy presiding judges, and judges must be appointed and dismissed by the Standing Committee of People’s Congresses at their same level.
Meanwhile on September 17, the Ministry of Justice held a meeting in Yunnan for the promotion of “Party Building Work” among lawyers. Minister of Justice Fu Zhenghua (傅政华) spoke at the convocation, demanding that “the Party must assume comprehensive leadership in lawyer work; implement total coverage of Party Organization and Party Work across the legal field before the end of this year; guarantee the three year goal of Party building having achieved total coverage, total conformity, and total leadership by 2020.”
Is China Moving Muslim Internees to Other Parts of China in the Face of International Outcry?
The Chinese edition of The Epoch Times, a Falun Gong-associated newspaper, recently reported the following: “An official source in China recently obtained information from an associate in the police that over the last few days Uighurs in internment camps in Xinjiang have been distributed to different areas around the country. This work is being conducted with a high level of secrecy, and the travel routes used are all under police and military control. The source told The Epoch Times that 1,500 people were sent to the area he is in, and the police involved were all made to sign confidentiality agreements. The source speculated that, because the government plans to spread the 1-2 millions of Uighurs detainees, they would be sent to different prisons and detention centers, and he expressed the fear that the Uighurs might be killed.”
This reminds us that, in mid-August, there were rumors that internees from Xinjiang were being sent to Jiuquan (酒泉), Wuwei (武威) in Gansu province and Delhi (德令哈) and Golmud (格尔木) in Qinghai. A screenshot of a WeChat conversation describes an unusually heavy presence of security forces at train stations, and the understanding was that Uighurs were being transported.
Uighurs: More Professors Sent to Internment Camps; One Literary Editor Jumped to His Death; Highest Ranking Uighur Cadre So Far Sacked for ‘Corruption’
At least four senior Uighur officials from Kashgar University in Xinjiang have been removed from their posts for “two-faced” activities [i.e. disloyal to the CCP, critical of Party policies, or showing sympathy to targeted ethnic groups]. They include President Erkin Omer, vice president Muhter Abdughopur, and professors Qurban Osman and Gulnar Obul; information about them has been scrubbed from the university’s website. Read more.
According to a report by RFA’s Uighur service: Professor Azat Sultan, former President of Xinjiang Normal University and former chairman of Xinjiang chapter of China Federation of Literary and Art Circles, has been arrested for being a ‘double faced person.’ His whereabouts are unknown.
RFA Uighur service also reported that Keyser Keyum, the editor-in-chief of Literary Translation magazine, jumped from the 8th floor of his office building. It is said that he had received a call from police that day about sending him to ‘re-education’ camp.
On September 21 Xinhua reported that the deputy director of the National Develop and Reform Commission and director of the National Energy Administration, Nur Bekri, was suspected of severe violations of Party discipline and is being investigated by the Central Commission for Discipline Inspection. Hu Ping, a U.S.-based dissident, expressed horror at the news: “Nur Bekri was the chairman of the Xinjiang Uighur Autonomous Region in 2009 during the July 5 incident. In Xinjiang, the only other Uighur to be secretary of the region’s Party Committee was Saifuddin Azizi, and subsequently all Party Secretaries were Han, and the highest ranking Uighurs were only chairmen of the region [not chairmen of the Party Committee of the region]. And now, Bekri himself has been toppled. From this it can be seen how serious the situation is in Xinjiang, and how horrific the plight of Uighurs in China.”
Hu Ping noted that “according to Bekri’s official curriculum vitae, he received a Han education since he was a child and joined the Party in his early 20s. Following the July 5 incident he was promoted to the Central Committee during the 18th Party Congress, but didn’t remain in the Central Committee during the 19th Party Congress, nor become a deputy in the 13th National People’s Congress. It’s clear therefore that he had not been trusted by the Party center for some years already.”
On the second day of the riots in Xinjiang in July 2009, Bekri went on television to criticize Uighurbiz.net, a Chinese-language website run by Professor Ilham Tohti and his students, accusing it of “inciting violence and spreading rumors.” In March 2014 during the ‘Two Meetings’ in Beijing, Bekri told a press conference that the evidence showing that Ilham—arrested in January of 2014—had engaged in splittist activities was conclusive and unquestionable.
Ilham Tohti was sentenced to life imprisonment in 2014 and is currently being held in the Xinjiang No. 1 Prison. There has been almost no word about Ilham circumstances for the last two years, and many now worry about his health.
