Driving the Day
1.Xi puts politics above all else
On Wednesday, the Central Committee issued the Opinions on Strengthening the Party’s Political Construction.
The doc’s purpose: To make sure that the entire Party is united behind Xi’s political program.
Some context: Xi chaired a Politburo study session in June 2018 to discuss “political construction.” These opinions were then approved at the January Politburo meeting.
The new document is a nasty piece of work, equal parts mind-numbing and chilling. It’s also looooong, clocking in at nearly 10,000 characters.
First, this is further evidence of how Xi Jinpnig has elevated politics above all else. Jiang Zemin and Hu Jintao tended to emphasize economic development over political orthodoxy. But with Xi, it’s all politics, all the time.
Second, Xi has elevated himself to the level of Marx:
- “Xi Jinping Thought on Socialism with Chinese Characteristics for the New Era is contemporary Chinese Marxism, and 21st century Marxism.”
Why that matters: In the Communist cosmology, nobody is higher than Marx. And now Xi is putting himself on that level – apparently with the acceptance of the rest (or at least most) of the Party leadership.
Our read: Despite all the grumbling over the past nine months, Xi still seems very much in control.
CPC People: 中共中央关于加强党的政治建设的意见
Driving the Day, cont’d
2.Xi demands loyalty from everybody
We’re not done! We’ve got more thoughts on the political construction opinions.
Xi is still clearly not satisfiedwith how the Party functions as an organization. The opinions call for researching and establishing new rules for the Party to carry out its work.
Xi is focusing more on the outer edges of the Party. There is a clear focus on getting Party groups within state-owned enterprises, social organizations, and at the grassroots to get on board.
You already knew this, but separation of Party and state is DEAD:
- “Central and local People’s Congresses, administrative bodies, CPPCCs, supervisory bodies, judicial bodies, and procuratorial bodies at all levels are essentially all political bodies.”
Xi seems worried that cadres might lose faith in the system:
- “Keep a high degree of vigilance against all kinds of erroneous thoughts, vague understandings, and bad phenomena in the ideological field.”
- “Be a ‘warrior’ who dares to fight…and strictly guard against inaction in the face of wrong remarks and bad behavior that challenge the political bottom line.”
Get smart: The already tight information sphere is going to get even tighter.
The big question: Will any of this be effective? Xi clearly believes that the biggest problem facing the country is the lack of a unified, disciplined Party. Is he right? And if he is, will officials follow him?
The even bigger question: Xi is building a system that centers around his person. How will that system survive after Xi is gone?
3.Yi Huiman’s first presser
On Wednesday, the new head of the securities regulator, Yi Huiman, gave his first press conference since being appointed to the job on January 26.
It was a highly anticipated event, not least because of the tear that Chinese stocks have been on in recent weeks.
Yi talked about improving market supervision (Caixin 1 and 2):
- “Yi [said] that China would push for revisions to the Securities Law to ‘significantly raise the costs of violating the law and regulations of the capital market.’”
- “Yi called on regulators to respect the market…and to always be vigilant about risk control.”
He also discussed the challenges facing the new tech board being set up in Shanghai:
- “Yi…spoke at length about the new board and the difficulties it faces, including the lack of experience of brokerages and banks in pricing and underwriting initial public offerings (IPOs).”
He didn’t address the current bull market head-on, but he did allude to it:
- “[Yi…joked] that ‘whether I like it or not, I have already had a taste of what being in a volcanic crater feels like.’”
Our take: That doesn’t sounds like a regulator about step in to tamp down the market rally.
4. New plan to address swine flu
Reuters reports that policymakers have a new plan to address the country’slingering challenges with African swine flu:
- “China plans to divide its hog industry into five zones in an attempt to halt the spread of African swine fever across the world’s top pork producer and guarantee supplies.”
- “Beijing has reported more than 100 outbreaks of the disease, which is fatal to pigs but not harmful to people, in 28 provinces and regions since last August, causing turmoil in the $1 trillion industry.”
Hence the recently stepped-up concern:
- “China’s Ministry of Agriculture and Rural Affairs drew up the plan to ease the trade of pigs and pork within the regions, after earlier measures distorted prices and the market.”
- “The plan…was sent to provincial governments and municipalities for their feedback last week.”
The details of the plan:
- “Under the proposal, disease prevention measures and the enforcement of laws regulating transport will be unified across the region, allowing for smoother trade.”
- “Each region contains one of China’s top pig-producing provinces, which will ensure it is basically self-sufficient in pork, said the document.”
Get smart: Officials need to deal with this fast. The longer the issue persists, the bigger the inflationary impact on pork prices.
Reuters: China moves to halt swine fever with hog industry overhaul
5.Latest moves to attract foreign investors
China’s financial regulators are drawing up yet more plans to entice foreign investors to bring money into the country (Bloomberg):
- “The Ministry of Finance has enlisted a global accounting firm to conduct due diligence ahead of a potential feasibility study on a capital gains tax exemption, the people said, asking not to be identified discussing confidential information.”
- “The deliberations are at a preliminary stage, and there are regulatory hurdles that would need to be cleared first.”
This is one piece of a broader push:
- “Attracting international funds is a key part of President Xi Jinping’s push to build a more institutionally driven financial system that’s less prone to the boom-and-bust cycles that have plagued China.”
But investors aren’t cool with the current tax burden:
- “International funds registered in China are currently subject to taxes of up to 25 percent on capital gains earned worldwide, marring the nation’s appeal as a base.”
Get smart: Despite the increasingly stringent political atmosphere, China’s regulators are ultimately a practical group. That practicality is driving the recent financial opening and ongoing integration with global financial markets.
Bloomberg: China Considers Tax Breaks to Draw In Global Funds, Fend Off Tax Havens
6.Xinjiang crackdown taking toll on local cadres
Xinjiang has a new head of its Politics and Law Commission, Wang Junzheng. He will be in charge of coordinating the province’s crackdown on Uighurs.
Officials have already turned the province into a police state. And that is taking its toll on local officials, according to the SCMP:
- “[An] informed source, whose family members work for the regional government, said apart from maintaining stability, a key challenge for Wang and the Xinjiang Communist Party was to boost the morale of local cadres.”
- “Many of them are overworked and are under tremendous pressure.”
- “They are required to arrange to have at least one person to be on call round the clock.”
- “He said cadres were also obliged to keep watch over Uygur families by staying in their homes, but they were not able to claim any expenses for doing so and have to buy gifts for their hosts.
- “’Although we have made some friends [with these families], this also created additional financial burdens for us,’ he said.”
Our thought: We have always thought that the Xinjiang crackdown will ultimately prove counterproductive by turning an entire generation of Uighurs against the Party. Now it looks like it might be sapping the morale of officials as well.
Related: It looks like Wang’s boss, Xinjiang Party Secretary and Politburo member Chen Quanguo, plagiarized his doctoral dissertation (FT).