How Did Xi Jinping Abandon the CCP’s Washington Back Channel? | Zooming In China Teatime

Hello, everyone. Welcome to Zooming In China Tea Time. I’m Simone Gao.

At a November 23rd gathering of the Boston College Chief Executives Club, Jaime Dimon, CEO of JPMorgan Chase Bank, revealed that while he was recently in Hong Kong, he “made a joke that the Communist Party is celebrating its 100th year. So is JPMorgan. And I’ll make you a bet we last longer.” This revelation came with his admission that “I can’t say that in China. They are probably listening anyway.” 

Whether the CCP was listening or not, the world was and JPMorgan’s government relations team and offices in China were scrambling to mitigate the damage within hours. That began with a public apology from Dimon who clarified that while he was “trying to emphasize the strength and longevity of our company,” he regretted and “should not have made that comment.” 

Through his spokesperson, Dimon added that “it’s never right to joke about or denigrate any group of people, whether it’s a country, its leadership, or any part of society and culture. Speaking in that way can take away from constructive and thoughtful dialogue in society, which is needed now more than ever.” His spokesperson added that Dimon “acknowledges he should not speak lightly or disrespectfully about another country and its leadership.” 

JPMorgan’s history is longer than that of the Chinese Communist Party. It was established as a U.S. corporation in 1895. In 1921, they opened their first branch in China, just as the Communist Party was being established. Dimon’s comments, then, may threaten that 100-year relationship, especially if this comment expresses his true belief that he is not optimistic about the future of the CCP and is only seeking to establish a good relationship with the current regime until its inevitable fall. 

There is much at stake. JPMorgan currently touts a $20 billion business in China with hopes to expand their market share. Those hopes were strengthened early in 2021 when JPMorgan was granted approval by Chinese regulators to fully own their China securities ventures. Executives at JPMorgan are considering more licensing requests, but they will need to maintain good standing in the country to have those approved. 

While the international attention to his comments may be new, comments of this kind are not new from Dimon. He is a well-known voice on Wall Street who has been openly critical of a number of countries at times, including the U.S. But comments about the potential instability of China came first in his 66-page letter to shareholders earlier this year. In that letter, Dimon wrote that while China has done a “highly effective job” with economic development over the past 40 years, the next 40 years will require China to deal with their diminishing resources, income inequality and corruption. 

While Dimon did not address the CCP directly, he did mention that only 100 million people in China “effectively participate” in the nation’s single party system. With a total population of 1.4 billion, that leaves China with the lowest participation level of any developed nation. 

“China’s recent success definitely has its leadership feeling confident,” wrote Dimon in the shareholder’s letter. “Growing middle classes almost always demand political power, which helps explain why autocratic leadership almost always falters in a larger, more complex economy.”

Some of the strain between the CCP and JPMorgan may have come from Xi Jinping’s recent marginalization of veteran leaders in domestic business and U.S. relations. According to a November 22nd report published by Nikkei News, before the 20th National Congress of the Communist Party of China, Xi Jinping was dismissive of the performance of Chinese political and business leaders closest to the United States, including Wang Qishan, Jack Ma, and others. All of those receiving Xi’s rebuke belong to one organization: the Tsinghua School of Economics and Management Advisory Committee. This is a significant reversal of Xi’s attitude when he took over as the party’s general secretary in 2012. At that time, Xi paid special attention to this advisory committee because of the elite individuals who comprised it. 

Who is involved in this advisory committee? The chairman is Tim Cook, president of Apple, and the vice chairman is Qiu Yong, president of Tsinghua University. 

Honorary members include the former president of BP and current chairman of Net Zero, the Lord Browne of Madingley as well as former U.S. Secretary of the Treasury and former chairman of Goldman Sachs, Henry M. Paulson, Jr. 

Former president and CEO of Wal-Mart, H. Lee Scott, Jr. and Wang Qishan, Vice President of the People’s Republic of China, are also involved.

While there are many members listed, some notable companies represented by a member on this advisory committee include General Motors, British Petroleum, Siemens, Dell Computer, Sony, Tesla, BMW, Microsoft, Coca-Cola, Facebook, and other chairmen, presidents, or CEOs of the world’s largest companies. There are also top leaders of the world’s largest financial companies such as Goldman Sachs, JPMorgan Chase, Flower Group, BlackRock Group, Zurich Insurance Group, and more. Jamie Dimon, CEO of JPMorgan, is on this advisory committee. 

