Xi’s October Surprise? Can a short-lived Committee Stop Xi’s Bid for a Third Term?

Simone Gao: Whenever there is a lot of red in China’s news media, you know something important is happening. It is either the Chinese New Year or an important political event. In this case, it is the prelude of the Chinese Communist Party or CCP’s 20th National Congress-The Seventh Plenary Session of the 19th CCP Central Committee.

Don’t get confused by their long names. The whole 20th National Congress of the CCP has one core mission that matters to the world: Xi Jinping’s so-called re-election into the top leader position of the Party and the country. So Let’s just call it Xi’s re-election conference.

The conventional wisdom is that Xi has subdued his opposition and will get a third term as the general secretary of the Chinese Communist Party, chairman of the Central Military Commission, and president of the People’s Republic of China, an incident that would violate the Communist Party’s long standing rule of top leadership’s serving only two terms. Nevertheless, Xi would most likely get his way. But just a few days ago, this gentleman, Gao Wenqian, an expert on the history of the Chinese Communist Party, revealed an important detail that he thinks could change Xi Jinping’s fate at the last minute.

What is it? It is the formation of a small committee whose lifespan is about 10 days.

This committee is called the Standing Committee of the Presidium of the 20th National Congress. It is the highest decision-making body during the Party Congress. Decisions on major matters must first be decided by the Standing Committee, then communicated to the Presidium, and then to all the delegates.

Why does this matter? You see, by the time the previous Central Committee has ended its work, the new Central Committee has not yet been elected. During this short period, who will lead the Party? Not Xi Jinping since he is the General Secretary of the Party elected by the outgoing Central Committee. It is this standing Committee of the Presidium which is elected by the outgoing central committee. It will preside over things during the Party’s congress until the new Central Committee is elected. In other words, Xi Jinping will not be in total control of the Party during those 10 days. This committee should be announced on October 15, the day before the opening of the 20th National Congress.

But… wait a minute, the Communist Party never has real elections, so can Xi decide who will be “elected” into the Standing Committee of the Presidium? Well, here is the thing.

Based on the Party’s precedent, the Standing Committee of the Presidium has a certain fixed composition of members which contains past, current and future members of the Politburo Standing Committee and some current politburo members and other high ranking officials. The Politburo Standing Committee is the Party’s highest ruling body so its members are considered the ones who really govern the country.
Keeping that in mind, now let’s see who is in the Standing Committee of the Presidium for the 17th National Congress right before Xi became the top leader.

It consists of 41 members. 7 from the future or upcoming politburo standing committee, 9 from the current or outgoing politburo standing committee, 12 from the earlier Politburo standing committees, and 15 from the current lower level politburo and other departments.

Xi Jinping is most concerned with the members from the past Politburo Standing Committees. These people are called political elders and there are quite a few of them who oppose Xi.

What could these opponents do? According to the CCP’s rules, the Standing Committee of the Presidium performs a range of functions including studying the major issues related to the conference, and submitting opinions to the conference presidium for discussion and decision. In other words, they have the right to submit special motions for the Central Committee to discuss. This is where unexpected things could happen, and things similar in nature have happened in the past.

In 1978, right before the Third Plenary Session of the 11th Central Committee , A Politburo Standing Committee member Chen Yun raised some controversial issues regarding the Cultural Revolution. His remarks had wide resonance which led to the change of the original agenda for the conference. The conference was prolonged to 36 days, during which the theoretical foundation of then Chairman of the Party Hua Guofeng (华国锋)was criticized; multiple political figures have been rehabilitated. Not long after the conference, Hua’s power was replaced by Deng Xiaoping. China entered a new era.

What a terrifying example for Xi Jinping and there are more in the CCP’s history! According to historian Gao Wenqian, the essence of such events is that when the elders of the Party gather together, it is very hard to stop them from voicing their opinion. If one person raises his hand, can you not let him speak? If his remarks have resonance, things could get out of control. The Standing Committee of the Presidium could propose a special motion for the National Congress to discuss certain issues.

And there are many issues people would like to discuss regarding Xi’s policy. The collapse of the Sino-U.S. relations, the questionable alliance of China and Russia; the notorious zero-covid policy and the failing of the Chinese economy, to name just a few. However…

Guess what? If you and I have thought about these scenarios, I guarantee you Xi Jinping has thought about them too. In fact, Xi has made thorough preparations to avoid such surprises.

In May, 2022, the General Office of the CCP Central Committee issued an Opinion that pointed out the necessity to ensure that retired cadres, especially Party members who have held leadership positions, continue to listen to the Party’s words, follow the Party’s words, and consciously align with the Party Central Committee with Xi Jinping at its core. The Opinion specifically forbade arbitrary discussion of the major policies of the Party, spreading of negative political remarks, and participating in activities of illegal organizations.

This is to prevent the political elders from getting together to plot against Xi Jinping. It is reported that eavesdropping of these people is prevalent. They don’t dare to talk about sensitive things over the phone. If they had no preparations, no communications beforehand, would they improvise such a high risk operation at the meeting in a concerted effort? I highly doubt it. But historian Gao Wenqian seems hopeful. He said among the political elders, some of them are from Xi’s father’s generation. Some of them promoted him, others did him huge favors, still others hold strong opposing views on Xi’s policies. So this is a group of people Xi has a hard time dealing with.

Another preemptive move from Xi’s side is to make the Party incorporate the so-called Two Establishments into an important Party resolution last November. What are the Two Establishments? They are Establishing Comrade Xi Jinping as the core of the Party Central Committee and the core of the whole Party, and establishing the guiding position of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era.
Narration: This resolution was passed by the last Plenary Session of the 19th CCP Central Committee. In other words, it was adopted by the same group of people who will attend the upcoming 7th Plenary Session. What does that mean? It means if Xi Jinping’s position and Xi Jinping’s guiding thoughts were to be changed or altered, the same group of people not only denied themselves, but also would need to bear responsibilities for making such a mistake to adopt the Two Establishments in the first place. That will mean the dysfunction of the CCP as a whole. Therefore, such an outcome will turn out to be highly unlikely. In fact, the Two Establishments and some other doctrines that aim to establish Xi’s permanent leadership position will be written into the Party Constitution during the 20th National Congress. That will pave the way for Xi to get a life-long tenure.

According to the Communiqué of the 7th Plenary Session of the CCP Central Committee, The Party will continue to unite around the Central Committee with Xi Jinping at its core. This is an indication that Xi will get a third term. But the Standing Committee of the Presidium of the 20th National Congress is still the thing to watch for. If the number of political elders is reduced, it will mean Xi has changed the rules once again, but it also shows Xi is concerned about them. If there is no change to the composition pattern of the Standing Committee, it could mean Xi is confident that there will be no surprises. It could also mean Xi does not have the authority to change this long standing tradition of the Party. In either case, its implications will only be revealed after the 20th National Congress.


Is a Covert China-Russia Alliance underway? | Zooming In with Simone Gao

Simone: No, no, no, no, still no, Putin and Xi Jinping’s meeting did not make it to the picture headlines of the People’s Daily, China’s largest government owned newspaper.

Did the People’s Daily report their meeting at all? Ok, here it is, hmmm, there is no video, and no pictures. I wonder if Xi’s other meeting reports don’t have photos either.

Oops, other meetings have videos; that’s because China Central Television, the country’s largest government owned TV station reported them. Only Putin’s meeting with Xi was not carried by CCTV.

What’s going on? What happened between Xi Jinping and Putin?

Xi Jinping visited ex-Soviet Uzbekistan on September 15 for a summit of the Shanghai Cooperation Organization. That was Xi’s first overseas visit since the pandemic began almost three years ago. The highlight of the summit was supposed to be his meeting with Russian president Putin, whom Xi has called a good friend, an old friend and a true friend, and maybe now the only friend.

But the much-anticipated warm interaction didn’t happen. Xi obviously kept some distance from this old friend. Putin in his opening statement in his meeting with Xi said: “We appreciate our Chinese friends’ balanced position in connection with the Ukraine crisis. We understand your questions and your concerns in this regard. During today’s meeting we will certainly explain in detail our position on this issue, although we have spoken about this before.”

Let me try to explain what he really meant: “My dear friend, I didn’t want to accuse you of not helping enough. I completely understand your situation and concerns. However, you should still help me. And this is why.”

We don’t know what Putin actually discussed with Xi Jinping because the rest of the meeting was muted. But we do know that Xi rushed to the airport the minute the summit was over. It really didn’t seem Xi was too enthusiastic about this whole thing.

However, the day after Xi went back to Beijing. Nikolai Patrushev, Secretary of the Security Council of the Russian Federation, arrived in China on a working visit. He met with the CCP’s Central Committee Politburo member Yang Jiechi.

One of the main messages he conveyed was that based on the agreement between Putin and Xi, the priority in Russian-Chinese relations is to work consistently to strengthen their strategic link.

More specifically, he said “The parties agreed on further cooperation between the military departments with an emphasis on joint exercises and patrols, as well as on strengthening contacts between the general staffs. Mutual interest was expressed in maintaining a high level of military-technical cooperation.”

And a day after that, Putin did this.

Putin: I think it is necessary to support the Ministry of Defense and the general staff to conduct a partial military mobilization in Russia. We have no moral right to hand over our loved ones to the executioners, we can not fail to respond to their sincere desire to determine their own fate…and have asked us, Russia to help.

Simone: And lastly, he warned the West that In the event of a threat to the territorial integrity of the country and to defend the Russian people, they will use all weapon systems available including, he implied, the nuclear weapons.

This partial mobilization will call up 300,000 reserve troops. But there is a problem. Wasn’t Russia running out of weapons and ammunition already? If they get another 300,000 troops on the battlefield, what are these soldiers going to fight with? And do they have the money to support this operation? Hmmm, this escalation took place right after Putin met Xi Jinping in Uzbekistan, which followed by a ministerial level meeting that discussed among other things, further cooperation between the military departments of the two countries. Could Xi be backing Putin up after all?

