Ex-PBOC Deputy Governor Accused of Bribery, Abuse of Power; Exclusive: Xi's Chessboard of Personnel Arrangements
Chinese naval ship heads for Philippines in 'friendly' tour; China mutual fund sales dry up amid market gloom; New rules planned to regulate file sharing services like Airdrop and Bluetooth
Welcome to this issue of The China Brief. Today is June 9, 2023 . Here at The China Brief, we bring you the latest news on China's politics, economy, and society from global media sources, along with exclusive expert analysis. If you find our content helpful, please subscribe to our newsletter.
Xi's Chessboard of Personnel Arrangements
Xi Jinping's 20th National Congress of the Communist Party of China marked the completion of centralized power and unity. The personnel arrangements at the level of the Politburo Standing Committee, as demonstrated in this chapter, and the future analysis of personnel arrangements in the Politburo and the State Council, serve both as an expression of Xi Jinping's centralized power and as a guarantee of his absolute leadership core position.
By allowing factions to share power and restrain each other through the creation of personnel arrangements that involve both opposition and unity, Xi Jinping has transformed his relationships with the other six members of the Politburo Standing Committee, as well as with members of the Politburo, the government cabinet, and others, from comradeship to a master-subordinate dynamic.
For example, the State Council is responsible for implementing and executing the policies formulated by the Party at the administrative level. Prime Minister Li Keqiang and Vice Premier Ding Xuedong, who holds the top rank, resemble chess pieces flanking the king in a game of chess, providing a delicate balance and mutual complementarity. This personnel arrangement ensures that Premier Li Keqiang remains a subordinate, unlike previous premiers who could exercise control over the State Council, thus avoiding issues where the General Secretary of the Party is unable to reach or influence the government.
To summarize the personnel arrangements of the current Politburo Standing Committee, the goal is to guarantee the supreme leader's authority through personnel arrangements. The design is skillfully crafted, with three premier ministers pulling the "cart" and Li Xi serving as the "whip," their roles clearly defined and hailing from four distinct provinces, creating a clear distinction between each position. This personnel arrangement clearly demonstrates thoughtful and thorough consideration, devoid of impulsive changes as rumored in the media, discarding and replacing individuals at will.
Among the 24 members of the Politburo, excluding the 7 Standing Committee members, there are a total of 17 individuals. They include the party secretaries of the four municipalities directly under the central government (Beijing, Shanghai, Tianjin, Chongqing), the party secretary of the economically important province of Guangdong, the party secretary of the autonomous region of Xinjiang on the border, leaders of the four functional departments of the Communist Party of China Central Committee (Organization Department, Publicity Department, United Front Work Department, Political and Legal Affairs Commission), three Vice Premiers of the State Council, the Vice Chairman with the highest rank in the Standing Committee of the National People's Congress, the two Vice Chairmen of the Central Military Commission of the Communist Party of China, and the Director of the Office of the Foreign Affairs Work Committee of the Communist Party of China Central Committee, responsible for coordinating foreign affairs.
Chinese naval ship heads for Philippines in 'friendly' tour
Reuters
China's largest naval training ship is due to dock in the Philippines on 6 June as part of its "friendly" regional tour. The voyage comes against a backdrop of growing tensions between China and neighbours including the Philippines, who are at odds with China's claims in the South China Sea. The Philippines has already taken part in the first-ever trilateral coast guard exercise with Japan and the US.
China mutual fund sales dry up amid market gloom
Reuters
Fundraising by mutual funds in the first five months of 2023 in China was the lowest in four years, resulting in a struggle for money managers to stimulate investor interest. More than 200 million Chinese retail investors are bearish on equities and instead prefer safer investment options such as deposits and treasury savings bonds due to an economic recovery that is faltering and rising unemployment. Newly-launched funds raised a total of CNY432.1bn ($61bn) in the first five months, the smallest amount since the same period in 2019, and even fewer buyers currently exist, which is causing particular weakness in demand for active equity products.