Deans of other elite educational institutions like Harvard Business School, Penn Wharton Business School, Stanford Business School, MIT School of Management, and others are involved as are notable Nobel Prize winners in economics. 

Members from China include Beijing Mayor, Chen Jining; former chairman of China Development Bank, Chen Yuan; Foxconn’s Guo Taiming; Alibaba’s Jack Ma; Vice Premier Liu He; People’s Bank of China Party Secretary Guo Shuqing; Baidu founder Li Yanhong and so on.

What does this expansive list of names reveal? First, the importance of the committee based on the credentials of its members. Every business member on this committee is seated in a prominent position at a Fortune 500 company. In addition, all Western members come from the industries of business and academia, and most of them come from the United States. At least half of China’s members are current high-ranking government officials, including the deputy prime minister in charge of the economy, the governor of the Central Bank, and others. 

This makes clear that the Tsinghua School of Economics and Management Advisory Committee is not a private organization. It is an informal channel for the CCP to communicate with Washington through Wall Street and multinational companies in order to influence Washington’s policies on China. 

Because of the power of that channel, and because he himself came from Tsinghua University, Xi Jinping attached great importance to this organization when he took office. Shortly after he took office in October of 2013, Xi personally met and spoke with 22 overseas members of the advisory committee at the Diaoyutai State Guesthouse. Reports make clear that Xi’s rhetoric at that time emphasized the need to comprehensively deepen reforms and learn from Western management experience. That is far from what Xi is saying today. (http://www.sem.tsinghua.edu.cn/gwwyhnewscn/TZ_71540.html)

The last time this committee played an active role in Sino-U.S. relations was four years ago, in 2017. According to Nikkei News, Trump visited China in November 2017. Just a few days before Trump’s visit, Xi Jinping invited members of the Tsinghua University Advisory Committee to the Great Hall of the People for a meeting. This is not a coincidence. Xi Jinping had hoped to highlight his tight connections with these Western business elites in order to pressure Trump into side-stepping a trade war with China. 

At that time, the world was concerned about the possibility of a direct trade conflict between China and the United States, and Xi Jinping was using his Tsinghua channel to amplify his voice and tried to avoid a trade war. At the meeting, Xi said that China was advancing comprehensive reforms with unprecedented determination and intensity through opening up. Xi claimed that China was not only a beneficiary of economic globalization but also a contributor; that China’s development is an opportunity for the world. Xi argued that China’s opening up was not about winning or losing but rather about cooperation and a win-win. He also quoted a Chinese saying that even if a business deal could not be reached, good relationships and trust should remain.  He also said China does not engage in overlord clauses and does not try to take advantage of others. He claimed that China would continue to introduce a series of measures that would expand its opening up.

All of this was a show, for the United States and for Trump. A long, winding way of saying don’t fight a trade war with me and I promise China would continue to open up and all the wrongs would be corrected gradually. 

Those words went to a powerful audience including Henry Paulson, Secretary of the Treasury during the Bush administration; Stephen Schwarzman, CEO of the Blackstone Group; Apple CEO Tim Cook; and Mark Zuckerberg of Facebook. Reports of the meeting suggest that each of these leaders had an opportunity to share their opinions and that all highly praised Xi Jinping’s policies. Given the political and economic power of those in that room, a great deal of pressure was put on Trump.

As a result, the Sino-U.S. trade war was not officially launched in 2017. Instead, China and the United States reached an agreement for China to purchase US$250 billion in goods from U.S. companies.

But this was a trade war delayed, not a trade war averted. Trump did ultimately launch a trade war with China, despite these American business elites and their collective persuasive power. The Wall Street-led China policy, which had been tried and tested before, did not work well for Trump. Because of that, the relationship between Xi Jinping and this committee should have changed. 

Instead, China attempted the same strategy a second time. A report in November 2018 said that Liu He, Vice Premier of the People’s Republic of China, came to the United States to negotiate with the U.S. trade delegation. Prior to those negotiations, he met again with a group of American business leaders. mostly from Wall Street. Guests at the meeting held in a hotel near the White House included Larry Fink, CEO of BlackRock; David Solomon, the second in command at Goldman Sachs; and Jamie Dimon of JPMorgan Chase, among others. Many of the attendees were members of Tsinghua’s advisory committee. Liu He stressed once again that China would open up their financial markets. 