This guy is more important than Patrushev and Yang Jiechi combined when it comes to China-Russia relationships because he is the number three guy in China.

His name is Li Zhanshu, chairman of China’s National People’s Congress Standing Committee. By the way, China’s People’s Congress is not like the congress in democratic countries. The representatives are not elected through a real democratic process, but rather, are nominated by government officials. This doesn’t mean the People’s Congress does not have power, it does. It legislates just like Congress in America. Only, the legislation reflects the wills of the Party leaders, not the Chinese people. Anyway, Li Zhanshu is the head of the People’s Congress. And he also ranked third in the Party’s seven Politburo Standing Committee, THE top ruling body in China. Last but not least, he is a Xi Jinping confidant.

Li Zhanshu went to Russia right before Putin and Xi Jinping’s meeting at the summit of the Shanghai Cooperation Organization. He delivered a key message to his Russian counterpart that the “strategic coordination” between the two countries had “reached an unprecedented level,” According to Russia’s State Duma, Li told Russian legislators that “China understands and supports Russia on issues that represent its vital interests, in particular on the situation in Ukraine.” and that China is providing its assistance.

The English word assistance doesn’t reflect the exact meaning of “策应”. “策应” is more than just assistance. It is support by coordinated action, most commonly used in a military context.

Li Zhanshu’s promise was not improvised. His choice of words must have been discussed and decided by the Politburo Standing Committee. Therefore, it represented the top Chinese leadership’s decision although they don’t want to make it as public as the Russian media did. Li Zhanshu’s mention of supporting Russia over the Ukrainian war was cut from the Chinese media’s readout, just like the severe downgrade of the report on Xi’s meeting with Putin. But why? Who is the Chinese Communist Party hiding this information from?

The CCP hid it from its own people more than anyone else. Russia had just lost 6000 square km of occupied land in Ukraine. Forming an alliance with a loser is particularly sensitive for Xi Jinping now.

The party’s 20th National Congress will be held in October this year. Xi Jinping’s top priority is to be elected smoothly into the position of General Secretary of the Party for the third time. Anything obstructing this goal will need to be eliminated. He strives to be possibly entitled “the people’s leader of China”, on the same footing as Mao Zedong, at this conclave. He can’t afford to be closely associated with someone who is incompetent and could potentially bring trouble to China. Public opinion could turn very negative, even with heavy handed censorship. Xi does not lack opponents in China. They are watching carefully for loopholes in Xi to destroy him. Xi can not give them that opportunity. He also didn’t want to stir up more trouble for himself with America and the West right before the 20th National Congress. American sanctions could incur serious internal criticism against him.

This is why he couldn’t support Russia openly. But with Li Zhanshu’s promise and Patrushev’s follow up trip to China, you can be sure that China’s support to Russia will continue if not increase. One area mentioned in Patrushev’s statement is further cooperation between the two militaries with an emphasis on joint exercises and patrols.

Why joint military exercises? A joint exercise could serve multiple purposes. And one of them could be this: If the exercise is conducted on the Sino-Russian border or in Russia. Could China conveniently bring a large number of weapons to Russia? And after the exercise, what about leaving a portion of them for their Russian friends?

This video was filmed by Russian citizens in Vladivostok a few weeks ago. A long fleet of Chinese military vehicles were seen driving in the city. What’s inside of these vehicles? We don’t know. But we do know that starting from September 1st, Russia held a week-long military exercise at seven firing ranges in Russia’s Far East and the Sea of Japan and involved more than 50,000 troops and over 5,000 weapons units, including 140 aircraft and 60 warships. The participating parties include several ex-Soviet nations, China, India, Laos, Mongolia, Nicaragua and Syria.

If the Chinese military does leave weapons to the Russians, Russia could theoretically claim they bought them from North Korea who bought them from China before. In fact, according to the Guardian, the Biden administration officials earlier this month confirmed a declassified US intelligence assessment that North Korea was in the process of selling arms to Russia in violation of UN security council sanctions banning Pyongyang from importing or exporting weapons. North Korea denied such sales.

Another area as mentioned in Patrushev’s statement is the military-tech cooperation between the two countries. I talked to a veteran Chinese air force officer about this and asked what this military-tech cooperation could be. He told me that China has been relying on Russia’s military doctrines and technologies since the P.R.C. was formed. And that has lasted ‘til today.

Russia could provide advanced technologies to China in exchange for money, equipment and components. It is highly suspected that China already supports Russia through disguised civil trade, such as selling electronics including chips. A lot of those chips used in consumer electronics can also be transferred to weapons. China could also transfer weapons or other materials to Russia via a third party, for example, a country in the Shanghai Cooperation organization.

I read this interesting report from Aid Data, a research lab at William & Mary. It was released in 2021 and it says that China’s contracts contain unusually broad confidentiality clauses, which prevent borrowers from revealing the terms or sometimes even the existence of the loans. The researchers also found that China’s contracts have become more secretive over time, with a confidentiality clause in every contract in the dataset since 2014.

Could China support Russia via these secretive contracts? We definitely can’t rule out the possibility. But what if America finds out and sanctions China? Well, first of all, it is hard to find out given the secrecy of these contracts. Secondly, I don’t think China cares that much since China assumes America is decoupling from China and trying to besiege China economically anyway. The Biden administration’s recent ban on selling sophisticated chips to China and Russia is a good example.

In fact, Biden revealed to CBS’s 60 Minutes that during his recent telephone conversations with Chinese leader Xi Jinping. “Biden said: if you think that the Americans and others will continue to invest in the Chinese economy while violating sanctions against Russia, then you are making a huge mistake.”

And guess what? At SCO’s final press conference, Putin said that he and Xi Jinping “stated a significant increase in trade turnover”. An open defiance to Biden’s warning.

This is what we expected. The two countries are both severely isolated. And they DO need each other. The most important tie is energy.

One of the highlights of this SCO summit is the tripartite talks between China, Russia and Mongolia because Russia’s natural gas pipelines to China and other Asian countries are likely to be laid in Mongolia.

Russian state energy giant Gazprom has been researching for years how to lay the massive gas pipeline Siberia 2 to transport natural gas to China over Mongolia. If the pipeline is laid, it will be able to transport 50 billion cubic meters of natural gas per year, equivalent to the annual transmission volume of Nord Stream 1 and about one-third of the total natural gas that Russia sends to Europe each year.

Russia has now replaced Saudi Arabia as China’s largest oil importer. If this pipeline goes through, energy sanctions against Russia by Europe and the United States will hardly bring a fatal blow to Russia. At the same time, the threat to cut off oil transport from Saudi Arabia to China through the Strait of Malacca will also lose its deterrent effect. This has great strategic significance for both China and Russia. For this reason alone, China and Russia have to form an alliance.

Does the CIA or FBI have think tanks under them? I have never heard of it. But China does. And because it is under the intelligence agency, it is more important than other think tanks. So In a recent article by Fu Mengzi, vice president of a think tank affiliated to the Chinese Ministry of State Security, Mr. Fu proposed three responses from China’s side in response to the West’s countering of a China-Russia alliance.

The first is to oppose a Unipolar world order, the second is to seek an alternative development mode in a post globalization era, and the third is to solidify relationships with neighboring countries, to reorganize the supply chains within these countries to create an extended internal economic circulation in defense of a Western blockade. Just to be clear: Russia has a four thousand three hundred kilometer border with China, the second longest among all of China’s neighbors.

The article also recognized that the trend of an Eastern rise and a Western descent is slowing down. A stronger West and a Weaker East will not be changed in the near future. Therefore, China should be prepared for a long haul.

Xi Jinping probably looks beyond the Russian-Ukrainian war. He sees Russia as an indispensable piece in his united front against America and the West. Xi Jinping’s Taiwan ambition also needs Russia’s vocal and material support. Yes, China and Russia compete in central Asia for leadership. China’s Belt and Road Initiative intrudes into what Russia considers its strategic backyard. But China and Russia need each other more. It doesn’t seem they have other choices now. They are literally each other’s strongest support. Xi Jinping couldn’t let Putin fall. The deeper Putin is in trouble, the more Xi Jinping has to help him, unfortunately.

Putin’s Bet on Germany; A CIA Warned, Reagan Opposed, Zelensky Protested Project Went Ahead, Why?

One month into the Ukraine war, reigning in Russia using sanctions still proved difficult for the European member countries who were deeply entangled with Putin due to their reliance on Russian gas and oil. How did that reliance come about and is there any chance for them to break free from the need for Russia’s energy?

The current European dependence on Russian oil began decades ago, during the Reagan era and with the promise of a pipeline. That Soviet pipeline traverses the landscape between Siberia and Germany and brings with it much needed gas imports that, according to a March 1981 CIA memo, were needed to offset likely declines in oil supplies for the six European countries in question. They also argued that “related equipment sales by West European firms would create thousands of jobs and billions of dollars in business.”

Despite those positives, the CIA warned of some serious risks in creating this type of infrastructure with the Soviet Union. In their memo titled USSR-Western Europe: Implications of the Siberia-to-Europe Gas Pipeline, they find that such a pipeline would “provide the Soviets one additional pressure point they could use as part of a broader diplomatic offensive to persuade the West Europeans to accept their viewpoint on East-West issues,” citing, as an example, an attempt to undermine “European willingness to act in concert with the US on economic sanctions against the Soviets or on security issues.”

They also cite a potential for a “natural gas weapon,” stating that “the likelihood is strong that the Soviets will attempt subtle exploitation of the developing natural gas relationship” and warning that the effects of that pressure would depend on “West European and NATO cohesion and will” and “progress over the next few years by Western Europe in installing ‘insurance’ in the form of strategic reserves and fuel substitution capability.”