New rules planned to regulate file sharing services like Airdrop and Bluetooth
Guardian
China's top internet regulator, the Cyberspace Administration of China, has released draft regulations aimed at close-range mesh network services. The wording of the legislation aims to restrict the spread of illegal and harmful material and require service providers to report the activities of technology users. The move has been seen as an attempt to tighten censorship, as protesters in Hong Kong used applications such as AirDrop and Bluetooth to evade government restrictions. The move could impact Apple in particular, which used AirDrop to circulate state-critical messages during the 2014 Occupy Central protests.
Credit Suisse puts up China brokerage venture for sale
The Globe and Mail
Credit Suisse is reportedly looking to sell its China securities brokerage business following its takeover by rival UBS. The bank owns 51% of the loss-making Credit Suisse Securities China joint venture, which had previously attracted interest from Citigroup, but the US bank has decided to grow its own business organically. One source suggested that "UBS will not get a license for CSS if they don't sell their stake in the Beijing Securities JV", while Chinese securities regulations state that no entity can hold two licences for majority-owned brokers.
China’s Central Bank Governor Reiterates Stable Policy Stance
Bloomberg
China's central bank governor, Yi Gang, has said that the bank will keep monetary policy targeted and ensure credit growth is stable, with monetary policy tools used to keep liquidity reasonably ample. Yi spoke in a meeting with businesses and banks in Shanghai, where he also claimed that he has confidence that the official growth target of around 5% can be achieved this year, despite calls for more easing across China's economy.
Chinese ambassador asked Korean lawmaker to include Beijing in US-led chip alliance
South China Morning Post
The Chinese ambassador to South Korea, Xing Haiming, allegedly lobbied a South Korean congresswoman to include China in the US-led Chip 4 alliance, which aims to reduce the size of Beijing's presence in the global semiconductor supply chain. During an episode of a webinar series on the implications of the global semiconductor chip wars, Yang Hyang-ja said Haiming visited her office proposing China would be included in a "Chip 5" alliance instead of the Chip 4. Whilst the US has rallied allies in attempts to block China's semiconductor industry advancement, China has launched a counter-offensive, however, Japan and the Netherlands have also followed in the US's footsteps with exports restrictions to China.
Man Group's discretionary fund unit turns 'underweight' on China
Reuters
Man GLG, the discretionary investment unit of hedge fund Man Group, has reduced its holdings in China, with the fund finding it hard to spot high-growth China stocks worth investing in. The company has increased exposure to India and Southeast Asia in its "Asia ex-Japan" book and is adding Taiwan semiconductors to be better positioned for the artificial intelligence revolution. Hedge funds' net allocations to China have steadily declined, while foreign buying has picked up strongly since April elsewhere in North Asia and in India.
People in China are so worried about the economy they’re asking for divine intervention
CNN
China's young people are flocking to Buddhist and Taoist temples to pray for divine intervention in securing jobs, getting into good schools or becoming rich overnight, as economic growth in the country stalls. With disillusionment rife, temple visits and tourism have surged this year, rising more than fourfold from a year ago, fuelled by social media sharing about the experiences. The jobless rate for youth between 16 and 24 years old reached a high of 20.4% in April, and with 11.6 million college students about to enter the already tough job market, the tourism trend is set to continue.
China Mounts Six-Month Campaign to Get Car Sales Moving Again
Bloomberg
The Chinese government has begun a six-month campaign to increase the sales of electric vehicles (EVs) in rural areas, after growth in EV sales slowed. Encouraging financial institutions to offer credit support for car purchases, local governments and vehicle makers to provide subsidies and discounts and improving charging infrastructure are among the schemes to boost purchases. The number of EVs sold rose by 41% in the first five months of this year, compared with growth of 120% from January to May 2021. The broader car market rose 4.2% over the same period, according to the China Passenger Car association.
China registers low inflation as stocks slump
Deutsche Welle
China's inflation rate rose by 0.2% year on year in May and its six largest state-owned commercial banks were requested by the central bank to lower their interest rates to boost spending in the country, the National Bureau of Statistics (NBS) announced. The producer price index (PPI) simultaneously dropped, marking the largest decline since 2016 and PPI has fallen for eight consecutive months due to low domestic demand and lowering commodity costs. Top economist and government advisor Liu Yuanchun called for regulators to cut borrowing costs to aid small and medium-sized private businesses in securing funding as many still pay around 9% for loans.
