China’s missing politburo statements fan fears of diminishing transparency; Exclusive Insight: Cai Qi, Li Qiang, and Ding Xuexiang: the trio at the helm of China's political power
Vice-Premier Zhang Guoqing targets China’s manufacturing sector; Chinese anti-corruption watchdog says crackdown will continue; China Posts Robust Commodities Imports Despite Stuttering Growth
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Cai Qi, Li Qiang, and Ding Xuexiang: the trio at the helm of China's political power
2023-06-07
Cai Qi, Li Qiang, and Ding Xuexiang, the trio at the helm of China's political power, have diverse origins. Cai Qi, hailing from Zhejiang—the very cradle of Xi Jinping's political journey—has been a loyal confidante and ally to Xi for two decades, entrusted with the crucial responsibility of managing party operations. Li Qiang, another Zhejiang native whose career has grown alongside Xi's trajectory, served as a key aide during Xi's tenure in Zhejiang. His current mandate is to aid Xi in supervising the State Council. Ding Xuexiang, emerging from Shanghai where Xi briefly gained prominence, became a significant aide-de-camp to Xi following the latter's relocation to Beijing, as the Director of the CCP Central Office. Currently, he presides as the highest-ranking Deputy Prime Minister, thereby holding the equivalent power of a "Premier" within the government structure.
Ding Xuexiang's appointment represents a cunning stroke of genius in the personnel configuration of the current Standing Committee. His primary function is to supplement Li Qiang's efforts while simultaneously acting as a restraining and disrupting force for Cai Qi and Li Qiang.
Three salient reasons underpin Ding Xuexiang's potential to fulfill such a role:
Firstly, prior to his ascension to the Standing Committee, Ding Xuexiang occupied two pivotal posts within the CCP Central Committee - the Secretary of the Central Secretariat and the Director of the CCP Central Office. His intimate familiarity with Cai Qi's operations and subordinate network positions him to substitute Cai at any given time, thereby serving as a strategic counterbalance.
Secondly, before the 20th National Congress of the CCP, Ding concurrently functioned as the Secretary of the Central and State Organs Work Committee. This committee shoulders the responsibility of guiding the party building operations of central and state organs (inclusive of various ministries under the State Council), and supervising the departmental leadership. Through this committee, Ding Xuexiang managed to quietly seize control of the State Council years ago, a fact unknown to the public. Now, as the top-ranking Deputy Prime Minister, Ding is equipped to officially assist Li Qiang of Zhejiang in the familiar State Council system, while retaining the capacity to replace Li at any juncture, offering a potent check and balance.
Lastly, adhering to the Party's unwritten 'seven up eight down' rule (compulsory retirement at 68 during a leadership transition, with the possibility of another term at 67), both Cai Qi and Li Qiang are slated for retirement at the 21st National Congress of the CCP in 2027. Ding Xuexiang, born in 1962, will be 65 years old at the time of the 21st National Congress and can remain in service until the 22nd National Congress. Given the present arrangements, it is plausible that Ding will ascend to the role of Premier in the subsequent term, thereby obstructing Li Qiang's path forward.
Ding Xuexiang and Cai Qi, as contemporaneous ministers, grapple with what political science dubs as "intra-generational conflicts". Ding Xuexiang and Li Qiang, being the top two figures in the incumbent State Council, are embroiled in "intra-generational conflicts" owing to mutual checks and balances. Moreover, the potential severing of Li Qiang's future prospects by Ding Xuexiang creates conflicts between this generation's Premier and the future Premier, a phenomenon referred to as "inter-generational conflicts" in political science. These inter-generational conflicts introduce an additional temporal dimension to the conflict between Ding Xuexiang and Li Qiang, as compared to that between Ding Xuexiang and Cai Qi, thus increasing its complexity.
Indeed, these intra-generational and inter-generational conflicts are deliberately orchestrated by those arranging personnel, aiming to sustain political equilibrium through a framework of controlled struggle.
Vice-Premier Zhang Guoqing targets China’s manufacturing sector
South China Morning Post
Vice-premier Zhang Guoqing has directed China's major manufacturers to expedite their progression up the value chain and accelerate breakthroughs in the sector's key technologies, reports state media. The move indicated that Zhang, formerly in charge of a weapons supplier, is leading the country's domestic and international ambitions to become a leader in advanced manufacturing. Zhang visited factories specialising in satellite navigation, commercial aircraft and integrated circuits during his trip, with its itinerary providing insight into China's future industrial development policies.
