Holiday data OK; Emancipating minds; Kinmen; Party History; Wang Yi in Europe
Happy Year of the Dragon!
Summary of today’s Essential Eight:
1. Holiday data OK but markets not impressed - Travel and consumption data for the weeklong holiday were up from 2019, the last Spring Festival not affected by Covid, but the increases from five years ago were not that impressive and per capita spending looks to have dropped. The stock market opened strong, weakened, then state buyers appear to have stepped in push key indexes up. That was not the hoped for first day of trading in the Year of the Dragon.
2. Emancipating minds in Hunan - Hunan has launched a large-scale discussion campaign on emancipating minds. Xi has talked repeatedly about emancipating minds so of course other officials do as well, though so far Hunan Party Secretary Shen Xiaoming has taken it the farthest with this new campaign. While the concept has echoes of the campaign in the early years after Mao to emancipate minds and drive major reforms, this one appears targeted to “anchoring the ‘Three Highs and Four News’ blueprint and accelerating high-quality development”, a concept that came out of a 2020 inspection tour by Xi.
The notice also states that:
“we aim to address the lack of development confidence, weak sense of mission, and insufficient spirit of responsibility from deep within our thoughts. We strive to resolve issues regarding for whom achievements are made, what kind of achievements are pursued, and how these achievements are attained. Fundamentally, we seek to shift away from the simplistic glorification of GDP growth rates, to overcome the reluctance to change development methods and the unwillingness to endure the pains of transformation. We aim to curb the impulse to manipulate data for the sake of "achieving results," to reverse the dependency on risky debt accumulation, blindly following trends in project initiation, and the reckless expansion that disregards risks. We intend to move away from the "top-down" mentality that ignores objective realities and does not follow natural laws, fearing not the dissatisfaction of the masses but the lack of attention from leaders. We plan to abandon the extensive economic development model that relies solely on the input of resources and capital, to reject the utilitarian tendency of seeking temporary hype rather than long-term welfare for the community, and to correct the chaotic approach of making unrealistic plans and failing in their implementation. We aim to shift from deliberately avoiding, concealing conflicts and problems, and the "ostrich mentality," to moving away from the "lying flat" attitude of doing nothing to avoid problems.”
One thing is clear is that while minds may be emancipated it will only incur inside the framework of Xi Jinping Thought; this is not some sort of push back on Xi. It will be interesting, and probably good for the Hunan Party Secretary’s career, if other provinces copy this campaign.
3. Changing the “status quo” around Kinmen - Two PRC fishermen drowned over the holiday when their boat capsized trying to flee a Taiwan Coast Guard vessel that found them in waters around Kinmen. The PRC now says that it will send regular Coast Guard patrols into waters previously considered “restricted”, and that there is “no such thing as 'prohibited or restricted waters”.
4. Wang Yi in Europe - Wang attended the Munich Security Forum and also is visiting Spain and France. Wang’s speech in Munich hit the usual themes of China as a responsible major power, a force for peace, an upholder of the UN-led system and the protector of economic globalization. Wang also had almost a dozen bilateral meetings.
5. US-China meetings - Wang Yi met with US Secretary of State Blinken in Munich. The respective readouts made the meeting sound constructive while repeating the usual points and hinting at more engagements to come. There was no mention of the expected Xi-Biden Call. Minister of Public Security Wang Xiaohong met in Vienna with US Secretary of Homeland Security Mayorkas. Wang requested that “the US side stop the unwarranted harassment and questioning of Chinese students, ensuring that Chinese citizens enjoy fair treatment upon entry and full dignity; take concrete and effective measures to ensure the safety of Chinese diplomatic and consular institutions and personnel in the US; cancel visa restrictions against relevant Chinese institutions and personnel; and correct the erroneous practice of listing China as a "major drug source country.”
6. MSS WeChat attacks the CIA - The MSS WeChat posted a bilingual Chinese and English article criticizing CIA Director Bill Burns and his recent Foreign Affairs article “Spycraft and Statecraft”. The MSS wrote “In recent years, the USA, on the one hand, started intelligence wars, sparing no efforts to step up its espionage against China and, on the other hand, "brought suit against its victims", scandalously smearing China's justifiable defense and trying to misrepresent the Counterespionage Law of PRC as an "evil law". It is nothing but that "one may steal a horse while another may not look over the hedge" or another typical case of hegemonic, domineering, and bullying practices of the USA.”. I am curious as to the logic of posting this article in English as well. Most countries, especially in the Global South, dislike the CIA and so does this make it even easier to push it globally?