A bitter dispute followed. Reagan vehemently opposed the pipeline and issued sanctions preventing American corporations from participating in the construction and operation of that pipeline. But after what The New York Times calls “a public-relations and lobbying blitz that played out across newspaper opinion pages, congressional committees and a direct appeal to the White House,” Reagan backed away from the sanctions, and the pipeline moved forward.

In the decades since, two more pipelines—the Nord Stream and Nord Stream 2—have been added, both running under the Baltic Sea and taking gas from the Russian coast to Germany. Together, they could deliver 110 billion cubic meters of gas to Europe every year. But while the Nord Stream has been operational since 2011, the $10 billion Nord Stream 2 project has now been put on hold. The US, UK, Poland and Ukraine strongly oppose the project, fearing that it would provide Russia with an even greater stranglehold on Europe. Ukrainian President Volodymyr Zelensky has called it “a dangerous political weapon.” And German regulators are fearful that because Russian state-owned firm Gazprom owns both a 50% stake in the pipeline and all the gas that goes through it, Russia would have too much control over supply.

That supply is substantial. Even without the Nord Stream 2, Russia currently provides roughly 40% of the European Union’s natural gas imports. Russian supply drying up leaves Europe vulnerable, especially Germany and Italy who consume 42.6 billion cubic meters and 29.2 billion cubic meters respectively. Belarus, Turkey, the Netherlands, Hungary, Kazakhstan, Poland, China and Japan are also at risk if Russia cuts off the supply.

And Russia has a history of tinkering with the supply when they feel politically justified in doing so. The Soviets cut off oil supplies to Yugoslavia in 1948, to Israel in 1956, and to China in the early and mid-1960s. More recently and more notably, Russia cut off gas supplies to the European region in a 2009 diplomatic dispute with Ukraine. According to The New York Times, they left “tens of thousands of homes without heat” and “more than a dozen people froze to death, mainly in Poland, before Russia reopened its pipelines.”

The risks the CIA warned us of in 1981 are just as real today, and we are just as unprepared for them. The EU had proposed a plan to end reliance on Russian oil by 2030 but now, eight years ahead of that date, finds itself scrambling to find alternatives in order to end their participation in the funding of the attack on Ukraine. The US has committed at least 15 billion cubic meters to Europe in the remainder of 2022 along with its commitment to making “sure the families in Europe can get through this winter and the next while we’re building the infrastructure for a diversified, resilient and clean energy future,” as Biden said in a recent statement at the U.S. Chief of Mission Residence in Brussels. But 15 billion cubic meters won’t be enough to meet that goal, and without help from Saudi Arabia, the United Arab Emirates, Iran and Venezuela, there seemed no real plan on how to offset European reliance on Russian gas and oil.

Or there is one more route, according to Bloomberg, If there’s any country that might’ve been in a position to rescue Europe from its energy crisis, it’s the U.S. — home to vast shale fields holding a seemingly endless supply of natural gas and giant terminals capable of liquefying it and shuttling it abroad.

But American shale drillers refuse to drill more. Why? We will explain in our next video.

Why Xi Jinping’s Anti-Corruption Campaign Is Forever on the Way?

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

Just days ahead of the Chinese New Year, the start to the year of the Tiger, state-owned CCTV and the CCP Disciplinary Inspection Commission revealed their five-part documentary series on Chinese corruption. “Zero Tolerance” features former Chinese officials from behind bars, revealing the causes of their corruption and their deep regret over their crimes against the country. 

Those alleged crimes are substantial, and the punishments are even more so. One episode features Hu Huaibang, a former head at China Development Bank, who was sentenced to life in prison for bribery. Wang Fuyu, who said in his episode that “my crazy greed is at its peak, but I don’t know why I want money,” was sentenced one day after his episode aired. The sentence imposed for allegedly accepting 434 million yuan (about 68 million U.S. dollars) in bribes? He received the death penalty, suspended for two years at which point it will be commuted to life in prison.  

The premier was broadcast on Saturday, January 15th, during primetime, showing the importance of this campaign—and its reach to the Chinese citizens it hopes to convert. The first episode, titled “Not Losing 1.4 Billion,” focuses on Sun Lijun and sets the tone for the series, with Sun claiming that he “didn’t expect that I would become a destroyer of the construction of the rule of law or fairness and justice.” Sun Lijun was once the vice public security minister and is said to have received bribes in excess of 14 million US dollars. He is also currently facing charges related to stock manipulation and gun possession.

It is the 1.4 billion citizens of China that Xi, according to this propaganda series, is claiming to protect through his anti-corruption campaign. In the beginning of the first episode, Xi says “If you don’t offend hundreds of corrupt officials, you must offend 1.4 billion people.” Clearly, in order to achieve stability for the regime, the majority of the Chinese people need to be pacified. They need to be persuaded. They need to believe that the CCP, and Xi Jinping in particular, are working for them by removing corrupt officials. The series also aims to “kill the chicken to scare the monkey,” as they say in China. It aims to take power and momentum away from any of Sun’s associates who may intend to oppose Xi through the political or legal systems. It says, in essence, that your boss is down. The trend is over. You have no path forward. Obediently disarm and surrender before the 20th National Congress. 

Should we believe that Sun Lijun and the others featured in this series completely disarmed and surrendered? I believe so. Analysts are saying that Sun’s indictment has shrunk recently, showing a much smaller list of crimes than that originally reported by the party. That may be because of his cooperation with the party both on this documentary and, potentially, on turning over names of his associates in order to atone for his own wrongdoing. Censorship within the party focuses on political issues, like overly inflated political ambitions, but the party cannot punish opponents on the basis of political opposition. Instead, they bring charges often relating to bribery and often punished by life imprisonment. 

Why might Xi have opted to begin this series with Sun Lijun? Perhaps because of the outsized threat he posed to Xi. Sun was the youngest deputy minister of the Ministry of Public Security. He had clear political potential and advantages. Alongside those advantages came ambition. Sun developed a “15-year plan” for himself, striving to improve in five-year increments. 

Sun opted for five years chunks because the party congress of the Communist Party of China is held every five years. At that time, CCP officials from central government all the way down to local governments change ranks, and the promotion of officials is rushed during this period. If you are not promoted, you are likely to face a five year wait for another opportunity or, worse, lose the opportunity because you have aged out of the appointment. In the CCP system, cadres of the Communist Party are appointed by age. 

In Sun’s case, he designed steps very likely looked like this: in the first five years, when the 20th National Congress of the Communist Party of China is held in 2022, he would become Minister of the Ministry of Public Security; in the second five years, in 2027, he would become the deputy secretary of the Political and Legal Committee and enter the central politburo; and, in 2032, he would become a member of the Standing Committee of the Politburo, perhaps even becoming chairman of the Standing Committee of the National People’s Congress. At that point, he would be 64 and would be able to serve one term.  

Ambitions such as these would be normal, in a political system where the leader would be replaced after his stated two terms. But that was never Xi Jinping’s intention. And now, because Xi remains in his position and the key positions of the CCP leadership would be stuffed with confidants of Xi Jinping, others who also have their eyes on those positions often find themselves facing corruption charges. Xi will not rotate out his inner circle nor give up power himself. The ambitious have nowhere to go but to quietly fade from politics or be sent to Qincheng Prison on corruption charges. Qingcheng is a prison for jailing only high ranking CCP officials. 

The political and legal system is the top priority of Xi Jinping’s anti-corruption campaign to eliminate his challengers. Clearly, he will arrange for his own people to ascend to the top of key departments like the Ministry of Public Security which is under the Political and legal committee. While Sun Lijun was never a Xi Jinping confidant, I believe that he initially did try to please Xi in his role as deputy minister. In one example between October and December of 2015, five staff members from Causeway Books (located in Hong Kong) went missing and were believed to be detained in mainland China. The owner was among those kidnapped, and it has been suggested that the detainments came because of the bookstore’s sale of a book titled Xi Jinping and His Six Women. Sun Lijun would have been in a position to oversee those detainments at the time. Unfortunately for Sun, this move did not win Xi’s trust.

With Sun’s 15-year plan at odds with Xi Jinping’s ambitions, Sun Lijun had no political path forward. That would be difficult for a man like Sun to take. But the corruption charges were more likely tied to Sun’s leadership in the asssasination attempt of Xi Jinping. His role in the Ministry of Public Security provided him with access to local public security departments, especially those in Jiangsu, a site of an alleged assassination attempt on Xi Jinping. Others rumored to have played a part in that attempt were also featured in the “Zero Tolerance” documentary as the small gang of Sun Lijun.

But despite this group being named as the gang of Sun Lijun, a deputy minister of the Ministry of Public Security does not have the reach or resources to carry out a coup d’état alone. If the assassination was successful, there would need to be a new regime set to take over, including not only a replacement for Xi Jinping but the entire top leadership of the CCP. It would take players whose rank go beyond the political and legal systems in China to carry out such a coup. Who might those other players be? Because Sun was a member in the “Shanghai clique,” a group led by former CCP general secretary (and Xi Jinping rival) Jiang Zemin. Notable figures in  this clique become suspects. Such as Meng Jianzhu, the former head of the political and legal Committee and Zeng Qinghong, former member of the politburo’s standing committee, Jiang Zemin’s right hand man.  

Sun’s assasination attempt did not come out of the blue. It represents an escalation of opposition to Xi Jinping in the CCP leadership. The initial coup d’état attempts are believed to begin in the earliest moments of Xi Jinping’s regime. In 2012, Zhou Yongkang, secretary of the Political and Legal Committee, and Bo Xilai, former governor of Liaoning and an ambitious princeling, crafted a plan to oust Xi and make Bo the top leader of China. The plan was exposed, though, leading to Xi Jinping’s vow to vigorously eliminate their influence over the political and legal systems. 

