SinoInsight 1
Propaganda
Aug. 30
State broadcaster CCTV reported that propaganda official Shen Haixiong had a “collective conversation” with six new China Media Group cadres on Aug. 25. Shen is the Central Propaganda Department deputy director as well as Party group secretary, director, and editor-in-chief of China Media Group.
Shen rehashed pro-Xi Jinping propaganda in speaking with the cadres. He urged them to “speak politics” (講政治) and always take “loyalty to the core, embracing the core, safeguarding the core, and defending the core” as the “biggest politics.” Shen reminded cadres to be vigilant against “black swans” and guard against “gray rhinos,” take responsibility for their own work and manage their personnel well, and “welcome the victorious opening of the 20th Party Congress.”
Shen also requested that cadres “do a good job in promoting the leader [Xi Jinping] with heart, soul, and diligence,” and “fight well the active, protracted, and overall war in the struggle for international public discourse.”
Sept. 2
Fu Hua, the president of state broadcaster Xinhua, published an article in “China Cyberspace,” the main publication of the Cyberspace Administration of China. Titled “Strive to Build a World-class, New All-media Organization” (努力建成國際一流新型全媒體機構), the article saw Fu demonstrate his loyalty to Xi Jinping and promote the propaganda apparatus’s agenda.
Fu urged Xinhua to “speak politics with a clear stance” (旗幟鮮明講政治) and strengthen online efforts to propagate “Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era.” He added that Xi’s “two safeguards” should be the “strong voice of the times,” and Xinhua will “never stand outside the Party line for one minute, never deviate from the direction pointed by General Secretary Xi Jinping for one minute, and never disappear from the sight of General Secretary Xi Jinping and the Party Central for one minute.”
Fu also said that Xinhua will “effectively conduct public discourse guidance and public discourse struggle,” and strengthen the creation of accounts on overseas social media platforms to “resolutely fight back against attacks and smears involving (the regime’s) core interests.”
Sept. 4
Xinhua launched a new column titled, “Navigating China” (領航中國), which will feature articles that “comprehensively reflect” the “major achievements [of the Xi leadership]” since the 19th Party Congress and the “great changes in the new era over the past decade.”
The first article in the series published that day was titled, “Ensuring That the Party Will Always Be a Strong Leadership Core — A Review of Unswervingly Adhering to and Strengthening the Party’s Overall Leadership Since the 18th Party Congress” (確保黨始終成為堅強領導核心 — 黨的十八大以來毫不動搖堅持和加強黨的全面領導述評). The article repeated previous propaganda narratives about why China can only “move forward in unison” with a “strong leadership core,” namely, the leadership of Party Central with Comrade Xi Jinping at the core.
Xi’s diplomatic trips
Sept. 5
Kazakh foreign ministry spokesman Abek Smadiarov told Russian media that Xi Jinping will visit Kazakhstan on September 14, according to overseas Chinese media reports. Xi will meet with Kazakh president Kassym-Jomart Tokayev in person, have talks “aimed at further deepening the eternal comprehensive strategic partnership and developing political, trade, economic, cultural, and humanitarian cooperation,” and sign a series of cooperation agreements.
If Xi does visit Kazakhstan, it will be his first trip abroad since January 2020.
Sept. 7
Russian envoy to Beijing Andrey Denisov told reporters that Russian president Vladimir Putin and Xi Jinping will meet on the sidelines of the Shanghai Cooperation Organization summit (Sept. 15 to Sept. 16) in Samarkand, Kazakhstan.
“There will be plenary sessions and various kinds of group meetings, and we are planning a serious, full-fledged meeting of our leaders with a detailed agenda, which we are now, in fact, working on with our Chinese partners,” Denisov said.
OUR TAKE
1. Recent efforts by leading propaganda apparatus officials to butter up Xi Jinping are in line with the latter’s attempt to boost his “quan wei” (authority and prestige) through propaganda before the 20th Party Congress. This is also an outcome of Xi’s earlier effort to consolidate control over propaganda through key personnel reshuffles (see here and here).
Concurrently, those senior propaganda officials almost certainly have their personal interests at heart in their praise for Xi. Both Shen Haixiong and Fu Hua still have room for further career advancement and would want to build political capital by demonstrating their loyalty to Xi and going along with his agenda. They would also wish to make their careers as secure as possible when the chance arises to lessen the impact of propaganda mistakes and miscalculations. For instance, the propaganda apparatus dabbled in bellicose propaganda before House Speaker Nancy Pelosi’s trip to Taiwan was confirmed, and later found itself in an awkward spot when the latter went ahead with her visit in the face of CCP pressure.
2. Xi Jinping’s upcoming trips to Kazakhstan and Uzbekistan for the Shanghai Cooperation Organization summit indicate that he feels secure enough politically to leave the country. Xi’s sense of security could be due to the Party elite having reached a “consensus” on his third-term bid and preferred personnel appointments at the 20th Party Congress. Xi could also be feeling safer leaving the country now that his ally Wang Xiaohong is the public security minister.
