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Wu Guoguang: Xi Jinping’s Reversal of the Course, Will China’s Transition be Peaceful or Marked with Bloodshed?

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Cheng Xiaonong: U.S.-China Strategic Relations Have Crystallized

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Xinhua Commentaries: “Exposing the Three Major Political Deficits of the U.S.”

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The CCP’s Performing Arts Troupes in the U.S.

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Half of China’s Local Government Bond Issuance in the First Seven Months of the Year Was to Pay Off Old Debt

On August 5th, Yicai (China Business Network) cited public data saying that, in the first seven months of this year, China’s local governments issued approximately 4.2 trillion yuan (US$ 590 billion) worth of bonds, a year-on-year decrease of about 16 percent. Among them, refinancing bonds totaled around 2 trillion yuan, primarily used to repay the principal of maturing government bonds or existing debt. This means local governments were essentially “borrowing new debt to repay old debt.” Additionally, 2.2 trillion yuan of new bonds were issued (i.e. bonds not used to pay off old debts), comprising 1.8 trillion yuan in new special bonds and 400 billion yuan in new general bonds.

Source: Lianhe Zaobao, August 8, 2024
https://www.zaobao.com.sg/realtime/china/story20240808-4443056

Briefings | | |   Economy/Resources

China’s Growing Influence in the Middle East

German newspaper Deutsche Welle published an article that discussed the reason behind China’s growing interest in the Middle East.

The article takes note of the differences between the United States and China’s approaches and roles in the region. Last year, under China’s mediation, Iran and Saudi Arabia restored diplomatic relations. The analysis examines why Chinese leadership has concentrated so much diplomatic energy on the Middle East, arguing that the geostrategic interests centered on oil acquisition have undergone a shift.

Fifty years ago, the US and Saudi Arabia reached a “petrodollar agreement” which established the US dollar as the international reserve currency. With the maturation and widespread use of shale oil extraction technology in the US, however “the region’s (Middle East) oil has become less important to the US.” While the US still imports oil from Saudi Arabia, the volume has declined to less than a third of what it was 22 years ago. Notably, the US has risen from being one of the largest oil importers to the third largest oil exporter.

In contrast, China is now Riyadh’s largest crude oil customer, buying over 20% of Saudi Arabia’s total output. China’s energy security is heavily dependent on the Middle East, and it is also the largest buyer of Iranian oil, accounting for 37% of Iran’s oil exports. China has not joined Western sanctions on the Iranian regime and its state-owned firms have capitalized on the absence of Western companies in the Iranian market.

Amid geopolitical tensions, China is increasingly interested in trading in its own currency rather than US dollars to purchase the coveted oil. Direct RMB settlement also makes sense for many countries in the region as China has surpassed the US as the largest trade partner.

The Deutsche Welle article says that “In the past decade, Beijing has cleverly expanded its influence, filling every vacuum left by Washington. But this also means increased vulnerability, as Middle East political stability aligns with China’s interests due to robust bilateral trade and energy needs. Unlike the US, China does not view Iran as an adversary, nor does it feel a special affinity towards Israel for moral or historical reasons, opening up new operational space for Beijing in the region.”

Source: Deutsche Welle, August 19, 2024
https://p.dw.com/p/4jde8

Briefings | | |   Geo-Strategic Trend

China’s Fiscal Woes: Local Governments Tighten Belts as Land Sales Revenues Plunge

The Chinese government is facing a fiscal crisis as plummeting land sales revenue has severely strained local government budgets. To cope with this, local governments across China have implemented austerity measures, including limiting air conditioning temperatures, requiring public officials to dine in government cafeterias, and restricting use of official cars.

These “belt-tightening” policies have also led to widespread pay cuts for civil servants and other public sector workers. Public sector employees report salary reductions of 20-30%, with the most developed regions seeing the biggest cuts. Annual bonuses have also been eliminated in many cases. This is seen as the first wave, with pay cuts expected to spread to state-owned enterprises and other institutions.

Experts attribute this fiscal crunch to an over-reliance on land sales revenue by local governments, which has dried up due to the property market slump. Land sales revenue plummeted 55.7% in the first half of 2024 compared to 2019. Tax revenue has also been under pressure due to declining corporate profits.

To address this, policymakers have promised to reform the fiscal system by increasing the share of tax revenue for local governments and expanding their taxing powers, such as by potentially shifting the consumption tax to the local level. However, experts warn that this may incentivize local governments to promote polluting or unhealthy industries to boost revenues. Tackling local government debt will also be crucial to putting their finances on a sustainable footing.

More directly, some suggest that China should raise the share of fiscal revenue to GDP, which at 26% is lower than advanced economies and even other developing countries. Implementing a property tax is seen as one option to boost local government revenues.