Nearly a decade has passed, and Xi’s commitment to his anti-corruption campaign has not ceased. With more than 100,000 people indicted for corruption and more than 1.3 million lower-level officials punished since 2013, why is Xi unable to end the influence of the opposition within the CCP for such a long time? 

It is understandable that Xi would be so forceful and persistent in his attempt to end this opposition given that others were plotting his ouster even before he formally took power.  However, if all he had done was to round up those involved in that attempt, this likely would have ended. Those at fault were Zhou Yongkang, Bo Xilai and a very small number of accomplices. Had he punished only the guilty, others would not have given it a second thought.

Instead, Xi chose to purge the political and legal systems of anyone close to or promoted by Zhou. He assumed guilt by proximity. That assumption led to scores of others being punished where there was no crime or for crimes that were common practice even among Xi and his inner circle. 

Why do it then? Probably as a show of power, of prestige. He was just coming to power amid disagreement over whether he should even be the general secretary. His power was unstable, in part because of his few political achievements at the local level. With the attempted coup, the spotlight on his lack of authority and overt qualifications for this new role was even brighter. So, he deemed a show of force necessary to establish his rule over the political system of China.  

But there is problem. In the current CCP system, top leaders promote those who are below them and, in many cases, those promotions come through connections or interests. If you want to become the mayor of Hangzhou, you must bribe the secretary of the Zhejiang Provincial Party Committee. Often, those bribes are in the tens of millions and are accompanied with an inspection to be sure that the leader finds you loyal. Where does that money come from? It comes from bribes paid to you from those below you or from kickbacks gained from major projects. There is no layer of the chain of CCP commands that is clean. 

As the top leaders fell in the anti-corruption campaign, lower-level players tended to join forces—not against Xi, but to defend themselves as one body. And as the anti-corruption campaign expanded, Xi pushed those on the sidelines who were simply looking to protect themselves into an alliance against him. Selective anti-corruption felt like a sword hanging over the heads of these officials who knew it could fall at any time because none of them were clean. 

And these people have no national law written in their hearts. Sun Lijun gives an example in “Zero Tolerance,” stating that after he became the deputy minister, he always ran red lights. He did so believing that red lights were meant to restrain ordinary people and, as the deputy minister, he should not be bound by them. This is an attitude that is common in the political and legal system, in ways well beyond the running of red lights. These officials believe there is nothing they cannot do, no matter who it is that is setting the restraints around them. The Sun Lijun clan is known to eavesdrop on the top CCP leadership, they record their conversations and even record videos of their private affairs. So, if these people begin to truly feel threatened, they are likely to take the risk and kill Xi Jinping. 

Those same reasons may be driving Xi to become more dangerous and less willing to step down. The more he takes this hard-handed approach to this corrupt system, the more enemies he creates. And the more enemies he creates, the more at risk he becomes. 

The 2018 revision of China’s constitution, removing the requirement that the president of the country step down after two five-year terms, ended the peaceful path to a transfer of power. This change affected more than just Xi Jinping himself. 

A perfect example is Sun Zhengcai. Sun’s life can be summed up by the phrase “the wrong person in the wrong place at the wrong time.” He was a rising star in Chinese politics, serving as a member of the politburo and mostly seen as Xi Jinping’s successor as the general secretary of the Party when Xi’s tenure was up. But when Xi decided not to step down, Sun’s existence became intolerable to Xi. Therefore, Sun was charged and convicted of bribery and received a common sentence among Xi’s opposition: life imprisonment. 

At a larger scale, the consequence of Xi using only people he knows and trusts from Zhijiang and Fujian provinces where he worked before is that the careers of most officials in the CCP will be negatively affected. Trusting only your own people does not even leave open the opportunity for others to defect to your faction. As a result, rising numbers within the CCP are becoming increasingly alienated, even antagonistic. 

That antagonism is likely to hit a breaking point at the upcoming party congress. As I mentioned earlier, every five years brings an intense struggle at the party congress when entire cadres are promoted. Should you miss the promotion at the right age, you are aged out of advancement in the political system and left with nowhere to go. Xi is not about to upset a handful of CCP leadership hopefuls. He is about to alienate thousands and create an even longer list of political enemies. Those who advanced together as cadres and have now been shoved aside as cadres are likely to unite against the Xi Jinping regime. 

So long as Xi continues with these tactics, he will continue to create ever-larger numbers of enemies. Doing so will ensure an endless battle against the opposition, one he claims as a war against corruption. Besides this, Xi’s vision of taking the country to a more closed future is at odds with the more reform-minded party majority. Getting rid of Xi Jinping becomes a common interest of all. 

That’s all for today.Thanks for watching Zooming In China. 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, and in-depth reports available only to members. Just $5 a month, or $50 a year and you can cancel anytime. Please check it out.

How Xi’s Most Powerful “Ideas Man” Got America Wrong?| Zooming In China

Hello everyone. Welcome to Zooming In China Tea Time. I’m Simone Gao. I am suffering from allergies on my face so I will not appear on camera this time. Sorry about that. 

Dubbed “almost certainly the most dangerous man in the world that most folks have never heard of” by Washington Post columnist Hugh Hewitt, Wang Huning is emerging as a source of intrigue for academic and political leaders trying to understand the rapidly changing tides of Chinese politics. A man notorious for his comfort in the shadows of Chinese presidents who seeks no political limelight for himself, Wang is reported to have carried tremendous influence over the last three leaders of the Chinese Communist Party and to be the central figure behind Xi Jinping’s major policy reforms.

According to an October 2021 article in Palladium, written by a China expert using the pseudonym N.S. Lyons, the “sudden wave of new government policies that are currently upending Chinese life in what state media has characterized as a ‘profound transformation of the country,” policies that are commonly referred to as Xi Jinping’s “Common Prosperity” campaign, are the brainchild of Wang Huning. 

Recently, I read Wang Huning’s popular memoir America Against America, written after a 6 month stay in the United States. I have to say his knowledge of Western political philosophy, American history, and American politics went well beyond my expectations, leaving me with the impression that he is a diligent, rigorous and qualified scholar. Despite that theoretical rigor used in his memoir, however, I don’t think he understands the essence of the American order. Does that matter? Yes it does. Wang is now charged with charting a way forward for the world’s second most powerful nation. In that role, he has chosen to view the U.S. as a negative lesson, an example of what not to do when defining China’s path. He is also choosing to define and build China’s strengths in opposition to America’s perceived weaknesses.  

With China’s economic size and ambition, any political or economic move it makes will have an impact on the world. We have only to think about the impact that Nazism had on the world to understand that ideas have consequences. 

Yet for all Wang’s clear persuasive power with the presidents he has served under, I do not believe he yields as much power as author N.S. Lyons claims. Lyons claims that Xi Jinping’s strength is sufficient to tolerate very smart people around him and that Wang, as the brightest of the bunch, survived into Xi’s regime because of it.  

I believe this judgment to be wrong. I don’t believe that Xi Jinping is strong enough to tolerate dissent and highly intelligent people. Instead, he is faction-minded. He trusts and uses only those people from where his old posts were in Zhejiang and Fu Jian province which caused a grave alienation of the rest of the CCP bureaucracy. Wang Huning did not survive into the Xi Jinping regime because of Xi Jinping’s broadmindedness. He survived because of his political cunning, a cunning that has allowed him to gain the trust of three generations of Chinese leaders, especially with Xi Jinping who only trusts his own people. 

In Lyons’ reading of the book “America against America”, he found that Wang “marvels at homeless encampments in the streets of Washington DC, out-of-control drug crime in poor black neighborhoods in New York and San Francisco, and corporations that seemed to have fused themselves to and taken over responsibilities of government. Eventually, [Wang] concludes that America faces an ‘unstoppable undercurrent of crisis’ produced by its societal contradictions, including between rich and poor, white and black, democratic and oligarchic power, egalitarianism and class privilege, individual rights and collective responsibilities, cultural traditions and the solvent of liquid modernity. In the end, [Wang believes that] ‘the American economic system has created human loneliness’ as its foremost product, along with spectacular inequality.”

Obviously the American trip had an impact on his views on liberal democracy; that change conveniently fits with the Chinese political shift right after the 1989 democratic movement. After the Tiananmen  massacre, the CCP started to crack down on Western liberal thought, believing that was the cause of the democratic movement. A few years later, though, China’s then de facto leader Deng Xiaoping directed the country to open up and began the economic reform. There was no indication, however, that Wang Huning went along with Deng Xiaoping’s vision. 

That said, I believe Wang’s different policy prescriptions for three Chinese leaders speaks more to a desire to serve the current regime and ruler than to individual ideological shifts on the part of Wang. To survive through three Chinese leaders, Wang needed to tailor his ideas of governance toward not only the needs of the Communist Party as a whole but also the unique preferences of each leader. The political and social shifts now being attributed to Wang may not be fully his own but rather represent adaptations made to pacify each new leader. 

But whether the political ideologies are Wang’s own or are adaptations to the thinking of his employers, it remains true that this key advisor to three generations of CCP leaders holds great influence over China’s future directions and, as such, is worthy of study.

Much of the ideology that Wang Huning consistently holds is centered on the idea that value systems shape a country’s political system and when the central values of a nation crumble, the nation itself will follow. In one of his most cited works, his 1988 article “China’s Changing Political Culture,” Wang argues for an urgent review of how Chinese society’s “’software (culture, values, attitudes) shapes political destiny as much as its ‘hardware’ (economics, systems, institutions).”

Wang argued that “Since 1949, we have criticized the core values of the classical and modern structures but have not paid enough attention to shaping our own core values.” He went on to say that “There are no core values in China’s most recent structure,” making a daring negative claim about China’s socialism with Chinese characteristics.