Xi’s Central Asia visit is also likely an opportunity for him to strengthen ties with countries in the region and reestablish the PRC’s position of influence. For example, Xi could leverage Russia’s need for PRC support to get the former to compete less with the latter in expanding influence over Central Asian countries and making energy purchases from those countries. Xi could also look to revive “Belt and Road” development, which suffered serious setbacks due to the Russia-Ukraine war, from the Central Asia region where it passes through.
If Xi managed to score some diplomatic successes in Central Asia (reaching agreements with oil-producing Central Asian countries, reaffirming alliance with Russia against the West, etc.), he will likely have the propaganda apparatus talk up his “great power diplomacy” and diplomatic “achievements” ahead of the 20th Party Congress. Xi would also be able to remove some of the sting and loss of prestige caused by Pelosi’s visit to Taiwan.
SinoInsight 2
A Legal Daily (publication of the Central Political and Legal Affairs Commission) report on institutional reform in Hequ, a county in Shanxi Province with a population of only 124,000, gained social attention for its unwitting revelation of local government problems.
The report noted that small counties like Hequ commonly have an “unreasonable” ratio of population to “financial support personnel” (財政供養人員, i.e. workers who draw a salary from the government) and insufficient financial support to make ends meet. Thus, these counties mainly rely on fund transfers from higher levels of government to “make expenditures” (i.e. sustain local operations).
The report added that the Shanxi provincial Party Committee ordered Hequ County and Fushan County to “greatly reduce” their government payroll (編制) in April 2020 under a pilot program to address the issues of having too many “financial support personnel” and funding shortages. At the time the report was published, the Hequ County government had reduced its Party and government organizations from 36 to 22, its leadership positions from 135 to 114, consolidated public sector organizations from 186 to 40, reduced its government-funded personnel positions from 1,964 to 659, and vacated 10,500 square meters of office space. Hequ County also cut public expenditures by 8.2 percent to 3.67 million yuan. In particular, expenditures such as wages and benefits, including the so-called “five insurances and one housing fund” (五險一金), were reduced by 133 million yuan each year, or 13 percent of the general public budget revenue. Meanwhile, the ratio of population to “financial support personnel” was increased from 31 to 1 before the pilot reform to 40 to 1, or better than the provincial average and close to the national average.
According to reports from other mainland media, Fushan County, the other small county (population of less than 100,000) in Shanxi Province that was put on the pilot program, reduced its administrative departments from 125 to 40 and cut its government-funded personnel positions from 1,944 to just 970.
Sept. 2
Dozens of depositors staged a protest outside the Hangzhou branch of the Bank of Nanjing, according to information circulating on Chinese social media and overseas Chinese-language media. The depositors carried signs with the words “injustice” (冤) on them and shouted slogans like “return my money to me” and “return my deposits.” Concurrently, photos of the protesting depositors were widely circulated on social media, as well as screenshots of comments claiming that the bank had “defaulted” (爆雷) on its wealth management products and how depositors “couldn’t withdraw money.”
The local authorities eventually deployed more than 50 police and riot police to surround and drive away the depositors.
According to news reports, the protesting depositors were those affected by the Henan rural bank scandal in April with more than 500,000 yuan in deposits. The depositors believed that the Bank of Nanjing should be held responsible for their losses.
The Henan Banking and Insurance Regulatory Commission and the Henan Provincial Financial Supervision Bureau had announced at the end of August that repayments would be made to depositors with between 400,000 yuan and 500,000 yuan in the four Henan rural banks. Those with over 500,000 yuan would receive 500,000 yuan in repayments first, with the remainder paid out based on how much of the rest of the assets could be recovered in the case; that is, depositors with over 500,000 yuan will likely get further repayment from the recovered assets based on a proportion of what they originally had instead of the full amount.
On Sept. 3, the Bank of Nanjing issued a statement on its official website refuting rumors that it had defaulted on wealth management products and that depositors were unable to make withdrawals. The Bank of Nanjing acknowledged that the bulk of the protesting depositors were victims of the Henan rural bank scandal with large deposits. The bank further explained that its settlement service for village banks is only meant to be a channel for fund settlement and does not bear capital risks, and therefore has nothing to do with the Henan rural bank scandal.
OUR TAKE
1. The Legal Daily report on institutional reform in Hequ County was likely intended by local officials to tout their achievements in adhering to the central government’s policy of streamlining bureaucracy and other forms of “belt tightening.” However, those officials likely did not expect to expose their and the CCP regime’s shortcomings while providing more signs of China’s serious economic deterioration in reporting seemingly innocuous bureaucratic data.
We have noted on numerous occasions the deficiencies of the CCP’s authoritarian system, Party culture, and bureaucratism. Virtually all local officials govern in a way that best serves their personal and career interests, and cater their policies to the preferences and targets of their superiors. Very few local officials take action to actually resolve the deep-seated problems in China’s governance. This phenomenon is not as obvious when times are good for the CCP regime; when the Chinese economy was doing well, local officials whose annual performance evaluations were based on GDP growth had “breathing space” to fudge their figures to make them more impressive and win promotion while the central government was not overly strained in supporting poorer localities.
