CCDI Plenary Session; PBoC warning to RMB bears; Annual meeting of propaganda officials; Hacking allegations; Tencent
Happy New Year!
It is always hard to restart the newsletter after a break as I know I have missed a lot of things. I will try to work things back in over the next few days.
Summary of today’s Essential Eight:
1. CCDI Plenary Session opens in Beijing - Xi Jinping spoke at the opening of the Fourth Plenary Session of the 20th Central Commission for Discipline Inspection (CCDI) of the CPC. Li Xi delivered a report to the meeting but it is not yet public. From Li's report and the communique to come at the end of the meeting we will learn which if any sectors will be especially targeted in 2025, but the lack of any mention in Xi's speech, or at least the part released publicly, of any sectors is interesting. In his speech to the January 2024 CCDI Plenum Xi said "efforts should be deepened to rectify corruption in areas such as finance, state-owned enterprises, energy, pharmaceuticals, and infrastructure projects, where power is concentrated, funds are abundant, and resources are rich, and to clean up hidden risks".
The communique for January 2022 stated that “efforts will be made to investigate and deal with corruption behind disorderly expansion of capital and platform monopolies, and cut off the link between power and capital” and the one for January 2023 said that “we will resolutely prevent leading officials from becoming spokespeople or agents of interest groups and powerful organizations, and prevent political and business collusion and capital infiltration into the political sphere from damaging the political ecology and the environment for economic development. We will focus on key areas and deepen the crackdown on corruption in areas with concentrated power, capital and resources, such as finance, state-owned enterprises, political and legal affairs, and grain purchase and marketing”.
Does the absence of a mention by Xi signal that the corruption crackdown in the financial sector has peaked? If there is no mention of it in the forthcoming communique then perhaps it has, or is it just regularized and so no need to keep mentioning?
According to the readout Xi "emphasized that, in the new era, efforts to advance the comprehensive and strict governance of the Party and the fight against corruption have been unprecedented in scale, and the results are evident to all. The Party must maintain a relentless determination to keep the anti-corruption fight ongoing, preserve its strategic resolve and tough stance, press forward without pause or retreat, and advance the integrated approach of ensuring that officials 'do not dare to be corrupt, cannot be corrupt, and do not want to be corrupt.' These efforts are crucial to winning this hard-fought, protracted, and overall battle."
2. People’s Bank of China warning to RMB bears? - The PBoC is signaling that it wants a stable RMB, probably dashing the hopes of those betting that RMB will continue to devalue meaningfully against the USD. The PBoC’s Financial News outlet explicitly stated that the language from the readout of the PBoC’s Monetary Policy Committee’s Fourth Quarter 2024 meeting over the weekend contains a “noticeable change”. According to the report “compared with the statement from the third-quarter meeting, this press release sends a clearer, more forceful signal of stabilizing the exchange rate by removing the phrase “enhance exchange rate flexibility.” It emphasizes “strengthening market supervision, resolutely cracking down on behaviors that disrupt market order, resolutely preventing the formation and self-fulfillment of one-sided consensus expectations, and resolutely guarding against the risk of excessive exchange rate adjustments.” It also reinstates the earlier “three resolutes,” demonstrating the PBOC’s strong determination to maintain the stability of the RMB exchange rate. This shift is a key indicator of the central bank’s future approach to exchange rate policy and is conducive to stabilizing expectations in the foreign exchange market.”
3. PRC stock markets start 2025 down - The leadership always talks about getting a good start to the new year - 开门红 - but in the first three trading days of 2025 the PRC stock markets have gone down every day. Reuters reports that over the weekend regulators reached out to some big funds to tell them to ensure they had net buying every day. I doubt that inspires confidence at those funds, but the leadership is not going to want a declining market into the Lunar New year at the end of the month, so expect more jawboning at least.