Source: BBC, August 19, 2024
https://www.bbc.com/zhongwen/simp/chinese-news-69274197

Briefings | | |   Economy/Resources

Local Governments in China Accused of Inflating Fiscal Revenues Through Falsification

Yicai, a newspaper based in China, discussed the issue of local governments falsely inflating their fiscal revenue figures, as revealed in recent audit reports across the country. This has become a persistent problem, motivated by the desire to bolster performance metrics for government officials.

The article cites several examples from audit reports in different provinces. In Guangdong, 3 cities and 3 counties were found to have increased fiscal revenue by 17.101 billion RMB through state-owned enterprise asset purchases. Hebei’s audit found 1 city and 7 counties had artificially inflated revenue by 2.495 billion RMB through fake asset disposals and overpayments. Audits in Sichuan, Qinghai, Inner Mongolia, and Liaoning also uncovered hundreds of millions to billions of RMB in falsified revenue.

Experts argue this practice conceals true fiscal deficits, amplifies local financial risks, and distorts central government’s understanding of local fiscal conditions, potentially leading to misguided policymaking and damaging government credibility.

To address the problem, the report suggests that local governments realign performance incentives away from rigid revenue targets. Ongoing tax and fiscal reforms to bolster local fiscal autonomy could also help reduce the pressure to fabricate numbers. Stronger oversight and strict accountability for responsible officials are also recommended.

The article also notes audit reports have proposed improving revenue collection management, data sharing across departments, and plugging institutional loopholes to ensure comprehensive and accurate fiscal revenue reporting.

Source: Central News Agency, August 20, 2024
https://www.cna.com.tw/news/acn/202408200177.aspx

Briefings | | |   Economy/Resources

Leaked Documents Reveal CCP Plan to “Eliminate” Falun Gong, Escalating Persecution

The Falun Dafa Information Center has reportedly obtained information from insiders in China’s Ministry of Public Security’s (MPS) regarding the organization’s new plan to “dismantle Falun Gong worldwide,” including in the United States. Falun Gong (also called Falun Dafa) “is an ancient spiritual practice in the Buddhist tradition.” The Chinese Communist Party (CCP) started persecuting Falun Gong in 1999 and has continued its persecution of the practice until today. The CCP has also targeted the Shen Yun performing arts group, which showcases traditional Chinese culture and religious beliefs and aims to raise awareness about the CCP’s persecution of Falun Gong.

The Falun Dafa Information Center’s report stated that “it is abundantly clear both from sources inside China as well as from observable attacks (on Falun Gong and Shen Yun) over the past few months that these escalations against Falun Gong have already begun and are trending into uncharted territory. The internal documents explicitly state that the regime’s aim is to ‘eliminate Falun Gong worldwide.’”

The MPS’ new plan has five tactics:

  1. “Coordinated propaganda attacks against Shen Yun, Falun Gong”
  2. “Inciting conflict between Falun Gong and the U.S. Government”
    The MPS indicates it will deploy a two-pronged strategy:

    1. Incite Falun Gong practitioners to distrust and even protest the U.S. government.
    2. Provoke the U.S. government to investigate Shen Yun Performing Arts and other organizations founded by Falun Gong practitioners.
  3. “Cutting communication channels that expose persecution inside China,” blocking Falun Gong practitioners in China from contacting their overseas supporters
  4. “Manipulating search engines and disseminating content in multiple formats” as a means to “carry out the offensive” against Falun Gong.
  5. “Provoking distrust and internal divisions within the Falun Gong community”

Source: Falun Dafa Information Center website
https://faluninfo.net/weaponizing-social-media/

Briefings | | |   @CS Government/Politics Social Stability US-China Relations

Retired CCP Cadre and Professor Urges CCP to Step Down, Proposes “Federal Republic of China” Unifying Mainland China with Taiwan

Veteran Chinese Communist Party (CCP) cadre and retired professor from Renmin University, Leng Jiepu, recently published an open letter addressed to the two Vice Chairmen of the CCP Central Military Commission, proposing the establishment of a Federal Republic of China and urged the CCP to step down.

The open letter is available on X platform. Leng talked with a reporter from the Epoch Times on August 11 to confirm that he was the author of the open letter.

Leng’s letter was addressed to Zhang Youxia and He Weidong, the two Vice Chairmen of the Central Military Commission, and was also communicated to the general public. He mentioned that he had learned that Xi Jinping was very ill and unable to work and that all party, government, and military affairs had fallen on Zhang and He. He expressed his hopes the two would support his proposal. Leng mentioned that the hanging of a large banner “The CCP Must Step Down” on Sitong bridge in Beijing in 2022 and the march with banners calling for the “Downfall of the CCP” in several cities have indicated that “the situation (for the CCP) is not optimistic.” He therefore suggested that the CCP take “the route of compromise” by establishing a Federal Republic of China and unifying the country with Taiwan, calling his proposal “the best possible solution.” He also proposed specific operational steps, including the formation of a “Grand Committee for the Unification of the Chinese Nation.”