Moving Ordinary Residents out of Heart of Beijing
A social media post recently noted that following the expulsion of residents and demolition of buildings along Fuyou Street (府右街, the street along the west side of Zhongnanhai) and Xihuangcheng street (西皇城根, adjacent to Fuyou Street), a similar operation on the east side of Zhongnanhai has taken place, expelling residents along Nanchang and Beichang streets (南长街和北长街). The eviction and demolition notices stipulate that state leaders who live on these streets are not the targets of eviction. The post also said: “In the future, Nanchang street, Beichang street, and Fuyou street have all been closed off for regular traffic. According to the plan, in the next one to two years there will be a gradual eviction and demolition of residences on both sides on Jingshan (景山公园), the east of the Forbidden City, along Nanchizi and Beichizi streets (南池子和北池子), around Beihai park (北海公园), and around Shichahai (什刹海), in order to expand the living space for central Party leaders.” The elementary school on Beichang street, as well as Beijing 161 Middle School not far from Tiananmen, will both be relocated and incorporated into other schools.
We drew a rough outline of the area affected by the project based on the social media post:
Twitter User Detained for 10 Days for “Attacking Leaders of the Party and Country”
On September 11, a 42-year old Twitter user in Beijing, Quan Shixin (全世欣), went to the Haidian Public Security Bureau to request permission to demonstrate, and was administratively detained. He was released on September 21. The notice of administrative detention given to her said: “Quan Shixin used internet circumvention methods to attack the Party and state leaders on Twitter, the circumstances being severe. Thus she was administratively detained for 10 days.”
No Foreign Programs in Prime Time, and Foreigners Not Allowed in Key Positions on Chinese TV
On September 20, the National Radio and Television Administration published a draft version (for public comment) of a set of regulations regarding non-Chinese citizen involvement in television, broadcasting, and shows. The regulations apply to those from Hong Kong, Macau, Taiwan, and the rest of the world. The basic content is as follows: without the approval of the NRTA, TV outlets may not broadcast overseas programs from 7:00 p.m. to 10:00 p.m.; television stations may not spend more than 30% of their daily broadcast time on foreign films, shows, cartoons, documentaries, or other programs; the screenwriter and director of a program cannot both be foreign persons; male and female lead roles cannot both be played by foreigners; television and film producers who employ foreigners as creative staff must register the contract with the NRTA within five days of its signing.
Foreign television programs are popular in China, and it appears rules of this nature are meant to curb the availability of imported programs and the enthusiasm for them.
When a band in China named Fangu (反骨) [Rebels] applied for a permit to perform in Suzhou and Shanghai, the authorities told them to change their name before they could be approved. The band announced on social media that “due to force majeure, the band has temporarily changed its name to zhenggu (正骨) [Bone Correction], and we ask for your understanding.”
The Berlin Schaubuehne theatrical troupe’s performance of Henrik Ibsen’s An Enemy of the People has received a warm welcome in Chinese drama circles, but after three performances in Beijing the original plan to put on another two performances in Nanjing were cancelled. The authorities said that this was due to “technical reasons,” but is it possible that the drama’s storyline and theme felt a little too close to home for the Chinese authorities?
On September 15, the city of Jinan, Shandong Province, held a Rocket Music Festival (火箭音乐节); at one point during the event, when the audience felt particularly moved by the music, they began swaying their bodies together (as often happens at music festivals). At that moment, a police officer dashed onto the stage, stood at the microphone, stopped the music, and delivered a stern warning about public safety. “If you don’t cooperate, we’ll have to stop this performance [this elicited loud laughter]. Everything is subordinate to safety! If everyone is like you just were, then it absolutely cannot proceed. Everyone knows that our country is currently engaged in a special struggle in Sweeping the Black and Eliminating Evil… I’m watching everyone’s behavior from the stage. If there is danger, the performance could be stopped at any moment.”
‘Totalitarian’ Is the Word
Stein Ringen, Professor of Political Economy at King’s College in London, wrote a letter to fellow China analysts, asking that “we set our work straight in language.” “The People’s Republic of China is a totalitarian state,” he wrote. “Of its own kind, to be sure, hence neo-totalitarian, but totalitarian it is. No clarity of analysis is possible without clarity of language. The PRC is not ‘an authoritarian system,’ it is ‘a totalitarian state.’”
At China Change, we began to use the term “totalitarian,” “neo-totalitarian” and “market-totalitarian” in as early as 2013.
Signs of China (1), China Change, September 16, 2018.