7. Central Commission for Comprehensive Deepening Reform meeting - The CCCDR met, Xi is the director and Li Qiang, Wang Huning and Cai Qi are deputy directors. According to the readout “the meeting deliberated and approved the "Opinions on Reforming the Land Management System to Enhance the Support Capacity for High-Quality Development in Advantageous Regions," the "Opinions on Promoting the Comprehensive Green Transformation of Economic and Social Development," the "Opinions on Further Improving the Emergency Management Capacity at the Grassroots Level," the "Opinions on Accelerating the Formation of a Basic System Supporting Comprehensive Innovation," the "Central Commission for Comprehensive Deepening Reform 2023 Work Summary Report," and the "Central Commission for Comprehensive Deepening Reform 2024 Work Priorities.”
8. Regulations on the study of Party history - The Central Committee has publicly released new regulations on the study of Party history. According to a Q&A with a responsible cadre from the Institute of Party History and Literature of the CPC Central Committee, the Politburo Standing Committee reviewed and approved the new regulations in a January 18th meeting. That cadre also reminded everyone that we should not be surprised, saying that “the report to the 20th National Congress of the Communist Party of China proposed that theoretical armament should be combined with the normalization and long-term implementation of Party history study and education. The Party Constitution amended at the 20th National Congress added the study of Party history to the duties of Party members and included the promotion of the normalization and institutionalization of Party history study and education in the basic tasks of the Party's grassroots organizations. The "Outline for the Work Plan on the Formulation of Internal Party Regulations by the Central Committee (2023-2027)" has listed the formulation and issuance of "Regulations" as a key project”. So no rest for cadres from all their studying duties, and no mercy for historical nihilists…
Last week I participated in a China File conversation about the PRC economy in the Year of the Dragon. The other contributors were Anne Stevenson-Yang, Zongyuan Zoe Liu, Arthur R. Kroeber, Lizzi C. Lee and Diana Choyleva. Here is my contribution:
The zodiac animal may have changed, but the Year of the Dragon is likely to be another Year of the Grind for the PRC economy.
In spite of the exhortation from the December Central Economic Work Conference (planning for 2024) to “strengthen economic propaganda and public opinion guidance, and promote a positive narrative about the bright prospects for the Chinese economy,” it is very hard to build a case that the economy is doing well or that 2024 is going to be a smooth year for the economy and consumers.
Xi and the leadership are very serious about transitioning from the old growth model to the “New Development Concept” with high-quality growth. That transition would be painful even in the best of times, but it is now more difficult in the wake of the pandemic hangover, the huge debt problems throughout the economy, employment challenges, the recent stock market meltdown, and a growing loss of confidence in the economy and the competence of policymakers.
Those hoping for more robust “stimulus” and a return to more “pragmatic” policymaking will likely be disappointed again in 2024. There has been lots of targeted stimulus, but the goal has been to manage the debt crises and prevent a sharp decline in economic activity and employment, rather than massive, indiscriminate 2008-like stimulus. As for a return to “pragmatism,” Xi Jinping Economic Thought is the chart for navigating the rough economic seas to higher-quality growth, and so far we have no indication that the top leadership, or at least the top leader, believes there is any need to deviate from that.
Other hopeful events for change we often hear about are the March National People’s Congress (NPC) and the oft-rumored but so far not convened Third Plenum. The hope is that Premier Li Qiang, in his work report to the NPC, will outline more stimulative policies and that the Plenum perhaps will shift back to a more “pragmatic” approach to economic policy. I am skeptical. The policies for 2024 were likely set at the Central Economic Work Conference in December, and other than the stock market decline over the last several weeks it is not clear anything else in the economy has materially worsened since then, so why would they suddenly shift policies so soon after?
Both the Central Economic Work Conference and the October Central Financial Work Conference, the first held in several years, raised hopes of more comprehensive measures to resolve some of the massive debt problems. Meaningful and credible steps to materially resolve the real estate and local government debt crises would be very positive, and also very painful.
It makes sense that so many inside and outside the People’s Republic of China want more robust stimulus. I believe the top leadership, however, is willing to endure much more pain than investors and citizens expect, and that it will continue to harden the system to be able to withstand significantly more difficult times.
You can read the full conversation here.