A few days after this gathering, Liu He presented China’s position to the United States, including the same promise to open up the financial industry in China. But the Trump administration rejected China’s proposal, believing that the proposal was too narrow. After all, Trump was not a representative of the wall street interests. So despite a well-worn strategy that had so often worked in years and administrations past, this time Liu He returned to China without success.

Trump pressed on, using tariffs to push China to the negotiating table time and time again. At the end of 2019, Xi Jinping and Trump skipped the strategizing with Wall Street and went personally to the negotiating table at the G20 meeting in Argentina. Xi negotiated with Trump point-by-point, making many promised concessions along the way with a commitment to implement those changes immediately. True to form, however, when Liu He came to the U.S. to implement the terms, Xi Jinping withdrew his prior commitment at the last moment and the Chinese delegation returned, again without success.

We don’t know what happened in China at that time. However, I believe that was an important turning point for Xi Jinping. Xi was not inclined to close the country as soon as he came to power, and he did not have any clear, fixed ideas on governing the country at that time. His early ideas on governing the country were dismantled by domestic and international tensions. It’s possible that he was put under pressure by other CCP elites who felt he made too many concessions to the American government. 

So, Xi has started a steady march toward closing the country, a march that will inevitably lead to a confrontation with the West. And he is using the coronavirus pandemic, and his claimed success at handling it, to suggest that the CCP’s totalitarian rule has advantages over Western democracy. What Xi claims about success in diagnosing, treating and containing the coronavirus cannot be trusted. The numbers are unbelievable by any standard. Still, Xi is using them to claim that China is institutionally and economically superior to the West, giving him the false sense that he has the strength to compete with and even overcome the Western world, a notion that has now made the Tsinghua School of Economics and Management Advisory Committee seem disposable to him. He doesn’t need a secret route to persuade the U.S. if he believes he can beat the U.S.

It is not just external factors that have swayed that decision, though. The Nikkei News report also cited the breakdown of Xi Jinping’s relationship with Chinese members of the committee in the past year. These members include Jack Ma, Wang Qishan, and Chen Yuan, the former president of the China Open Bank. Chen Yuan’s close assistant is currently under investigation. People around Wang Qishan were also investigated one by one. At the same time, Xi Jinping is still investigating 25 financial institutions, including large state-owned banks. The report said that this is also weakening Wang Qishan’s power as a veteran in the financial field.

Although Xi Jinping has alienated this think tank as a whole, some overseas members of this committee still hope to have a good relationship with the current regime of the Chinese Communist Party. The Blackstone Group has been a good friend of the CCP from the beginning, and BlackRock has argued for continued and aggressive investments in China and has endorsed the future of the Chinese economy. 

Xi Jinping will not oppose them doing so. What Xi wants is not a completely closed society. What he wants is Wall Street forces that will bend to his will and accept his ways as the right ways. China still needs foreign capital and global markets, but Xi needs them to operate under his control. But if that was his desire, he destroyed it through his string of suppressions on the corporate and economic environment of China. His crackdowns on Jack Ma, Didi, Tencent and others and his attacks on the platform economy have caused an irreparable break between Xi and this committee. 

Fundamentally speaking, this is a battle of routes. Earlier, I introduced several important members of this committee, but I have not introduced the most important person. He is the founder of the committee and the honorary chairman, Zhu Rongji. Zhu was the premier of China during the Jiang Zemin era. He founded this advisory committee in 2000, which opened the way for the top CCP to use American business elites to influence Washington’s China policy. Zhu Rongji was Wang Qishan’s boss.

Wang Qishan is one of the first CCP officials who knew how to navigate Wall Street. In 1996, Wang listed China’s state-owned banks on the New York Stock Exchange with the help of those on Wall Street, a move he made while working under Zhu Rongji. Both he and Zhu belonged to the reformists. Wang believed according to the book Red Roulette that China’s state-owned enterprises would one day be privatized and that they should prepare for that day by preparing the money to purchase those companies.

Since the era of Zhu Rongji, whether it is the CCP or the Western financial leaders and multinational corporations, they are all participants in and beneficiaries of economic globalization. As such, they can get along well. But Xi Jinping’s current trend of encirclement and suppression in China has prevented him from fully participating in the feast of globalization. 

That’s all for today. Thanks for watching Zooming In China Tea Time. Please like, share, subscribe and donate to this program if you like my content. Also, head over to my membership site at zoomingin.tv. You can get video/audio formats of my shows, full transcripts, in-depth reports and extra interviews available only to members. Just $5 a month or $50 a year. Please check it out.

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