Chinese anti-corruption watchdog says crackdown will continue
South China Morning Post
China's Central Commission for Discipline Inspection (CCDI) confirmed that its anti-corruption drive will maintain high pressure on industries such as finance, agriculture and sports. In an article published in state-controlled apper People's Daily, it also claimed to be cracking down on political conspiracies and cliques to ensure party unity. The CCDI faces increased criticism amid fears of arbitrary detentions and abuse of power as part of the seven-year corruption crackdown. In May, former Interpol chief Meng Hongwei was sentenced to 13 years for bribery, and numbers of other high-profile figures have been jailed in the campaign.
China Posts Robust Commodities Imports Despite Stuttering Growth
Bloomberg
China recorded strong commodity imports in May, boosted by weak international prices, stockpiling by energy importers and anticipation of stimulus from Beijing to revive economic growth, according to market data reviewed by Bloomberg. Analysts warn that unless demand lifts significantly, this extra supply could be held as stockpiled industrial materials, further depressing prices as the traditional summer factory lull takes hold. Copper imports are the only major commodity currently suffering a slowdown, partly due to weak exports of Chinese goods and thin domestic demand in manufacturing and building sectors.
Indonesia’s China-funded high-speed railway beset with fresh problems
South China Morning Post
The launch of Indonesia's $7.3bn, 142km high-speed rail service between Jakarta and Bandung, funded by China's Belt and Road Initiative, could be delayed until January 2024 after failures to meet deadlines and stakeholder agreements. The service is already four years behind schedule and is $1.2 billion over budget. Indonesian law firm Umbra, as well as consultants PwC and Mott MacDonald, claim that stations are incomplete and further work is required before the service can start commercial operations.
China’s missing politburo statements fan fears of diminishing transparency
Japan Times
China's Politburo meetings have failed to publish a statement for three separate months, spurring concerns over transparency and investor uncertainty. The top Communist Party's decision-making body normally convenes monthly, but has failed to do so in November, January, and May. The Politico meetings are closely watched due to their potential to guide investors and change economic policy. It is possible that the group did not meet at all over the missing months or discussed sensitive subjects. Sensitive information is becoming more guarded in China, with the Chinese government creating a 'black box' around data in response to increasing US scrutiny of its tech industry and economic engagement with Russia. The reduction in transparency further fuels investor unease about China, and it is now unclear if the omission of the readouts marks a significant change in how power is exercised.
Subway plans to open nearly 4,000 stores in China in one of its biggest deals ever
CNN
Subway has signed a "master franchise agreement" with Shanghai Fu-Rui-Shi Corporate Development, which plans to open almost 4,000 new sandwich shops across mainland China over the next two decades. The move is part of a plan by Subway to strike new partnerships, both at home in the US and abroad, including in the Asia Pacific region, it said. The sandwich firm has previously said that it was exploring a potential sale, after an uptick in its business fueled by store renovations and international growth.
China’s Gold Binge Extends to Seventh Month as Holdings Climb
Bloomberg
China has increased its gold holdings for a seventh straight month, according to the country's central bank. The People's Bank of China said it had added around 16 tons of the precious metal in May. The country's total gold holdings stand at around 2,000 tons, making it the sixth largest holder of gold reserves, although many analysts believe China may hold more gold in reserve than stated. Central banks bought a record volume of gold in 2018 as nations sought to stockpile the precious metal amid rising global uncertainty. Buying fell steeply in the first quarter of 2019, but many analysts expect purchases to resume.
Top-Performing Fund Favors China Stocks as Bearish Tide Grows
Bloomberg
The Invesco Pacific Fund’s manager, Tony Roberts, has suggested Chinese tech giants such as Alibaba and Tencent offer “pretty good value and earnings in some areas.” This is in contrast to Morgan Stanley and Goldman Sachs Group, both of which have cut targets for Chinese stocks. Roberts’ Invesco fund has been overweight on Chinese equities since January 2012, with the fund increased its holdings in Alibaba as shares weakened. Despite ongoing US-China tensions, Roberts sees Chinese companies as good value and has suggested any further weakness in the sector could be a good opportunity to buy.
