Simone Gao: Hello, everyone. Welcome to Zooming In China Teatime. I’m Simone Gao.
Billionaire investor, main proponent of globalism, and a frequent critic of Xi Jinping’s regime, George Soros, spoke out again on Monday. In an opinion piece for the Wall Street Journal, Soros targeted BlackRock, the world’s largest asset manager, for their “major initiative” in China, including their launch of mutual funds and other investment products for Chinese consumers and their direct recommendation offered weeks earlier to US clients to “triple their allocations in Chinese assets.”
Soros’ major charge against BlackRock is that they “misunderstand President Xi Jinping’s China” and so “have taken the statements of Mr. Xi’s regime at face value.” In doing so, they assume there truly is a distinction between state-owned and privately owned companies. This mistake, notes Soros, is a “tragic” one that “is likely to lose money for BlackRock’s clients and, more importantly, will damage the national security interests of the US and other democracies.”
As I mentioned at the very beginning of the program, George Soros is the main promoter and beneficiary of Globalism. He had a good relationship with previous CCP leaders such as Deng Xiaoping and Jiang Zemin who opened up China and engaged China in globalism. Soros’ motive to criticize Xi, as much as opposing Authoritarianism and protecting American investors interests, is to rid a real threat to globalism, Xi Jinping. This explains his sudden barrage of attacks against Xi while he kept silent over the years when Wall Street Invested in China. The globalists saw Donald Trump as a major enemy in the past four years. Now Trump is gone, but there comes a Xi Jinping who is worse than Trump. He is going to shut the door of China. This can not be tolerated. Nevertheless, I agree with his critique of Xi Jinping. Let’s go back to Black Rock.
BlackRock responded on Wednesday, arguing that “The United States and China have a large and complex economic relationship… Through our investment activity, US-based asset managers and other financial institutions contribute to the economic interconnectedness of the world’s two largest economies.”
And if it is interconnectedness they are after, BlackRock is in deep. They are the only foreign-owned business the Chinese government has approved to operate a wholly owned company in China’s mutual fund industry, that approval being granted in June of this year. Their first fund in China launched after they raised $1.03 billion from more than 111,000 investors. All in a time of increasing distrust between these two economic superpowers.
We might be able to view that as a bridge between nations if not for BlackRock’s other investment activities. After the Vanguard Group returned $21 billion dollars in assets they managed for Chinese government clients, including $10 billion each for China’s State Administration of Foreign Exchange and the China Investment Corp. sovereign wealth fund and $1 billion for the national pension fund, the bulk of those investments were expected to be transferred to BlackRock. For an American company to have this kind of access not just to Chinese citizens’ investments but also to Chinese state-owned assets is not just interconnected. It is unprecedented.
In their focus on interconnection between the companies, BlackRock doesn’t dispel Soros’ point. They prove it. To suggest that a mutually beneficial relationship can be built within Xi Jinping’s China is to assume his regime operates in ways similar to his predecessors. And that misunderstands Xi Jinping, a man Soros argued last month in another piece for the Wall Street Journal was “the most dangerous enemy of open societies in the world.” It also ignores Xi’s vision for his leadership and legacy, a vision that requires a direct march towards dictatorship.
The threat posed by China is not a result of the Chinese people themselves, nor is it a direct threat by all members of the CCP. As a recent publication by the Atlantic Council noted, “China, under all 5 of its post-Mao leaders prior to Xi, was able to work with the U.S.” The threat is Xi Jinping and his inner circle, strengthened and protected by their personal military, the PLA. And that threat is a threat to all, both outside and inside of China.
In the mind of Xi, the prior regimes were weak, too willing to pander to the ways of the Western world, ways that—in his thinking—would lead to a loss of legitimacy for their one-party rule system. To Xi, this shift was inexcusable, especially in the leadership of Deng Xiaoping, the man who had banished Xi’s father from his position as Vice Premier for disloyalty, leading to a time of social castigation for the Xi family and eventually a 7-year reform for Xi Jinping himself, much of which was spent in doing farm labor and living in a cave in the Shaanxi region, at one point going months without meat for nourishment. What Xi took from those years was an aversion to any sign of weakness, an extremist view of the need for nationalism, and a mission to undo what Deng had designed.
Deng saw opportunities to work with the more developed Western world. Rather than being staunchly opposed to Western systems, Deng believed China could rise within them and then surpass them. Because of that belief, Deng ushered in membership for China in the World Trade Organization in 2001, leading to the unprecedented growth Xi would later inherit.
With that growth, Xi inherited a people accustomed to it. Wealth was flourishing, as was fame and influence. Chinese citizens became comfortable living under one-party rule while keeping a toe in the Western capitalistic system. So, the likelihood that Chinese citizens, and especially the economically elite, would fall in line with Xi’s proposal to undo Deng’s social and business structures, and thus his gains, was slim, a fact Xi was aware of when he came to power in 2012. Knowing his mission would be met with resistance, especially from those who had benefitted from Deng’s systems, he knew he would need more than the two five-year terms allotted him under the current system. He knew he would need the power and the permanence of a dictatorship.