Source:
1. Epoch Times, August 12, 2024
https://www.epochtimes.com/gb/24/8/12/n14309516.htm
2. X Platform, @china_epoch
https://x.com/china_epoch/status/1822441580361372096?s=42

Briefings | | |   @CS Government/Politics

Xiamen University: “Urgently Prepare for Taiwan Takeover”

On August 5th, the Xiamen University Cross-Strait Urban Planning Research Institute published an article titled “Urgently Prepare for Taiwan Takeover.” The paper stated that, with the increasing likelihood of Donald Trump’s victory in the U.S. presidential election, Beijing’s “unification” with Taiwan could come sooner than expected. According to the article, the “turmoil” observed in Hong Kong over the past few years shows that “lack of full preparation could have serious consequences for a smooth power transition.” Since Hong Kong’s policy of “50 years of no change” does not apply to Taiwan, the depth and breadth of the mainland’s takeover of Taiwan will far exceed that of Hong Kong in 1997, according to the article. “It is urgent to prepare comprehensive plans for taking over Taiwan after unification.”

The article was taken down shortly after publication. However, the Center for Strategic and International Studies (CSIS), a Washington-based think tank, has preserved the article and translated it into English on its website.

The CSIS published the following “key takeaways” regarding the Xiamen paper:

  • Researchers at the Xiamen University Cross-Strait Institute of Urban Planning argue Beijing should set up a shadow government in preparation for intended “reunification” with Taiwan.
  • The unnamed authors suggest that “reunification” will be a complex process, and the “One Country, Two Systems” model Beijing has adopted toward Hong Kong would be inappropriate for governing Taiwan. Instead, they argue that “full integration into the mainland” should be Beijing’s goal.
  • They suggest Beijing set up a “Central Taiwan Work Committee” to research and prepare “post-takeover” policies on a variety of issues – including currency conversion, education systems, military integration, and customs, among others – based on a solid understanding of existing policies and institutions in Taiwan.
  • They also recommend Beijing set up a “Taiwan Governance Experimental Zone,” which would be a “highly realistic physical environment” for simulating and testing out governance practices prior to “reunification.” This would involve recruiting retired military officers, civil servants, and teachers from Taiwan to train cadres from the mainland in how to govern Taiwan (thereby conferring what they call “regime building experience”).
  • Importantly, the authors suggest that these activities will speed up the process of “reunification” by shaping political dynamics in Taiwan and encouraging what they call “anti-Taiwan independence” forces on the island to better organize and vocalize their positions.

Sources:
1. Radio France International, August 17, 2024
https://www.rfi.fr/cn/台湾/20240817-厦门大学呼吁尽快准备-接管台湾-并称没有类似香港50年不变问题-此文遭下架
2. CSIS website, August 5, 2024

Start Taiwan Takeover Preparations as Soon as Possible

Briefings | | |   @CS Geo-Strategic Trend

Another Chinese Young Man Confronts CCP, Calls for Xi Jinping’s Resignation

Recently a Chinese young man has attracted attention by calling for the ouster of Xi Jinping using a wifi router to spread his message.

On August 14, Su Yutong, a Chinese freelance writer living in Germany, released a video on the web and stated: “A young person from China who has been promoting the movement to dismantle the Great Firewall (CCP’s internet censorship/blockade system) was imprisoned in a psychiatric hospital on political charges. This morning, I received this video showing that he has once again confronted the CCP.” In the video, the young man shouted: “Oppose the CCP’s internet censorship and control of speech,” “No privileges, we want equality,” and “We need freedom of speech and internet freedom.” The video was recorded outdoors. The young man hoped that Chinese people would be able to “see the true face of the CCP.” The young man also mentioned that, in the past, he had used routers and other equipment to broadcast messages such as “Xi Jinping, step down.” The authorities issued a warrant for him as a “political criminal,” ransacked his home, and confiscated his equipment including routers, laser sound systems, transmitter modules, and mobile phones.

On August 16, Su Yutong posted again on the X platform again, identifying the young man as Yan Zhongjian, born in February 1999. Su received a message from a friend entrusted by Yan: the friend and Yan had agreed that, if Yan could not be contacted for a certain period of time, the friend would release Yan’s personal information and call on netizens to show concern and support for him.

The young man followed in the footsteps of several other dissidents in recent history. For example, in October 2022 Peng Lifa posted banners and played recordings denouncing the Chinese Communist Party and asking for the ouster of Xi Jinping. On July 30 of this year, Fang Yirong posted similar messages on an overpass in Hunan Province (see this ChinaScope briefing).

Source: Epoch Times, August 17, 2024
https://www.epochtimes.com/gb/24/8/17/n14313098.htm

Briefings | | |   @CS Government/Politics Social Stability