China begins drilling 11,100-meter borehole in search of oil and gas
Japan Times
China has begun drilling an 11,100-metre borehole into its oil-rich Xinjiang region, in an effort to source energy and mineral resources, according to state media. The multi-layered continental strata hole will reach the cretaceous system, of stratified rocks that are 66 million to 145 million years old. The Tarim Basin in which the drilling is taking place has complex geological structure that have formed over millions of years, and drilling materials and equipment must be able to withstand high temperatures and atmospheric pressure. The project, set to finish in about 457 days, aims to beat the current record for the world's fastest time to finish digging a 10,000 metre borehole.
China’s exports tumble in May as global demand falters
CNN
China's exports fell by 7.5% YoY, more than expected, and following an increase in April; imports also fell in May, albeit at a slower pace, in a sign that manufacturers are struggling to find demand abroad and domestic consumption is remaining slow. Furthermore, South Korean data last week showed shipments to China slid 20.8% in May, marking a full year of monthly declines, with Korean semiconductor exports dropping 36.2%, suggesting weak demand for components for final manufacture. Experts predict that the weak exports demonstrates that China needs to rely on domestic demand as global growth slows.
OECD forecasts 'long road' for global economic recovery
Deutsche Welle
The Organization for Economic Co-operation and Development (OECD) has presented a new outlook on global growth, foreseeing an economic expansion of 2.7%, up from 2.6% in its last report in March. The organization upgraded predictions for the United States, China, and the eurozone. However, the OECD cautioned that while growth had stabilised, improvement was fragile. Economists had not expected a positive outlook to be presented, pointing to the ongoing war in Ukraine, inflation, and energy security concerns.
Sequoia’s Split Sends Warning to Every Company Doing US-China Business
Bloomberg
Venture capital firm Sequoia Capital is splitting into three separate firms in China, India and the US, as a response to local pressures, including from the US administration. Sequoia’s Chinese investments have been the subject of criticism in the normally easy-going world of technology investing. Sequoia Capital and Sequoia China face a looming executive order from the Biden White House that may limit US investments into foreign entities, targeting practices that helped to generate billions in profits in Europe and Asia, despite Covid-19 and market tumult. The split will be fully completed by the end of next year.
In recent years, Sequoia has become increasingly active in Washington DC, hoping to build power and influence. Until recently, venture investing in private companies has been ignored by US lawmakers. However, as technology investments become political, Sequoia’s arrangement was too tricky to ignore, with Sequoia US and China sharing operations and taxation. It remains to be seen if other big players such as Goldman Sachs and Blackstone will follow suit, although it is known that these companies are seeking ways to reduce scrutiny on some of their funds.
World Economy Set for Weak Inflation-Plagued Recovery, OECD Warns
Bloomberg
The global economy is expected to see weak growth in the short-term as the world recovers from the Covid-19 pandemic and the effects of the Russia-Ukraine conflict, according to the Organisation for Economic Cooperation and Development (OECD). In its latest report, the OECD said that while the global economy is steadily recovering from shocks incurred during the pandemic, inflation would remain higher than in the pre-pandemic period. Alongside low growth and high inflation, the restrictive policies of central banks seeking to control pricing pressure also pose a threat to global economic recovery. The Paris-based organization expects a 2.7% expansion for the world GDP this year.
Government rethinks police deal with China amid rising Pacific tensions
Guardian
The prime minister of Fiji, Siteni Rabuka, is reviewing the police exchange programme between his country and China, which has been in place since 2011. Rabuka has said he sees “no need” for the agreement with Beijing. A more sceptical stance towards relations with China has become evident since April when a coalition Government took power following general elections. The premier was speaking during a visit to New Zealand, where he announced an impending defence agreement that will increase co-operation between Fiji and New Zealand. No full decision has been made yet to cancel the police exchange agreement with China.
Citigroup CEO Visits China as Wall Street Seeks Closer Ties
Bloomberg
Citigroup CEO Jane Fraser has held meetings with senior Chinese officials guarding the country's financial sector, becoming the latest US executive to visit China amid what's being described as growing geopolitical tensions. Fraser met with Li Yunze, director of China’s National Administration of Financial Regulation, to discuss the opening up of the market to foreign banks. Citigroup and other US banks have faced increased scrutiny from lawmakers over investments in China.