In America Against America, Wang turns that critical eye toward the political ideologies and practices of the United States. He quotes extensively from American conservative political philosopher Alan Bloom’s book The Closing of the American Mind. Bloom advocated for the promotion of Western cultural traditions and civilizations, praising the cultural and spiritual creations of Plato, Socrates, Locke, Rousseau, Kant, Shakespeare, Bacon and others. He believed in the use of these heritages to spread the Western civilization and cultural spirit. 

Wang, however, believed that America was trending toward a deviation from those Western cultural traditions and toward nihilism. He argued that nihilism as the new American way would have a fatal impact on the American spirit and would eventually impact the entire democratic system. 

I believe that Wang Huning’s insight into this U.S. ideological trend was both profound and rare in 1988. Wang’s background as a successful professor and political philosopher combined with his rare opportunity to observe the U.S. first-hand at some of its elite educational institutions gave him the ability to see broadly and deeply. In doing so, he hit the nail on the head: America was built on an idea, one so central to its fabric and identity that if that idea disappears, the social system and national identity disappear along with it. Impressive, right?

He got the basic trend right. His understanding of why, however, reveals his limitations.

Wang Huning quoted a substantial portion of Bloom’s argument in his book, but he left out a key argument of the author. Bloom believed that American nihilism developed from the relativity of values instilled in college education at the time. The theory of value relativity says that there is no objective standard of right or wrong in this world. All good and bad, right and wrong are relative and subjective. One culture may have one set of criteria for knowing what is right or wrong, while another culture has different criteria. Because there is no objective standard, any value could be accepted. Which philosophical school or ideology holds the view of value relativism? Marxism. It stands in opposition to the philosophical thinking of the Eastern and Western traditions. Judeo-Christianity, Greco-Roman culture, and Eastern philosophies such as Buddhusim, Taoism and Confucianism all believe that there is an objective and eternal moral order in this world, and its standards come from God or heaven.

Why didn’t Wang Huning mention the theory of value relativity? Because his academic foundation is Marxism. While he affirms Bloom’s argument that America is moving toward nihilism, he cannot accept the argument that the move toward nihilism is because of value relativity and the loss of faith in God. 

This has a profound impact on his research and perspective on the United States. I believe that his core idea, that the value system shapes the political system, is correct. Yet, Wang Huning did not explain why the quality and origin of such a value system matters. That is a direct effect of his intrinsic belief in the relativity of value, the lack of an objective and eternal right or wrong. He believes that any value system that could be applied to his society and bring economic prosperity and strength to the country is a good value system. He further believes that China can create a more efficient and effective value system than the United States. 

This idea is very dangerous. It may lead China once again to the old path of so-called social and human nature transformation that has happened both inside and outside of China. The Cultural Revolution is a perfect example. It meant to better the human nature of the bourgeoisie and intellectuals by eliminating the traditional Chinese culture they were immersed in and sending these people to the countryside, forcing them to do hard labor so that they can shape the proletarian consciousness.

From the perspective of conservative thinking, Wang Huning’s theory of a value system that excludes moral judgment fails to grasp the essence of the American order. He does not understand what makes America great; He also does not understand what would make America decline. Therefore, his remedy for China that was meant to avoid America’s mistakes is destined to fail. 

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, and in-depth reports available only to members. I will also do live Q & A shows with members on the website. Just $5 a month, and you can cancel anytime. Please check it out.

America’s Biggest Mis-judgement of the Cross Strait Relations | Zooming In China

Happy New Year everyone!  Welcome to Zooming In China Tea Time. I’m Simone Gao.

As the final days of 2021 draw to a close, the United States and Taiwan are no closer to clarity on the question of whether the US will militarily support Taiwan if China attacks. Despite ongoing threats from China and increasing displays of PLA military strength in the region, the US continues to cling to the Taiwan Relations Act as their guiding principle, a principle that is too ambiguous to be useful against the modern-day threat of Xi Jinping’s  regime.

Why might the US be resisting a formal change of policy toward Taiwan despite the advancing threat posed by China?  One reason may be found in Taiwan’s internal disputes over their current and desired relationship with Beijing and the impacts of those on US trade with Taiwan.

Taiwan’s minority party, the Kuomintang, supports deeper ties with China and, on December 18th, Taiwan had four referendums to a public vote, attempting a show of no confidence in the current government. Kuomingtang is the main author of these referendums.  If these referendums had passed, they could have provided a springboard for the party to make a comeback in important mayoral elections next year. While the referendums are non-binding, they send a strong signal to current administrations about the values and ideals of the people they serve.

The most contentious of those votes was whether to reinstate the ban on pork imports containing ractopamine, a common feed additive used by American pig farmers. The additive helps to reduce the fat content of the meat, and leaner meat means a greater profit per animal. Ractopamine has been deemed safe at appropriate levels by US officials and is widely used in animal feed in the United States, but products containing it have been banned in the European Union, China, Russia, and 157 countries.

Taiwan had a similar ban until 2012, when then-President Ma Ying-jeou began allowing beef with low levels of this additive to be imported from the United States. Then, on August 28, 2020, President Tsai Ing-wen announced an executive order that would allow the import of pork containing ractopamine beginning on January 1, 2021.

The public and parliamentary protests quickly followed. And in January 2021, as the imports began, small gold and yellow stickers began appearing at Taiwanese restaurants proclaiming that they served only Taiwanese pork. President Tsai’s reassurance that these products would be clearly labeled to allow citizens a choice in whether they consumed them seemed to do little to calm public fears. 

Public concerns seem to center on two issues: the potential impacts to the health of Taiwanese citizens and the impacts to Taiwanese pork farmers. Pork is an important domestic product for Taiwan, as it is a common staple in their cuisine. About 90 percent of pork is provided by local farmers, and they are part of a powerful agricultural lobby. 

Polling in advance of the referendum vote indicated that it was likely to pass, with 55.4% projected to vote in favor of reinstating the ban. However, on December 18th, that referendum, along with the three others, failed. 

This may have been due to low voter turnout, but it is equally likely that President Tsai’s recent arguments in favor of allowing the imports swayed public opinion. In particular, she pointed to the importance of developing an open trade agreement with their most important ally, the United States, at a time when China is increasing their aggression toward Taiwan. 

In response to the vote, Tsai told reporters that “Taiwan’s people want to go out into the world and are willing to actively participate in the international community.” She expressed hope that these results would strengthen her case to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

The controversy over meat imports containing ractopamine has been a consistent source of conflict between Taiwan and the United States. Initially, the controversy centered on Taiwan’s ban of American pork products. But the United States also believed that Taiwan repeatedly violated commitments to expand both their beef and pork markets. From 2006 to 2021, there were tensions in the Taiwan-US trade relations, including several cancellations of annual trade negotiations and failed bilateral trade agreements due to Taiwan’s unwillingness to fulfill its commitments. 

In a recent article published on the United News Network in Taiwan, the president of the US-Taiwan Chamber of Commerce Rupert Hammond Chambers wrote that since President Ma Ying-jeou opened Taiwan to American beef containing ractopamine, consumption has increased steadily, yet no Taiwanese have experiences health problems due to that consumption. It would be illogical to assume that American pork containing ractopamine is unsafe if American beef containing the same was found to be safe for consumption over the past decade. 

If it is not truly a question of safety, then, what is the concern? It is a taking of sides, with the current Taiwanese leadership favoring a trade and military relationship with the United States and the opposition leadership looking to reunite with China.

Taiwan now has to decide whether to become an important member of the international trade community, establish deep trade relations with the United States, or to become part of China’s economic alliances. In January 2021, as Taiwan began allowing US imports of pork, the Taiwan Affairs Office of the Communist Party of China declared that meat products produced in Taiwan or transshipped through Taiwan would be strictly prohibited from being imported into China.

That announcement forced Taiwan to choose whether to move closer to the US or the CCP in trade, and Taiwan has now clearly made its decision, one that has significant impacts on national security. When I interviewed the highest-ranking official to have visited Taiwan in the last 40 years, former Undersecretary of State  Keith Krach, he mentioned the importance of Taiwan’s decision to begin importing American pork. 

After Taiwan’s decision to allow pork imports, the US immediately began to promote the free trade agreement with Taiwan. This is vital to the security of Taiwan today, because a free trade agreement would encourage American companies to invest in Taiwan which will, in turn, encourage other countries to make similar investments. Those investments add a layer of security to Taiwan. If countries all over the world make and maintain significant investments in Taiwan, they will readily oppose any attempt by the CCP to take Taiwan by force and will form an alliance to protect Taiwan against the CCP. With the ongoing tensions in the Taiwan Strait, this is a critical matter for Taiwan. 

The United States wants to protect Taiwan based on the ideals of protecting freedom and democracy as well as their own national security. But they need a meaningful and lasting commitment from Taiwan if they are to offer an unconditional and firm defense commitment. Through trade and investments, the US can help Taiwan join the international trade and security system and promote international investment in Taiwan. This is the most effective and least costly way to offer full defense protection of Taiwan. 

Those trade and defense commitments would also help prevent the confusion created by recent Biden administration comments and ambiguity by the US Department of Defense toward the conflicts in the Taiwan Strait. When asked on multiple occasions if the US would protect Taiwan against a CCP attack, Biden has firmly said yes. Immediately afterward, however, the White House spokesperson and Department of Defense spokesperson clarified that the US policy toward Taiwan has not changed and remains centered on the Taiwan Relations Act. That means the US’s goal is to help Taiwan maintain sufficient self-defense capabilities and they regard any non-peaceful means to resolve the Taiwan issue, including embargoes and boycotts, as a serious threat to the peace and security of the Western Pacific.

The language of this Act does not make clear whether the United States will use military force to defend Taiwan in the case of an invasion or attack by China. The ambiguity is a product of the historical context at the time it was enacted. At that time, the US was drawing in the CCP to jointly fight the Soviet Union, then seen as the greater US enemy. To establish diplomatic relations with the Chinese Communist Party, the US broke off their relations with the Republic of China, a move that was loudly contested by the opposition in America. To appease that opposition, the Taiwan Relations Act was created. This Act was a tactical strategy of rights and interests implemented by the US to achieve its strategic goal of fighting the Soviet Union. 

