CSRC head replaced; Government wants more EV exports; Wei Fenghe absence; Messi’s groin good enough for Japan

Summary of today’s Essential Eight:

1. CSRC head rolls - In yesterday’s commentary about the stock market I wrote “If the old playbook is still in use, scapegoats will be found soon, my guess is that outside of one or more CSRC officials it will be quant funds, and especially any with foreign ties, that are named as the bad actors.” I did not think though that the CSRC (China Securities Regulatory Commission) moves would happen so fast. Overnight Xinhua announced that Wu Qing was replacing Yi Huiman has head of the CSRC, effective immediately. No reasons were given, and while Yi is below retirement age it is certainly possible that this move was coming anyway but was just pushed up given the market mess. Whatever is going on the assumption is that Yi is taking blame for the state of the markets. Wu has experience working in the CSRC, and a reputation for discipline and cracking down, and the financial sector, and as a vice mayor of Shanghai. Was this the discussion with Xi about the markets that Bloomberg wrote about Tuesday? Or is there more coming from the top in the way of market stabilization plans? Taking out Yi may end up being constructive, but one CSRC official is not going to be enough to solve the underlying problems that have investors so lacking in confidence.

2. Government wants more EV exports - Nine government departments including the Ministry of Commerce issued an “Opinion on Supporting the Healthy Development of New Energy Vehicle Trade Cooperation”. The opinion contains 18 measures, with responsible departments listed for each measure. The Global Times describes the goal of the opinion as to “actively help enterprises in the new-energy vehicle (NEV) sector respond to foreign trade restrictions, while guiding industry associations and companies to collaborate with international counterparts”. Measure 18 says “Actively and properly respond to foreign trade restriction measures. Guide industry organizations and enterprises to actively engage in exchanges and cooperation with foreign counterparts, and help enterprises actively respond to foreign trade restriction measures”. So while pushing firms to find local cooperations and obey local rules and regulations, they are also gearing up for a fight.

3. Wei Fenghe may be in trouble - Every year before the Spring Festival the leadership visit or send other officials to pay respects to retired senior officials. The list of visited officials is always interesting for who is not included. The only missing name that has gotten attention is that of Wei Fenghe 魏凤和, former Commander of the PLA Rocket Force, State Councilor and Ministry of Defense and member of the Central Military Commission, sparking speculation that he has been caught up in the ongoing PLA corruption mess. Hu Jintao, as the most senior retired leader, is first on the list. Cai Qi personally paid visits to “well-known figures in the cultural and scientific communities”, in another move that makes him look more like Xi’s real #2.

4. NPC Standing Committee will next meet on Feb. 26–27 - The meeting, a week before the opening of the annual “Two Sessions”, will in addition to the usual NPC meeting-related preparatory work will also “review the draft amendment to the Law on Guarding State Secrets, examine reports on the qualifications of certain delegates by the Credentials Committee of the NPC Standing Committee, and consider appointments and dismissals.

5. Shifting trade - Mexico is now the top source of imports to the US, after seventeen years of China being number one, according to US government data. But the data does not break out how much of the imports from Mexico are goods shipped from the PRC, nor do I believe does it capture all the sub-$800 shipments from Temu and Shein. Decoupling/De-risking is happening very slowly.

6. Minxin Pei’s new book - “The Sentinel State: Surveillance and the Survival of Dictatorship in China” by Minxin Pei comes out next week. Foreign Affairs is running an adapted excerpt. From the book blurb: “The CCP’s Leninist bureaucratic structure―whereby officials and party activists penetrate every sector of society and the economy, from universities and village committees to delivery companies, telecommunication firms, and Tibetan monasteries―ensures that Beijing’s eyes and ears are truly everywhere. While today’s system is far more robust than that of years past, it is modeled after mass surveillance implemented under Mao Zedong and Chinese emperors centuries ago”.

7. Another warning from the MSS to PRC students overseas - The prolific MSS WeChat published another post discussing the risks of PRC students overseas being “turned” by foreign intelligence services. The post titled “Real Case | Going Abroad for Studies Requires Strengthening Awareness Against Espionage and Counter-Espionage” Says a student named Zhang became a spy while studying overseas and upon his return got a job at a research institute and gave secrets to the foreign service, before being caught. Does the use of the term “real case 真实案例“ in the title mean the other cases it has discussed that do not say “real case 真实案例” were made up? There is some interesting messaging coming from different parts of the PRC system. From one part there are condemnations of US harassment and prevention of the return of pre-pandemic overseas studies, while from the MSS there are almost weekly warnings of the risks of getting too close to any foreigners while studying abroad.

8. Messi’s groin good enough for Japan play - Messi played in the second half of the game in Japan, sparking even more outrage in Hong Kong and the mainland over his absence from the pitch in Hong Kong. He did issue a statement on Weibo just before he entered the Japan match, but it was not really an apology. The Argentine national team is scheduled to play again in the mainland in March. Will Messi join, and if he does will he be booed? It is remarkable that just last summer Messi played in Beijing and was greeted rapturously. He has endorsements with PRC companies so has significant earnings to lose if the online vitriol goes to the next level. Some of the outrage has become absurd. Hong Kong politician Regina Ip said on Twitter that “Hong Kong people hate Messi, Inter-Miami, and the black hand behind them, for the deliberate and calculated snub to Hong Kong”.

Thanks for reading.