Record 13m students sit China’s ‘gaokao’ college entrance exams
Al Jazeera
Almost 13 million Chinese students have begun taking the nation's notoriously difficult college entrance examinations, known as “gaokao,” the first since the lifting of China's COVID-19 restrictions that have seen classes move entirely online. In addition to core subjects such as Chinese and English, mathematics and science are also tested and a strong performance is critical for entrance to China’s most prestigious universities. The country's education system has proved controversial, with the UK's former education secretary, Michael Gove, reportedly keen to adopt the Chinese model of education. China has long achieved some of the world's most impressive scores in education rankings and has an unparalleled high-stakes testing system. However, questions have arisen over the mental health impact of the highly ambitious system, as well as those of cheating and the pressure on students felt by both themselves and their parents.
‘Our values differ’: Fiji rethinks China security ties as Pacific tensions rise
South China Morning Post
Fiji’s prime minister, Sitiveni Rabuka, has said that his government is reconsidering its 2011 police cooperation agreement with China, which authorised the deployment of Chinese police officers in Fiji, and in 2013 expanded to include military cooperation. Speaking in Wellington, New Zealand, during a news conference with his New Zealand counterpart, Chris Hipkins, Rabuka said: “If our systems and our values differ, what cooperation can we get from them?” China has said the agreement has been beneficial to Fiji, and that it hopes to continue the partnership.
CATL Slumps as Morgan Stanley Makes Sole Underweight Call
Bloomberg
Shares in China's Contemporary Amperex Technology (CATL) fell for the third day after Morgan Stanley lowered its rating to underweight, citing geopolitical tensions that are likely to make it difficult to supply batteries to the North American market. Analysts warned that restrictions under the Biden administration’s Inflation Reduction Act could hit Chinese battery makers' global expansion plans, while concerns over exports grew as Tesla's website showed that its Model 3 vehicles are eligible for a $7,500 tax credit, signalling the need to source and assemble electric vehicle batteries in the US.
The world is in a precarious position
The Sydney Morning Herald
The World Bank has warned that rising borrowing costs in advanced economies could lead to “financial dislocations” in emerging market economies. The bank described the state of the world’s economy as “precarious”. It forecast that, after growing 3.1% last year, growth would slow substantially to 2.1% in 2022 and only recover marginally, to 2.4 per cent, in 2024. Its forecast for advanced economies is even gloomier; after growing 2.6% last year, growth is expected to slow to a near flat-lining 0.7% growth rate this year and then post a weak recovery to only 1.2% in 2024. The World Bank cited the protracted effects of the negative shocks of the pandemic, the war in Ukraine and the “sharp” tightening of monetary policies to contain inflation for what it expects to be a significant slowing of growth in the second half of this year that will spill into 2024.
Hong Kong ends reign as most expensive city for expats, Singapore gains 8 places
South China Morning Post
Hong Kong has lost its position as the world's most expensive city for expats for the first time in four years and is now ranked second, according to a survey by human capital firm ECA International. New York has taken the top slot, followed in third and fourth place respectively by Geneva and London. Singapore rose from 13th to fifth place due to “rapidly rising accommodation costs” caused by demand outstripping supply, while several other Asian cities fell in the rankings, along with Norwegian and Swedish cities whose currencies weakened, possibly due to a post-pandemic return of Russian capital.
China is building the most powerful warship radar on record: scientists
South China Morning Post
China claims it has developed a radar system suitable for installation on new Chinese warships, which, when completed, could detect incoming missiles from thousands of kilometres away, giving the People's Liberation Army Navy an advantage. Chinese researchers, led by associate professor Sun Donyang from the Harbin University of Science and Technology, have created the new-generation active phased array radar made up of tens of thousands of transceiving array units, which can generate pulse electromagnetic signals as powerful as 30 megawatts enough to wreck the electrics of any warship in existence.
Chinese CCTV cameras that caught Matt Hancock affair to be banned over national security concerns
Telegraph
Under new national security rules, CCTV cameras made by Chinese manufacturers, Hikvision and Dahua, are to be banned from government buildings in the UK. Companies subject to China’s National Security Law will be prohibited from bidding on public contracts under the new Procurement Bill, which comes amid concerns that Chinese companies could offer a backdoor for Beijing's espionage. Oliver Dowden, the Deputy Prime Minister, last year ordered sensitive government buildings to cease deploying cameras subject to Chinese security laws and the departments of health were also advised to remove them.
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