4. Xi in Qiushi - Comprehensively Advancing the Building of a Strong Country and the Great Cause of National Rejuvenation Through Chinese Modernization - The lead essay in the January 1, 2025 issue of the Qiushi Journal is the main part, over 11,000 characters, of a speech Xi Jinping delivered on February 7, 2023, at a study session for new members of the Central Committee, alternate members, and principal provincial and ministerial-level leaders to study and implement Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era and the spirit of the 20th Party Congress. It is a remarkable speech, and given that the audience was top Party, State and PLA leaders it is very important, and helps explain much of what we have seen since the 20th Party Congress. I have bolded some of the sections that stood out to me but the whole thing is worth reading. And Xi's view that the East is rising and the West is in decline has not gone away, even if we do not see it mentioned publicly much these days. In this speech Xi tells his audience "Thanks to the initial success of Chinese modernization and its notable achievements—along with the marked contrast in the new era often described as “the East is rising while the West is in decline” and “order in China versus chaos in the West”—numerous developing countries now see new hope and new possibilities. Chinese modernization is the answer we have provided to the momentous historical question of how to “awaken the sleeping lion” and realize national rejuvenation. It is about choosing one’s own path and focusing on one’s own affairs. We have never intended, nor do we intend, to export Chinese modernization or the so-called “Chinese model.” However, by setting an example of how developing countries can achieve modernization independently, Chinese modernization will inevitably serve as a reference for some of them."
There is a whole section in the speech about the need for struggle - Advancing Chinese Modernization Requires Great Struggle 推进中国式现代化必须进行伟大斗争. Xi tells his audience that “History has repeatedly proven that striving for security through struggle brings genuine security, while seeking security through weakness and concession ultimately leads to insecurity; seeking development through struggle brings real development, while pursuing development through weakness and concession results in decline. This is precisely why I have repeatedly stressed the necessity of carrying forward the fighting spirit.”
5. Annual meeting of propaganda officials in Beijing - Cai Qi spoke at the annual meeting for officials from the propaganda system to set the goals for propaganda work in the coming year. According to the readout Cai “emphasized the need to implement long-term mechanisms for learning to forge the soul, increase wisdom, correct conduct, and promote action. We should improve the work system, innovate methods, and deepen the theoretical armament of the Party's innovative theories. It is essential to adhere to the correct orientation of public opinion, strengthen economic propaganda and expectation guidance, enhance the ability to respond to public opinion, and create a mainstream public opinion environment of unity and progress. We should promote the normalization and institutionalization of ideal and belief education, and strengthen and improve ideological and political work. We need to enhance the capacity to provide cultural services and products, stimulate the vitality of literary and artistic creation and production, advance the systematic protection of cultural heritage, and promote high-quality development of the tourism industry. We must tell China's story well, expand the breadth and depth of civilizational exchanges and mutual learning. It is crucial to uphold and strengthen the Party's overall leadership, implement the responsibility system for ideological work, strengthen team and conduct building, and continuously create new prospects for propaganda, ideological, and cultural work.
6. National Data Infrastructure Construction Guide - The National Development and Reform Commission, the National Data Administration, and the Ministry of Industry and Information Technology released the “National Data Infrastructure Construction Guide”. According to the release the guide “outlines specific directions for building national data infrastructure in areas such as data circulation and utilization, computing power foundations, network support, and security protection.”
7. Hacking allegations keep coming - Details of the massive hack of the US telecoms system keep dribbling out, and with each report it sounds even worse than people thought. The US Department of Treasury claimed that the PRC hacked some of its unclassified systems, and it disclosed the hack to Congress several days before Secretary Yellen sent Treasury officials for the most recent of the financial and economic dialogues with the PRC. The Wall Street Journal has a story revealing that in 2023 National Security Advisor Sullivan told a meeting that “Chinese hackers had gained the ability to shut down dozens of U.S. ports, power grids and other infrastructure targets at will”. So far the Biden Administration has not publicly responded in any meaningful way to these hacks, and with just 13 days left they will probably kick the mess over to the Trump team.
8. Tencent, CATL, Quectel Wireless among firms designated by US as “Chinese military company” - The US Department of Defense released an updated list of “Chinese military companies operating in the US”. The most noteworthy additions may be Tencent and CATL. Tencent’s stock dropped on the news, as while inclusion on this list does not prohibit US investors from buying shares in the company, it may discourage them. The reasons for inclusion are not given, and Tencent said it was a “mistake”.