And that is exactly the path Xi is pursuing. In perhaps his most poignant point, George Soros argues that “Mr. Xi realized that he needs to remain the undisputed leader to accomplish what he considers his life’s mission…. He intends to overstep the term limits established by Deng, which governed the succession of Mr. Xi’s two predecessors, Hu Jintao and Jiang Zemin.” And “because many of the political class and business elites are liable to oppose Mr. Xi, he must prevent them from uniting against him. Thus, his first task is to bring to heel anyone who is rich enough to exercise independent power.”
We have seen that strategy play out with increasing fervor as the threat of 2022 draws nearer. Where a hallmark of Deng Xiaoping’s leadership was the opportunity for China’s communist system to incorporate a market orientation where state-owned companies could exist alongside private enterprise, Xi has recognized the power and influence of public companies and wealthy investors, the kind of influence that could dismantle his regime and destroy his mission.
To be fair, Xi does not intend to get rid of the market economy altogether. He needs the livelihood of capitalism to keep the Chinese economy going. Only, he is putting the market economy under a structure the Party designs and dominates.
So, Xi attacked first and, for a while, the world failed to notice. Until he cancelled the IPO for Ant Group, a subsidiary of Alibaba, and its founder, Jack Ma, briefly went missing. Though Ma has resurfaced, his ongoing silence and his removal from the top spot at Alibaba have garnered international attention and concern. Then came Didi’s disastrous IPO followed by additional crackdowns, first on other US-listed Chinese companies then on China’s tech giants. The Wall Street Journal reported four leading companies, including Alibaba, Kuaishou Technology, Meituan, and Tencent lost about 20% of their market capitalization in July because of these crackdowns. And also in July, China’s Ministry of Industry and Information Technology announced a new six-month campaign specifically to regulate internet companies.
Alongside crackdowns on market offerings have come landmark fines, stripping these companies of the wealth they could otherwise use to challenge the regime. Alibaba was fined a record $2.8 billion in April for alleged anti-monopoly violations. The Chinese government is considering a $1.54 billion fine against Tencent for failing to properly report past acquisitions and investments. And they are currently considering “unprecedented penalties” against Didi that reportedly may exceed even the Alibaba fine. But the tech giants are not alone in these fines. Billionaire Sun Dawn was recently “persuaded” by government officials to donate the bulk of his wealth to charity as he began an 18-year prison sentence, stripping wealth his family might have used to oppose Xi’s regime in his absence. The same fate has awaited many of the wealthiest Chinese citizens.
But money is not the only thing being seized by Xi. Entire companies are being stripped from founders and are now controlled by the Chinese government. In the case of Wu Xiaohui, who married a granddaughter of Deng Xiaoping, his Anbang Insurance Group was seized by the government in 2018, as Wu began his own 18-year prison sentence. And Xiao Jianhua had nine subsidiaries under his umbrella company Tomorrow Group seized in July of 2020. Those companies are said to be worth hundreds of billions of dollars.
There is no word on where the money from these, and other, fines and seizures has gone or what it may be used for. There is also no word on the whereabouts of many of the wealthy elite founders associated with these companies. Xiao Jianhua was taken from a luxury hotel in Hong Kong by 12 men in the early hours of January 27, 2017, and while reports have said he is now under house arrest on the mainland, there is no evidence to his whereabouts and no verifiable activity by Xiao. The list of China’s wealthy elite who have disappeared is rapidly expanding as Xi Jinping tightens his grip on the Chinese Communist Party.
And no sector is safe. Alongside the crackdowns on tech giants over the summer leading to more than $1 trillion loss for Chinese tech stocks came a ban on for-profit tutoring in the country that wiped out the private education industry virtually overnight. “This is clearly not a sector-by-sector rectification; this is an entire economic, industry and structural rectification.”
There is more to come. Michael Shou, general manager of an on-demand English tutoring platform, said “I do believe we are seeing a profound transformation of society, especially given that the government has implemented definitive and strict regulatory measures in such a short amount of time and in so many different industries.”
Now the question is if Xi Jinping is contested domestically? I believe he is, and in big ways. The way Chinese society works is that you won’t see different political views get presented and argued in newspapers or tv programs usually. Everything is done behind the closed doors. When different views are presented and criticized, the fighting is already over.
The Sixth Plenary Session of the 19th Central Committee of the Communist Party of China will be held in Beijing in November this year. The rumor has it that the conference will launch the third historical resolution in the party’s history which will likely endorse the Xi Jinping route that dictates how Chinese society progresses in all aspects. Before that happens, the fighting will continue. George Soros’ barrage of attacks against Xi is not unrelated to the whole picture. After all, Xi is a common enemy of most elites on this planet.
That’s all for today. Thanks for watching Zooming In China Tea Time. Please like, share, subscribe and donate to this channel if you like our production. Also, head over to my new membership site at zoomingin.tv. You can get video/audio formats of my shows, full transcripts, and in-depth reports available only to members. I will also do Q & A with members on the website. Just $5 a month or $50 a year. Please check it out.