The benchmark for performance evaluations appeared to shift when the Chinese economy noticeably worsened following the start of the Sino-U.S. trade war in 2018. The central government began encouraging local governments to “tighten belts,” “live thriftily,” and reduce expenditure. In other words, local officials who demonstrate an ability to do a good job of “belt tightening” stand to accrue political capital in the current environment.
Just like with showing good GDP figures, however, local officials are wont to attempt questionable or unscrupulous schemes when it comes to implementing cost-cutting measures ordered from above. For instance, local officials could move some “financial support personnel” (often family members or associates of officials) to other government organizations ( new or temporary bureaucracies like that overseeing epidemic prevention work, etc.) or government-linked institutions (state-owned enterprises contract workers, etc.) whose staff are not part of the official government payroll. Those “financial support personnel” could even be moved down to staff similar positions in lower level governments. What this does is essentially retain the size of the bureaucracy or even grow it in some cases, while giving the appearance that “streamlining” and “reform” had been carried out. When new local leading cadres take office or when the central government tweaks its “belt tightening” policy in the future, the local bureaucracy can just as easily revert to its bloated form given that there may not have been any real “streamlining” to begin with.
Meanwhile, the “institutional reform” in Hequ County only offers limited help to local finances. The county did “shed” 66.4 percent of workers on the government payroll and saved about 136.67 million yuan (133 million yuan in wages and benefits and 3.67 million in public expenditure), but publicly available information shows that its general public budget revenue for 2021 was 1.2 billion yuan while its expenditure was over 2 billion yuan. Like many areas in China, Hequ County is likely to fare worse this year as compared to last year given the “zero-COVID” situation and many other crises facing the CCP regime. The Hequ local government also cannot count on the central government for backing; during a national teleconference with 100,000 officials in May, premier Li Keqiang even obliquely told officials not to expect financial support from the central government barring natural disasters.
Hequ County’s difficulties are a microcosm of many local governments in China. Mainland media reports say that there are more than 200 counties with a population of less than 100,000 in China, and half of those counties have less than 50,000 people. Those counties are likely to have an “unreasonable” ratio of population to “financial support personnel.” For example, Daning County in Shanxi Province has a population of 52,000 but has 115 administrative departments. Of those 115 departments, 82 employ more than 2,000 staff. Last year, we wrote about how Foping County in Shaanxi Province has about 8,000 permanent residents but 2,194 government personnel for a ratio of 13 to 1, or twice the national average. Having a sizable number of workers on the government payroll creates a heavy financial burden on local governments and strains their ability to maintain basic operations.
2. Even as the local governments embark on “institutional reform” to “streamline” their bureaucracy, more people are taking the civil service exam to secure an “iron rice bowl” government job.
According to publicly available data from 2019 to 2021:
- 2019: 1,338,700 people sat for the civil service examination, and 14,537 people were recruited.
- 2020: 1,395,800 people took the exam (up 4 percent), and 24,128 people were recruited (up 65.9 percent)
- 2021: 1,511,900 people took the exam (up 8.3 percent), and 25,726 people were recruited (up 6.6 percent).
The sharp uptick in demand for civil service jobs is a reflection of serious economic problems in China.
A recent internal memo by Huawei founder Ren Zhengfei to his company staff further underscores the seriousness of China’s economic decline. According to a Yicai Global report on the memo, Ren said that Huawei should focus on profits and cash flows instead of revenue and expansion to ensure the company’s survival over the next three years. Ren also signaled more job cuts by noting that Huawei would scale back or divert non-core businesses.
Ren stressed that 2023 and 2024 are critical periods for Huawei. He added that the next decade would be a “very painful period in history” for the company, and global economic decline will not turn around over the next three to five years partly because of the pandemic. “No more stories, we have to talk about the realities. We have to survive first, and we’ll have a future if we can survive,” Ren said in the memo.
Meanwhile, Nomura cut its China GDP forecast again, down to 2.7 percent from 2.8 percent in August. “Back [on Aug. 17], when we cut our Q3 and Q4 GDP growth forecasts, we did not expect growth to worsen at such a pace,” Nomura analysts said.
3. The recent protests of depositors outside the Hangzhou branch of Bank of Nanjing show that the CCP’s headaches with small- and medium-sized banks in China are far from over despite efforts by local authorities to tackle the issue. The protesting depositors are likely very concerned that they may not get back much of their remaining deposits after assets are recovered from the troubled Henan rural banks, especially with China’s mounting financial problems.
We previously noted that the Chinese people have long equated the credibility of banks and other financial institutions in China with that of the PRC government. The PRC government’s credibility will be further eroded if it cannot resolve small- and medium-sized bank problems in a way that satisfies most depositors.
Given current trends, China’s economy and the real estate sector will likely worsen further this year instead of recovering. The CCP could see a concentrated breaking out of financial risks should more large real estate companies default on their debt and more banks fail. The resulting economic and social crises will dangerously escalate political risks for the CCP and Xi Jinping, even if he secures a third term at the 20th Party Congress.