But this strategic approach also serves ideals since the US-Soviet Cold War was never a mere battle for hegemony, instead, it was a collision of two ideologies. This makes sense if we look at the difference between the Cold War and conquests of Eurasia by Alexander the Great or the Mongol Empire. Those ancient wars were entirely aimed at conquering and dominating another civilization while the US-Soviet Cold War was a confrontation between two concepts and two ideologies: Communism and liberal democracy.

The United States and the Soviet Union formed their respective camps and found allies to stand with them. Those allies allow them to expand their sphere of influence, but they also often lead to less-than-ideal partnerships in the name of overcoming a great evil empire or ideology. In the case of the US, that meant joining forces with the CCP to fight what they perceived to be a greater evil in the Soviet Union. 

Currently in the United States, the ideals of freedom and democracy, the bedrock of this nation, have not changed. But the strategic goals, however, have changed. The Soviet Union, the core rival in the Cold War period, has been replaced by the CCP who has now become enemy number one for the United States. The CCP today far exceeds the Soviet threat to the United States during the Cold War period. It is threatening the core value system and political order cultivated by Western civilization. Given that, we could see the Sino-US confrontation as a battle of ideals for the survival of civilization. 

Under such circumstances, the strategic goals have changed. How can the United States maintain its policy of appeasement to the CCP? The original reason for a half-hearted commitment to Taiwan was to appease the CCP. The need for that appeasement has now disappeared. What is currently in line with the national interests and ideals of the United States is to make every effort to weaken the CCP, and part of that effort must include uniting with the world in defense of Taiwan. 

President Biden was right when he repeatedly stated that if the CCP uses force, the US must match that force in defense of Taiwan. That would be the right decision, and I hope he is speaking the truth, despite the White House and Department of Defense later weakening and walking back those statements. 

During this dance of strategic ambiguity, the White House and Department of Defense also made the mistake of misjudging the genuine thinking of the CCP. The US has remained consistent in their opinion that as long as the status quo could be kept, as long as neither Taiwan nor China provoke each other, meaning the CCP should not attack Taiwan, but Taiwan should not declare independence either. Then peace could be achieved in the Taiwan strait forever. 

That’s not true. To China, keeping the status quo is equivalent to Taiwan’s de facto independence. For the CCP, there is just one acceptable option and that is cross-strait reunification. 

It is a wrong decision to hope that the two sides of the strait will continue to maintain the status quo. This hope will not be realized, and it will embolden the CCP to feel that the United States is not firm in defending Taiwan. If they are so emboldened, they are likely to take risks and attack Taiwan by force. The US should make the CCP understand that there is no ambiguity on Taiwan. The PLA’s military strength will never catch up with the United States. If they choose to attack Taiwan, the US and its allies WILL come to Taiwan’s defense and that day may be the beginning of the collapse of the Chinese Communist regime. The real solution to the crisis in the Taiwan Strait lies in dispelling the CCP’s desire to reunify with Taiwan.

That’s all for today. Thanks for watching Zooming In China. Please like, share, subscribe and donate to this program if you like my content. Happy new year to all of you. I will see you very soon again. 

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.

China Is Most Likely Spared from a Second Cultural Revolution | Zooming In China

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

Last week, the Sixth Plenary Session of the 19th Central Committee of the Communist Party of China formally adopted the Party’s third historical resolution. It is a landmark document that the CCP is using to project the “great glories and victories” of China in the past and to come and most importantly, Xi Jinping is using it as a launchpad for his third term in office. 

What this 27,000-word document doesn’t cover is notable. As the Taipei Times mentioned in their November 21st coverage of this resolution, “While a crisis at China Evergrande Group—which many call the bedrock of the Chinese economy—affects millions of Chinese invested in and dependent on the company, the sixth plenary session…declared in a landmark resolution…that these very people are enjoying the best years of their lives.

Meanwhile, the coal industry that once powered the country has dwindled in capacity, leading to widespread power outages…None of these major domestic issues that affect ordinary Chinese—not to speak of the sheer number of international issues the country is facing—are mentioned in the resolution. The CCP under Chinese President Xi Jinping seems oblivious to the things that directly affect the people it governs.”

Given that glaring oversight of anything that seems deeply relevant to the Chinese people, it would be easy to assume that this was a document to glorify Xi Jinping, one simply rubber-stamped by the Party. While this document does praise Xi exceedingly, it is not a full win for the dictator. A close reading of this resolution proves that it is a compromise reached between Xi Jinping and the Central Committee, with Xi gaining what he most wanted while still allowing for some compromises to influential Party members. 

Clearly, the core purpose of Xi Jinping’s third historical resolution is to lay the foundation for his third term in office. As I previously reported, in March of 2018, the National People’s Congress passed a constitutional amendment removing presidential term limits. While this removed constitutional barriers to Xi remaining in office for life, social barriers still exist. To continue his reign, Xi must convince Party leadership, and the Chinese people, that his is the vision that will carry them into a prosperous future. That he is the leader who will keep them from harm. To do so, Xi Jinping sets himself not just side-by-side with but above other storied Chinese leaders, including Mao Zedong and Deng Xiaoping. 

This resolution divides the history of the CCP into three major stages. The first stage contains the “new democratic revolution” before the establishment of the People’s Republic of China as well as the socialist revolution and construction stage after the PRC’s founding, both overseen by Mao Zedong. The second stage is one of so-called reform and opening up, a stage of socialist modernization that is overseen by leaders Deng Xiaoping, Jiang Zemin, and Hu Jintao. In marking the second stage as one involving three distinct leaders, this resolution weakens the position of Deng Xiaoping and leaves only Xi Jinping standing on par with Mao Zedong. 

The third stage features Xi’s self-described new era of socialism with Chinese characteristics. The intent of this section is to enhance the status of Xi Jinping and position him alongside Mao Zedong, each leading a critical stage of Chinese history alone. 

It is important to note that the plenary communique shared just after the Sixth Plenary Session of the Central Committee had five stages, not three. In that earlier draft, each of these leaders was highlighted as an equally important figure in a key historical moment. It is only in the post-session revisions that Deng Xiaoping, Jiang Zemin, and Hu Jintao are condensed in importance and Xi Jinping is raised to be an equal to Mao Zedong. 

But even a status equal to Mao is not enough for Xi. While the resolution highlights each as overseeing a core historical moment in China, the description of Mao over two historical periods contained only 5600 words. Xi’s self-proclaimed political achievements, on the other hand, included a 13-item list that totaled 19, 382 words.  All three of the other leaders accounted for only 4142 words. 

In essence, then, this new resolution has lifted Xi Jinping to a status higher than Mao Zedong, leaving the sense that his re-election is a done deal. Who among the CCP leadership would dare vote against a leader envisioned as greater than Mao?

However, not everyone in China agrees with the role Xi Jinping carved for himself in this resolution. A side note offered in state-run People’s Daily makes clear that there were fierce disputes and even quarrels at the Sixth Plenary Session, saying “For three full days, there were heated and contentious debates between the 348 people at the top of the Chinese power pyramid about this resolution, and they refused to give in. Before one had finished speaking, the others were standing up and preparing to talk. Even at the conclusion of the meeting, the participants were walking in twos and threes to discuss this in more depth. What was the focus of their debate?

The People’s Daily report claimed that the debates arose because of the difficulty in defining a party history, and the range of issues within it, for a full century. Of key importance, though, was the question of how to properly handle the relationship between the new historical resolution and the prior two historical resolutions, an issue of great concern to the leaders attending the meeting. Many strongly opposed the idea that the first two resolutions should be negated.

It is only the second historical resolution that deals with current policies in China. That resolution denied the Cultural Revolution, banned the cult of personality, had a seven-thirds evaluation of Mao Zedong, established a policy of reform and opening up and, importantly, abolished the lifelong system of leadership.

According to the rules of the Communist Party, when a resolution is voted on, it must be passed by all. Should anyone dare to vote against it, his political career would end immediately. However, knowing there may be some dissent and wanting to avoid antagonizing a large part of the Party leadership, Xi left space for a three-day discussion period before the vote. This is an internal discussion, protected by security guards at the Jingxi Hotel in order to ensure that none of the discussions are disclosed. 

This is different from the National People’s Congress and CPPCC meetings. Many deputies to the National People’s Congress and members of the CPPCC are simply figureheads whose opinions have no weight. But the Central Committee is the core of China’s power. They are princes from all sides, and no opinion they share is trivial. That does not necessarily make them free to express them at will or free from the consequences of doing so. 

Despite being princes from all sides, they are not necessarily protected from a purge by Xi Jinping after the meeting. It’s just like Stalin purging a group of members every time he held a meeting of the Central Committee. If that risk still exists, then, why would these committee members be willing to strongly speak out on or challenge this resolution? Because Xi Jinping has spent many years breaking the unspoken rules of the Communist Party’s game, namely the rules that give the leadership enormous privilege. If he is re-elected for a third term, they will lose these privileges and have to play a new game dictated by Xi Jinping. 

Recently, it came to my attention that the sons and daughters of CCP officials who have gone abroad have sought to stay in the United States. Before, CCP officials used the United States as a spare tire but kept their base in China. Now, they see that China is faltering and are seeking to stay in the U.S. permanently. They know that with Xi Jinping in charge, their property, privileges, and even personal safety are at stake. 

In the end, Xi got what he cared most about. He confirmed his supremacy in the Party and his position on par with Mao Zedong, laying the foundation for his third political term. This is a victory for him.

Meanwhile, he did make concessions on the direction the Communist Party will go in the future. 

