INSIGHTS April 2020 Cercius Group - Insights Notes: 1. Cercius Insights is a monthly professional journal published by Cercius group ltd. Cercius Insights focuses on short studies emphasizing recent political events, and the interrelationship between political and economic processess and factors that influence political, economic, and social outcomes in Mainland China. 2. The journal is based on original research and contains mainly unpublished work. On occasion, thematic special issue might be offered in addition to the regular subscription. 3. The content of all published articles in Cercius Insights reflect the views of Cercius Group Ltd and not that of any of its clients or affiliates. 4. The journal does not accept external manuscripts. 5. Cercius Insights is a subscription based journal. Copyrights of all articles are retained by Cercius Group Ltd, and any third party wishing to cite or quote parts of any articles must obtain a licence from Cercius Group Ltd. 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Please visit Cercius Group Ltd homepage at https://www.cerciusgroup.com Editorial communication should be sent to: The Editor, Cercius Insights E-mail: [email protected] The good, the bad and the ugly: a story of contain- ment, propaganda and of economic uncertainty Editorial April has certainly been an “interesting” month for the Middle Kingdom. As the propaganda apparatus founds it way into the Foreign Ministry – leading to “wolves” defending China – tensions between the People’s Republic and the rest of the world have been running high. As previously mentioned in the March issue, the propaganda system – and the people leading it – is now in full throttle and pushing diplomats to “act like wolfs to engage the West” 狼态度回应西方, a position which sounds good on the surface as China used to be more of a passive player on the international landscape. That said, “wolves” are supposed to be cunning. Instead of being simply firm, they were pushed to go down the “conspiracy road” thus discrediting this whole new take on Chinese diplomacy: these “war wolves” 战狼 not only fail to convince, but also made sure that China would lose credibility and sympathy points all across the board. The same can be said for the Hong Kong protests and of course, the trade war. This “tougher” stance – which can be traced back to both Xi Jinping’s experience of realpolitik early on, and to Wang Huning’s 王沪宁 conservative mindset, has clearly not served the Party well, not to say that it has weakened Xi’s position inside the Party-State. And this observation brings us back to the strange climate that persist around Zhongnanhai 中南海 as of late. This switch from the Xi-Wang alliance – Wang Qishan 王岐山, from 2013 to 2017, to the new Xi-Wang cooper- ation – Wang Huning, has been, for lack of better words, very unbecoming. The new ideas fed to Xi by the Central Policy Research Office 中央政研室 or the overall propaganda system 文宣系统 – we can think of the “Great war on the pandem- ic” 大国战役 published in March which drew public ire – have so far landed Xi in hot water more than once, especially with the US. And sadly enough, it seems as though both sides – China and the US – are competing in a race to the bottom as to see who will triple, quadruple or quintuple down on name-calling and conspiracy theories. On a different note, April has been the pre-battleground setting up the tone for the “Two Sessions” 全国两会 scheduled for May 20 and 21. The most notable chess move was the removal of Sun Lijun 孙力军 – the “successor” of Zeng Qinghong’s 曾庆红 influence in the public security / political and legal affairs apparatus 公安系/政法系统, a master move which required the concerted efforts of Wang Xiaohong 王小洪, and of Zhao Leji’s 赵乐际 Central Commission for Discipline Inspection 中纪委. With this jester gone, the tossing aside of another one of Zhou Yongkang’s pawns – Fu Zhenghua 傅政华 – from the Ministry of Justice, and the appointment of He Rong 贺荣 as deputy Party secretary of the Supreme People’s Court, might make Zhou Qiang 周强 start to feel isolated, if not outright targeted, by Xi. In the mist of these few early gunshots, another one of Xi’s Zhejiang allies – Tang Yijun 唐一军– has been positioned to secure what was once a loose end. Yet by doing so, Xi is using the Zhejiang “pandian” 盘点 once more – a move that is very indicative of the ongoing factional struggle. As the Party, and mainly Xi, is anxiously gearing up towards the “Two Sessions” – as made explicit by the pre-emptive dismissal of Fu Zhenghua and Sun Lijun and the appointment of Tang Yijun and Sun Jinlong 孙金龙 – internal tensions are on the rise and controlling the agenda will be made difficult for Ding Xuexiang’s 丁薛祥 team and the General Secretary Office 总书记办公室. In addition to more colloquial issues such as the Sino-US trade war, the – potential – economic recession, the Hong Kong protests, the COVID-19 pandemic, and the overall diplomatic situation, the Party has to deal with intra-Party struggles over vacancies – the Liaoning government head seat, as well as upcoming vacancies – the Xinjiang Party chief seat now held by Chen Quanguo 陈全国. The economic front is not well either. As one would expect, the sleuth of economic data that came out during April shows that while the Chinese economy has indeed – largely – returned to work, the economic recovery so far has been weak. Some have suggested that the consumer demand which was subdued during the nationwide lockdown would result in “revenge spending” – a sudden burst of spending that would reinvigorate many sectors of the Chinese economy. Howev- er, it appears that the economic damage dealt by the pandemic is structural and will take quite some time to mend. Not only have there been layoffs on a somewhat sizeable scale, but job postings have also decreased. Moreover, what is most concerning is that disposable income has fallen – meaning that the fiscally conservative Chinese consumer will have little incentive to spend his or her hard earned monthly salary. All in all, China’s economic recovery will be a long game – it will take serious policy-crafting to finish 2020 in the territory of positive economic growth. Lastly, as we all sit back and enjoy the latest product of the propaganda system – the not-so-well-received soap opera “Together” 在一起 – the Party needs to prepare itself to face potential social and international crisis, as disposable incomes and jobs are shrinking and lots of western countries are demanding that China be held accountable for the global pandemic. The Party will also need to decide on what to do with Jiang Chaoliang 蒋超良 – removed amidst the COVID-19 crisis, Ma Xiaowei 马晓伟, who so far seems a bit lost, and potentially re-assess the two main recent Hong Kong system appointments: Luo Huining 骆惠宁and Xia Baolong 夏宝龙. CONTENT Cutting the roots ................................................... 17 Political security “secured”? ................................. 20 PERSONNEL RESHUFFLING AHEAD OF Justice at all cost ................................................... 22 THE “TWO SESSIONS” ................................... 2 The mishu from Zhejiang: Tang Yijun ................. 24 Securing the Capital ............................................. 24 The curious case of Li Ganjie or Shandong’s new Governor ................................................................ 2 An old “environmental protection” Cadre ............... 2 FINANCE AND ECONOMICS ...................... 26 An “untouchable”? .................................................. 3 Overview ............................................................. 26 A spotlight on the Ministry of Ecology and Revenge spending? ............................................... 26 Environment .......................................................... 4 Foreign companies shifting production out of A Tuanpai lieutenant who rubbed shoulders with the China .................................................................... 27 “stars”...................................................................... 4 The new minister: a Party “outsider” ...................... 5 Luckin Coffee and the Problems of China’s Start- An undeserved punishment? ................................... 6 up Industry .......................................................... 29 “Losing at the starting line” – Luckin Coffee’s ill- Wang Qishan’s army deployed under Zhou advised corporate strategy .................................... 29 Qiang ...................................................................... 7 China’s start-up industry: the lesson of Ofo ......... 30 The “tiger tamer” from Beijing ............................... 7 Preparing