DRIVING THE DAY
1. Top officials prepare for the congress
The Central Committee of the CCP opened its 7th Plenum on Wednesday, exactly one week before the 19th Party Congress convenes.
The plenum is meeting to discuss the key documents to be delivered at the Congress. These are:
- a draft of the 19th Party Congress report to be delivered by Xi Jinping
- a draft amendment to the Party constitution
- a draft of the discipline commission’s work report
These documents have already been reviewed by top officials (China.org):
- “At a meeting on Sept. 18, the Political Bureau of the CCP Central Committee examined and discussed the three draft documents and agreed to submit them to the Seventh Plenary Session of the 18th CPC Central Committee for further discussion after revisions.”
Get smart: Everyone is focused on personnel when it comes to the Party congress. But Xi’s report will be the most important component of the gathering. That is where we will look for policy priorities and signals for the next five years.
China.org: CPC Central Committee plenum opens
DRIVING THE DAY CONT’D
2. Wang Qishan speculation heats up
Okay – we can’t help it. We are also focused on personnel.
On that score, one of the most important developments next week will be the fate of anti-corruption czar Wang Qishan.
Wang is too old to stay on according to traditional retirement norms, but there have been persistent rumors that Xi may bend the rules to keep Wang in power.
Ben Kang Lim at Reuters reports that Wang is likely to stay:
- “Twelve of the 16 people with ties to China’s leadership, including former officials as well as relatives, aides and close friends of current and former senior officials, said Wang was likely to retain a leadership role.”
What would Wang do if he stayed on? The same sources threw out several scenarios:
- “Wang would become one of two vice chairmen of the National Security Commission”
- “Alternatively, he could become vice chairman of the Communist Party itself, if Xi resurrects the party chairmanship position”
- “Wang could become premier – replacing Li Keqiang”
- “Or [Wang could become] head of parliament.”
Get smart: This leadership transition is more opaque than in years past. Take all speculation with a grain of salt.
Our best guess: We think Wang has a 64% chance of staying on.
Get in touch to learn about our premium politics service and find out how we came up with that number.
Reuters: China’s Xi looks set to keep right-hand man on despite age
FINANCE AND ECONOMICS
3. The Party wants to own the internet
If there was ever any doubt of the Party’s influence over large private companies in China, those doubts should be put to rest.
In fact, some regulators are considering a plan to go ahead and formalize the relationship (WSJ):
- “Internet regulators have discussed taking 1% stakes with social-media powers Tencent Holdings Ltd. and Weibo Corp. and with Youku Tudou, a YouTube-like video platform owned by e-commerce titan Alibaba Group Holding Ltd.”
The plan has been mooted for a while, but is now seeing a renewed push. Here’s how similar transactions have worked in practice:
- “People.cn, the website of People’s Daily, is paying 7.2 million yuan for a 1.5% stake in Beijing Tiexue, operator of the nationalistic military portal and forum site Tiexue.net.”
- “People.cn will appoint a board member to Tiexue.cn and will review all content on the site, a service for which Tiexue.cn will pay, according to the filings.”
The article’s money quote:
- “’Every company will have to do it eventually, so the earlier you get in, the more competitive advantage you’ll gain,’ says a person familiar with the deal.”
Our take: This is the next phase of China, Inc.
WSJ: Beijing Pushes for a Direct Hand in China’s Big Tech Firms
FINANCE AND ECONOMICS
4. Meet the Party’s new financial enforcers
We have repeatedly emphasized the discipline commission’s (CCDI) increasingly important role in policy implementation. Two new personnel appointments at the financial regulators reinforce that view:
- 45-year-old Li Xinran is the new head of discipline inspection at the banking regulator (CBRC)
- 51-year-old Lin Guoyao is the new head of discipline inspection at the insurance regulator (CIRC)
Who is Li? (Caixin):
- “a go-getter in the central discipline commission system, where he worked for more than two decades”
- “[he] participated in a slew of top-level corruption cases, including ones involving then-Politburo member and Chongqing party chief Bo Xilai, and his successor Sun Zhengcai”
- “[he is ] known for bold moves that arouse shock and awe.”
Keep an eye on Li: At only 45, he’s a leading light of the 7th Generation of leaders that will rule from 2032-2042.
Who is Lin?:
- he spent his entire career in Fujian, one of Xi’s power bases
- in Fujian he overlapped with Xi and important Xi ally He Lifeng, the current NDRC chairman
What it means: The CCDI has gone beyond merely being a graft buster. It is now the Party-line enforcer. And the main Party-line for the financial sector is to contain risks. These are the guys who will make sure it happens.
Caixin: Two Determined Graft-Busters Put in Senior Posts at Banking, Insurance Watchdogs
CBRC: 中央纪委驻中国银行业监督管理委员会纪检组组长 李欣然
CIRC: 纪检组组长 林国耀
FINANCE AND ECONOMICS
5. The insurance industry is getting boring
What types of rules will the financial industry’s new discipline enforcers be pushing?
Here’s the latest for the insurance industry, per Caixin:
- “The CIRC is soliciting opinions on a new draft guideline covering internal controls over the use of insurance funds. The new guideline mainly targets investments in equities, real estate and some financial products.”
- “The new rules, expected to take effect by the end of this year, would establish an anti-corruption system aimed at curbing the transfer of illegitimate interests.”
- “Insurers whose internal controls were already considered poor by the CIRC would need to make big improvements to meet the requirements.”
The upshot: Remember the financial industry’s current mantra – “Back to Basics”. Regulators are trying to ensure that insurers manage their assets in a much more conservative fashion.
Why it matters: The push to clean up the financial system isn’t going away. We can argue about whether or not regulators will be successful, but the policy trajectory has been firmly established.
POLITICS AND POLICY
6. The military has Xi Jinping’s back
In yesterday’s Tip Sheet we pointed out that Xi Jinping has further strengthened control over the Party’s disciplinary commission (CCDI). That is the key to commanding the Party and state apparatuses.
Today, it was the armed services turn to show fealty.
Wang Ning, commander of the People’s Armed Police, published an editorial in the Party School’s official newspaper, Study Times. He reiterated the Party’s absolute leadership of the forces under his command, and thus Xi Jinping’s authority:
- “In the past, Guo Boxiong and Xu Caihou [disgraced CMC vice chairmen who served under Hu Jintao] weakened the CMC chairman’s leadership…which put the army in an extremely dangerous place.”
- “The nature of the system is…to secure Chairman Xi’s authority and follow his leadership.”
Get smart: Xi is entering next week’s Party congress with all the Party’s hard power as his disposal. Xi has now established new CCDI representatives throughout Party and state agencies (see Caixin link) and reshuffled the commanders of armed forces (see Tencent link).
Get smarter: Those appointments mean there is little chance that things will go wrong for Xi at the congress.