His first concession was a denial of any positive outcomes from the Cultural Revolution. The resolution declared that Mao Zedong and the Party made a huge mistake that resulted in Ten years of civil turmoil which caused the party, country, and people to suffer the most serious setbacks and losses since the founding of New China, and the lessons were extremely painful. 

By doing so, the road that Xi Jinping wanted to build toward a second Cultural Revolution will now be left unfinished. I believe this is a manifestation of the will of a large number of people in the party, including the political elders, such as Hu Jintao, Wen Jiabao, and those in power, such as Li Keqiang, Wang Yang, and others who are firmly opposed to the Cultural Revolution. 

Xi’s second concession was to continue to adhere to reform and opening up. A couple of paragraphs pulled from different sections of the resolution help to showcase this concession.

One of them is Article 4 of Xi Jinping’s 13 major achievements in power, which is called the comprehensive deepening of reform and opening up. There, he stressed that reform and opening up represented a great awakening for the Party and a great revolution in the history of the Chinese nation’s development, and he called for continued efforts to see this process through.” 

He kept on saying: “Reform can only be carried out and not completed. There is no way out for stagnation and retreat. It must be advanced with greater political courage and wisdom. 

“The Party Central Committee is deeply aware that opening up brings progress, and closure will inevitably lag behind; if my country’s development is to gain advantages, win initiative, and win the future, it must conform to economic globalization, rely on my country’s ultra-large-scale market advantages, and implement a more proactive opening strategy.”

One thing is worth noting. The communiqué issued at the end of the Sixth Plenary Session of the Central Committee did not mention the need to continue the reform and opening up, leaving the impression that Xi Jinping was about to end that practice. However, the resolution issued five days later clearly stated that the reform and opening up should continue. Is this just the difference between the summary and the full text? Or was it added after the days-long game between the various factions of the Chinese Communist Party? I think the second possibility cannot be ruled out, because it says in the explanation of the resolution that more than 500 amendments were made from the draft to the final version, and the amendments are very large. That also shows the intensity of the debate about this resolution, in spite of potential backlash the participants may have faced.

The resolution also addresses Taiwan, though in a way that is neither too prominent nor too sensational. It repeats the wording we have been hearing from the party for years: “peaceful reunification” and “one country, two systems.” There are mentions of the 1992 consensus and an ongoing opposition to Taiwan’s independence. The most powerful sentence is this: “Solving the Taiwan issue and realizing the complete reunification of the motherland are the unswerving historical tasks of the party, the common aspiration of all Chinese sons and daughters, and the inevitable requirement for the great rejuvenation of the Chinese nation.” The resolution also states that they “firmly grasp the dominance and initiative in cross-strait relations meaning it is the party who decides when and how to complete reunification of the country.”

That sentiment was emphasized by Xi Jinping again in his comment to President Biden at their recent virtual meeting. He said they are patient and willing to use their utmost sincerity and do their utmost to strive for the prospect of peaceful reunification. “But if the ‘Taiwan independence’ separatist forces break through the red line, we will have to take decisive measures.”

This clearly indicates that if Taiwan dares to seek independence, China is prepared to rule them by force. 

Why is Xi Jinping so persistent on the Taiwan issue? I will offer a detailed explanation in the documentary I am making. That documentary will be published by the end of the year. For now, what is most important to know is that the Taiwan issue is what Xi Jinping truly believes is his greatest political legacy. His so-called great achievements in the third historical resolution are exaggerated, and he knows it. But were he to win Taiwan, it would establish his unshakable historical position in the Party. Then, re-election or tenure would not be in question. So, to solidify his own political power and role, he must win the battle over Taiwan. This is a critical fact that the U.S. and Taiwanese governments must understand.

That’s all for today.  Please like, share, subscribe and donate to this program if you like my content. Thanks again and I will see you next time.

China’s “Subprime Mortgage Crisis” Avoided? Downscaling Real Estate Tax Might Have Saved China

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

There is always a great deal to talk about in China, but perhaps the biggest topic right now is the real estate tax that Xi Jinping wants to implement and the resistance to it.  The topic is not new. Neither is the resistance. Since 2003, well before Xi Jinping’s rule, the Chinese government has been considering this tax. In 2011, they implemented pilot programs in Shanghai and Chongqing, but those programs taxed only higher-end apartments and second homes, at rates between 0.4% and 1.2%. 

Now, a decade later, the State Council, the top decision-making body of the Chinese government, has announced it will roll out a pilot of a broader real estate tax in some regions. They declined to name the regions or to provide more public details about the properties that would be taxed or the amount of the tax, but many experts expect real estate hot spots Zhejiang, Shenzhen and Hainan to be targeted. The pilot program is expected to last for five years before the government determines whether or not to roll the program out to the entire country.

This smaller-scale rollout is a far cry from the original desire of Xi Jinping and the Communist Party government to create a tax that some experts say would lead to one of the most profound changes to the country’s real estate policies in a generation. So, why would Xi trim down a country-defining change when he has the power to implement and enforce it? Might the timing of this change show a compromise meant to appease Communist leadership ahead of the Sixth Plenary Session in which Xi will likely be granted a level footing with Mao Zedong and Deng Xiaoping, the party’s widely recognized supreme leaders?

I do not believe this compromise is related to the Sixth Plenary Session. The battles for that session have already been fought and won by Xi Jinping, as we have seen with the October 18th announcement published on the official website of the Chinese government. In that report, they announce that the Political Bureau of the Communist Party of China Central committee held a meeting to discuss the resolution to be submitted for the Sixth Plenary Session and the result was the resolution was approved. 

The resolution says that the Chinese Communist leaders, with Mao Zedong, Deng Xiaoping, Jiang Zemin and Hu Jintao as the main representatives, had led the Chinese people to great achievements, but Xi Jinping led the country to new achievements and to new valuable experiences, providing a system to guarantee a great rejuvenation of the Chinese nation. 

The feeling in this passage is that although prior leaders had some major achievements, the new, more complete, more reliable power for China is in Xi Jinping’s hands.

The resolution continues by saying that China has ushered in a great leap from standing up, getting rich and getting stronger. Standing up, getting rich, and getting stronger represents three people: Mao Zedong made China stand up, Deng Xiaoping made China rich, and Xi Jinping made China strong. This statement makes Xi Jinping stand shoulder-to-shoulder with Mao Zedong and Deng Xiaoping.

Another goal of this historical resolution is to reshape and unify the ideas of the top elites of the Chinese Communist Party, that is, to “pinch Mao and Deng together.”

In the Mao era, China was governed by communist fundamental principles. Those were expanded in Deng’s era to combine the market economy with the communist one-party political system. In the era of Xi Jinping, the Communist Party once again began to monopolize and control all parts of the country, including the market economy. The market economy is allowed to exist, but only under the strict control of the government. You can develop only as the government allows you to develop. There will be no more disorderly expansions like the big ecommerce platforms such as Alibaba.  And those who have benefited most from the market economy are now under the tightest scrutiny.

That scrutiny has now extended to the real estate market in China, especially after the near collapse of Evergrande and the end of a market built on the notion of growing big by borrowing big. That Xi Jinping is reigniting a conversation that had been put on hold for a decade, then, is not surprising at a time of clear power-grabs by Xi and his leadership team. What is surprising is his willingness to compromise and scale back that tax. 

The Wall Street Journal says that, according to people familiar with the matter and with internal discussions, most of the feedback Xi received about his real estate tax plan was negative, from not only regular Party members but also the Party elites. 

There are many reasons for the antagonism toward the new tax. One reason comes from older Party members who benefitted from real estate purchases at a time when prices were low and favorable to Party members but who now say they cannot afford the additional taxes. Many of those Party members own multiple properties and so may face a substantial tax bill. Who are the people likely to own multiple properties and so be most affected by this real estate tax? CCP officials and wealthy citizens. CCP officials gained multiple properties as a perk of the power they held. The wealthy purchase homes as an investment. 

Speculation about the original tax plan indicated that a 0.7% rate was possible, a rate that would have yielded 1.8 trillion yuan (or $281 billion) of tax revenue in 2020 and that could generate revenue equal to roughly 75% of land sales revenues, money that could be re-invested into the public services and infrastructure that are desperately needed to boost the Chinese economy and ensure the safety of its citizens. Over time, the tax could help local governments reduce their reliance on those land sales.

But, according to CNBC writer Evelyn Chang, “A nationwide property tax would likely require disclosures of business and government leaders’ real estate holdings, which means such a policy could meet resistance even as the country has been cracking down on corruption.” Revealing just how deeply the Party elite have benefitted from those positions may be a problem not just for them but for Xi Jinping as well.

In addition to pressure from the Party elite, and his own personal interests, Xi must also consider the catastrophic consequences that a sudden increase in real estate taxes could bring to the economy. These consequences stem from a core reason for the real estate tax, one Xi announced in August when he said that pursuing “common prosperity” in China would mean reducing “excessive” income and encouraging the wealthy to give back. 

The intent of “common prosperity,” is “to recreate a lot of new middle-class people who have affordable housing and affordable health care and affordable education. And in order to do this you need to make sure that housing is for living—that is, not speculation or for investment.” 

Theoretically, China’s real estate bubble will reduce once a real estate tax is imposed, because people will no longer hold houses for investments, instead allocating funds to other investments, such as capital market investments. According to China’s central bank, Chinese citizens currently have nearly 60% of their urban household assets held in real estate with only 20.4% allocated to financial assets like stocks and bonds. U.S. households have, on average, over 40% of their wealth in financial assets. 

But if common prosperity and the real estate bubble were the only concerns, real estate taxes would not have been placed on hold for a decade. This topic would have been addressed at the height of China’s real estate bubble, not as the bubble began to burst. 