Ex-PBOC Deputy Governor Accused of Bribery, Abuse of Power
Bloomberg
China’s former central bank Deputy Governor Fan Yifei has been dismissed from the Communist Party and from his official post after it was discovered he had unjustly taken “massive” amounts of bribes among other accusations. Fan had allegedly used his position for personal gain when it came to lending, financing and running a business, according to the Central Commission for Discipline Inspection. In late 2020, Fan was placed under investigation, making him one of the few high-ranking central bank officials affected by China's corruption crackdown.
Honduran president arrives in Shanghai
Reuters
Honduran President Xiomara Castro has arrived in Shanghai on a visit until June 14 to meet with President Xi Jinping and "jointly plan and lead" the future development of ties.
Xie Xiaoliang is latest Chinese scientist to give up US citizenship
South China Morning Post
Biophysical chemist Xie Xiaoliang has given up his US citizenship to become a Chinese citizen and a domestic member of the Chinese Academy of Sciences (CAS). Xie was a former professor at Harvard University and is best known for his team’s development of a single-cell DNA amplification method that enabled the sequencing of individual human cells. Xie was previously a foreign member of the CAS. Meanwhile, Swedish scientist Sun Licheng has also transferred to domestic membership of the academy; he returned to China to become chair of chemistry at Westlake University last year. Several other CAS foreign members have also dropped their overseas citizenship to become domestic members. China has been working to attract talented researchers back from overseas, with previous research showing that more than 1,400 US-based ethnic Chinese scientists changed their academic affiliation from American to Chinese institutions last year.
China's Wanda unit seeking Hong Kong IPO told to explain its business
Nikkei Asia
Zhuhai Wanda Commercial Management Group, a subsidiary of Dalian Wanda Group, has been asked by China's top securities regulator to provide more information and safeguards with regards to its initial public offering in Hong Kong. The China Securities Regulatory Commission asked the firm, which principally works in commercial property management, to submit additional material to explain its shareholders' connection to it, and how it avoids funds being embezzled by shareholders, among other things. The CSRC is yet to decide whether to allow the firm to list in the city and may need to appeal to higher authorities about the application.
China envoy in South Korea warns of 'wrong bets' over Sino-U.S. rivalry
Reuters
China's ambassador to South Korea, Xing Haiming, has urged Seoul to stop "decoupling" from China and restore economic and diplomatic ties. Xing criticised South Korea for failing to respect Beijing's core interests, including Taiwan, while being influenced by the US. He warned against misjudging China “in a situation where the United States is pressuring China with all its might”. Xing said in order for South Korea to enjoy the “bonus” from Chinese economic growth, it should have confidence in bilateral ties.
A secret Chinese spy base? Cuban officials say no to media report
Al Jazeera
Beijing's plans to build an electronic eavesdropping facility or spy base in Cuba has been dismissed and called "totally mendacious and unfounded" by a Cuban Deputy Foreign Minister and multiple government sources. The proposed facility would allow China to conduct signals intelligence and intercept emails, phone calls and other data from the US. The US Central Command headquarters are based in Tampa, Florida and Fort Liberty, formerly Fort Bragg, the largest US military base, is in North Carolina.
TikTok-Owner Tests ChatGPT-Style Bot After Joining China AI Race
Bloomberg
ByteDance's Chinese video-sharing platform TikTok is working on a chatbot named Grace, marking its first foray into generative AI. Leaping on the trend, ByteDance joins competitor firms such as Alibaba Group Holding and Baidu in developing Chinese versions of the OpenAI GPT chatbot. ByteDance already uses algorithmic recommendations on its content to enhance the user experience, and the company has reportedly been developing its own large language models. AI investment in China's internet sector has grown substantially, and the industry is vying for dominance in a lucrative domestic market during a time when US sanctions have disrupted Chinese input.
China Asks US to Let Sanctioned Hong Kong Leader Attend Summit
Bloomberg
China has said the US should allow Hong Kong's Chief Executive John Lee to attend an economic summit in San Francisco later this year, despite Lee and other officials being placed on Washington's Specially Designated Nationals list in 2020. US sanctions could be a barrier to normal communication as a result of US President Joe Biden's plans to strengthen communication with China.