Instead, Xi Jinping is levying real estate taxes in order to solve financial difficulties. The central government has no money, and its reliance on land sales cannot continue indefinitely. Then came the Evergrande disaster with secret dealings that led to their loans being paid on time—a situation that strongly suggests some level of government bailout—and billions being funneled into Chinese banks to prevent a collapse of the market. The government is out of money and quickly running out of options. 

But while the addition of real estate taxes may curb real estate speculation and drive prices down, if housing prices fall too sharply, many residents’ mortgages will default. The logic is simple. When house prices fall many people will not be able to afford a mortgage because real estate is their biggest asset, especially if they use one house to pay for another house. For others, they will simply walk away from a devalued house. For example, if you borrowed $5 million on a 30-year loan but, two years later, found that the home was now valued at just $3 million, would you continue to pay on the loan and take the $2 million loss? Or would you default and walk away? Many will walk away, leaving the banks in possession of billions in bad debt and a number of houses that are not worth the money that was lent.

Up to 80% of some Chinese households’ wealth is tied to real estate; when real estate depreciates, people’s core assets will shrink and their spending power will drop sharply, driving the entire economy into a sharp decline. This is the rhythm of economic collapse. Xi Jinping is nicknamed Chief Accelerator of China meaning he is pushing China over the cliff in an accelerated way. But, this time, even the chief accelerator saw the cliff just ahead of him.

That’s all for today. Thanks for watching Zooming In China. Please like, share, subscribe and donate to this program if you like my content. Thanks again and see you next time.

A Fusion Between Mao and Capitalism: Xi Jinping Is Setting China on an Unprecedented Path

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

Two days before the publication of his much-anticipated memoir Red Roulette: An Insider s Story of Wealth, Power, Corruption, and Vengeance in Today s China, author Desmond Shum received a phone call from his former wife, Whitney Duan. Duan is the central figure in Red Roulette and had been missing since 2017, with no word from the Chinese government about her condition, whereabouts or alleged crimes.

Shum said in an interview with The Australian Financial Review, Whitney told me that she’s on temporary release and could be re-detained at any time. She asked me to cancel the book’s publication.

Shum later added that It was a ridiculous request which could only be dreamed up by some bureaucrat in Beijing, where they can disappear a book off all the shelves in China overnight. But this is the rest of the world. The book was already on the way to the bookstores,  contracts have been signed. I can’t disappear the book even if I wish to.

It is clear that the Chinese government is deeply concerned about the revelations in Shum’s story at a time of growing crisis within its borders. With the recent string of crackdowns on Chinese entertainment and corporate celebrities, IPO debacles locally and internationally, and questions from George Soros about the security of Chinese markets, the CCP was already under a glaring spotlight.

Now comes word that China is teetering on the edge of a financial crash, due in part to the potential failure of the country’s second largest property developer, Evergrande Group. While Evergrande said in a public filing that they had resolved issues related to their yuan-denominated bonds due on September 23rd, It is not clear what the company would do with the $83.5 million interest payments on their dollar-denominated bonds due that same day. The Chinese government has ordered Evergrande to do anything they can to avoid defaulting on these bonds. The conventional wisdom is that Beijing normally would prioritize paying off foreign debt due to the need to maintain a good image on the international capital market.

So the company is left with three options: a rapid collapse with impacts that may be felt worldwide, a managed dismantling of the company, or a bailout by Beijing. We will see which one will turn out to be the Party’s choice in the coming days.

The way Xi Jinping deals with Evergrande’s crisis will, to certain extent, reveal his plan for the Chinese economy. Recently, some conflicting opinions have surfaced on China’s state-owned media. One article by Maoist activist Li Guangman claimed that China is experiencing a profound reform or revolution in all aspects: economic, financial, cultural and political. Analysts believe the article was alluding to the possibility that China would launch another great cultural revolution. Days later, Hu Xijin, chief editor of the Party’s mouthpiece Global Times, rebutted Li by saying that his article was a profound misunderstanding of the central government’s political direction.

Who is right? What is really on Xi Jinping’s mind? To understand Xi s plan, we must first understand the great shift in America s China policy since the Trump administration. It is no coincidence that Xi began to target and reform the domestic platform economy at the same time he began efforts to partially close the country. Xi believed both were necessary to redirect China to a different path, one that would differ dramatically from the one China has travelled smoothly for decades towards economic and political supremacy.

That path had been forged through state subsidies, state-supported intellectual property theft, and state-supported forced technology transfer carried out in a globalized market and largely ignored by Western powers who believed China would become a free country after it became a free economy.

Under those conditions, China’s economy and national power had grown rapidly. But Trump’s trade war and the coronavirus pandemic fundamentally changed Western thoughts on Communist China. Xi realized that their seat at the grand feast of globalization, the access that had empowered Communist China, had been removed.

For some leaders, that might have been a fatal blow to their regime. But for Xi Jinping, it was the excuse he needed to redirect China onto the path he had envisioned long ago, a path very different from his predecessors. In Red Roulette. Shum paints the eras of Jiang Zemin and Hu Jintao as a time of forward momentum, a time when capitalists like himself and his then-wife, Whitney Duan, could see the critical role they played in China’s modernization. They were creating the new jobs China needed to become a world leader. They were creating, and enjoying, the wealth that comes along with it. Things were improving. Today was better than yesterday, and this year better than last year.

It was not only the political or economic elite that felt that way. All of China seemed to be taken up with the same optimism. Citizens throughout the country felt that China was moving toward a more open and free society, a path most supported, even within the Communist Party. While Mao Zedong had once put capitalists at the bottom of Chinese society, his successor Deng Xiaoping improved their status. And on July 1, 2001, then-General Secretary of the Communist Party of China, Jiang Zemin, delivered a speech welcoming everyone, including capitalists, to join the Party, allowing them to enter the margins of political power.

But capitalists would not be willing to stay at the margins of that power for long. Shum points out that, at the top of the Party, elites had been preparing for this change. In private conversations, top-level officials like vice premier Wang Qishan shared their views that at a certain point, the Party would be forced to accept large-scale privatization and that Party elites and their inner circles should set aside capital so that they were prepared to invest when that time came.

Wang Qishan had been at the center of China’s reforms for decades. In 1993, China’s economy was in crisis due, in part, to $1.4 trillion yuan ($217 billion US) in non-performing loan debt between the four state-owned banks. China’s state-owned banks and state-owned enterprises were in urgent need of funds. Wang stepped in, working with Goldman Sachs on a deal that allowed China Telecom, a massive state-owned enterprise, to go public on the New York Stock Exchange in 1996, providing critical financial relief through international investments.

But what felt to Goldman Sachs and American investors like a mutually beneficial arrangement that could lead to the privatization of China’s economy was nothing more than an effort to save state-owned enterprises, allowing them to secure the Communist Party’s rule.

This was a realization that would only come many years later, during the Trump era. America had finally opened its eyes to the understanding that they had not changed China’s political system through their economic efforts.They realized that China remains a totalitarian Communist regime despite its booming economy.

Though Western leaders may have felt this as a victory for the Communist Party, even those inside of China, including reform-minded Party leaders, began to express concern. On March 14, 2012, at the last press conference of his State Council, Premier Wen Jiabao spoke from the heart for the final time in his tenure. In response to a reporter’s question, Wen said If China does not carry out political reforms, the achievements of China’s economic reforms so far will be in vain, and China is likely to repeat the mistakes of the great turmoil of the Cultural Revolution .

These are very heavy words, and they touched a nerve for the CCP. Political reform is a sensitive idea in China, one that carries connotations of moving toward freedom and democracy while demolishing the one-party dictatorship. Wen Jiabao did not specify the type of political reforms needed, but Chinese citizens had enough experience with global markets and capitalism to know what he likely meant. He added that if political reforms were not carried out, the achievements of China’s economic reforms would be in vain.

There is a fundamental contradiction between the market economy and the ideology of communism. A functioning market economy requires political systems that guarantee individual freedoms and rights. The right to hold, and be able to protect, private property. The assurance of fundamental human rights. The knowledge that an independent judiciary will protect those rights. The empowerment of knowing that truly democratic elections will ensure that the people will choose those who oversee the preservation of these rights. That system is vastly different from the rule of the Communist Party.

Without real reform, then, the contradiction between the political regime and the economy will fracture China and, because the CCP wants to protect its political system, it will destroy the market economy. Wen concluded by saying that, should that happen, China is likely to repeat the mistakes of the great turmoil of the “Cultural Revolution.” Wen recognized that China was moving toward more openness and more freedoms, and he realized that if the market economy continued to develop, the contradictions between communism and free market enterprise would restrain what China truly could become. Faced with that situation, he wanted to change the political system, not the economy.

The political reform Wen talked about was never carried out. That’s why, at the start of the Trump administration, the clock had finally run out for the Party. Trump demanded a change. I agree, for the most part, with the claim that the engagement policy has not made China a free country. However, that claim makes it seem like there has been no change in China’s political system at all, and that is not true. Yes, China remains an authoritarian state, but big changes have happened, including how the Chinese people view the legitimacy of the Party’s rule.

In the Mao era, the Party was believed to have heaven’s mandate. The legitimacy of the Party’s rule was unshakable and so was the Communist ideology. Though the Party’s policy had caused the deaths of tens of millions of people, the Party remained in power and unchallenged.

That natural legitimacy has gradually eroded since the reforms that opened China. During the Jiang Zemin and Hu Jintao eras, the Party’s legitimacy shifted. It is now based solely on its capability of bringing economic prosperity. The Communist Party knows that if the economy sharply declines, unemployment rates rise, and the bureaucracy stops working for the people due to the lack of corruption money, their ability to rule will be reduced or lost altogether. On top of that, Chinese people are losing their faith in the Communist ideology itself.

That reality is precisely what Xi Jinping refuses to accept. He has a new plan for China which we will explain in our future programs.

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 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 live Q & A shows with members on the website. Just $5 a month or $50 a year. Please check it out. Thanks for watching and

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