Chip Titan TSMC's First Factory in Japan Has to Contend With Horrible Traffic
Bloomberg
The Japanese government is set to commit more than $14bn in subsidies as part of a push to triple domestic production of chips by 2030. Japan’s government is shouldering almost half the estimated $8 billion cost of the TSMC factory while in talks about support for a second adjacent plant. Japan is poised to provide about $1.5 billion to help finance an expansion at Micron Technology’s Hiroshima factory, and it is funding homegrown Rapidus Corporation to make the country’s own cutting-edge chips. However, the area is struggling with limited housing provision, infrastructure problems and the influx of workers overwhelming the town of 43,000. There is one train line out of Kikuyo to Kumamoto City, and limited bus service. In addition, small, unmarked roads, just wide enough for three adults to walk abreast without touching, are being overwhelmed by vehicles carrying heavy machinery and thousands of workers.
Thousands evacuated in China's Tianjin after cracks appear near high-rises
Reuters
Several high-rise buildings in the Chinese city of Tianjin have been evacuated following large cracks in nearby streets caused by underground cavities, according to state and local government reports. The consequences of the “sudden geological disaster” are severe and with experts admitting the situation is very rare. It remains unclear if drilling of geothermal wells has had an impact. The situation adds to a growing sense of concern relating to building safety in China causing the government to impose stricter rules and policies in relation to lax management of properties.
With China stimulus imminent, analysts differ on extent of rescue package
South China Morning Post
China is expected to put a stimulus package in place for the struggling property sector, following the recent slowdown; prices and investment have begun decelerating. The package could include measures such as; reducing mortgage rates, lowering down payments from 30% to 20% and cancelling home purchase restrictions in order to revive demand. Momentum in sales slowed after April, as homebuyers became wary of China’s faltering economic recovery, worsening unemployment rate and declining household incomes. The property sector contributes to 26% of the country’s GDP; last month, new home sales in tier-one and tier-two cities grew 22% while sales in tier-three and tier-four cities tumbled by 55%.
China envoy’s post-Soviet faux pas shows there’s no free speech in diplomacy
South China Morning Post
Diplomats cannot be permitted to voice personal opinions that contradict their government's official line, according to three unnamed diplomats: two from Asia and one from Europe. Although such opinions can be shared in private conversation, "at least two foreign service officers must be present at any diplomatic meeting", reflecting the fact that open differences of opinion cannot be permitted. The code governing diplomatic conduct is not usually made public and includes standards of behaviour. Public comments from diplomats should reflect the official line and avoid ambiguity in a time of geopolitical tensions, the article argued.
China Local State Borrowers Undergo Consolidation at Record Pace
Bloomberg
China’s local government financing vehicles (LGFVs) involved themselves in 240 deals in H1 2019, facilitating mergers and asset transfers to ease debt pressure and improve fundraising. None of LGFVs have defaulted on a public bond, though the recent payoff of a note has rekindled concerns about the sector’s debt service capacity. LGFVs are mainly used to fund infrastructure projects and the consolidation of these vehicles is “unavoidable”, according to Li Han, a fixed-income analyst at Citic Securities. Average government subsidies to LGFVs rose to CNY392m ($55m) in 2018, the highest level since 2013.
China-led team finds first evidence of oldest stars in the universe
South China Morning Post
The oldest stars in the universe could be as much as 260 times the mass of the sun, according to research led by Chinese scientists. The study, which involved scientists from Japan and Australia, is the first to provide observational proof that the universe's first-generation stars died in a unusual fashion which has only until now been theorised. The team examined the chemical footprints of these early stars in the Milky Way's halo using two of the largest land-based telescopes.
Chinese semiconductor, display makers brace for impact of Japan’s export curbs
South China Morning Post
Chinese companies are trying to reduce their dependence on Japanese suppliers following new export curbs on semiconductors, according to corporate statements and analysts. The new restrictions, from Japan’s Ministry of Economy, Trade and Industry, mean that Japanese suppliers of 23 kinds of semiconductor equipment require prior export licenses to sell to China from July. The move – which comes after an agreement involving the US, Japan and the Netherlands to limit exports to China of advanced chip-making equipment – is seen as a chance for Chinese companies to improve their levels of technological innovation.
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