China Neican: 20 September 2020
CCP and economy, WeChat and TikTok bans, 'Data leak'
1. Party leadership
A revealing document
On Tuesday, the CCP issued a document titled Opinion on strengthening the united front work of the private sector in the new era 《关于加强新时代民营经济统战工作的意见》. An “opinion” from a party organisation is actually a “directive” for its subordinates.
This directive calls for the strengthening of united front work with respect to the private (economy) sector. As many of you know, the United Front is both a strategy and system by which the CCP influences elite individuals and organisations, mainly within China but also abroad. The goal of the United Front’s influence activities is to build support and legitimacy for the Party.
Beyond the Party’s quest to tighten economic control, this document highlights a number of other important aspects of the Chinese Party-state that are worth exploring. We will look at these, but first let’s set the scene.
The Party leads all
This is encapsulated the formulation below:
Party, government, military, society, education, east, west, south, north, centre, the Party leads all.
The formulation of “The Party leads all” was actually first used by Mao during the 1962 Enlarged Central Work Conference (aka the “Seven Thousand Cadres Conference”). This is the famous conference that saw a broad pushback against Mao and his radical leftist policies that left tens of millions dead during the Great Famine (1959-1961).
In early 2016, Xi revived this formulation as one of the Party’s political principles. This was cemented at the 19th Party Congress in October 2017, when it was written into the Party Constitution (Chinese/English):
Leadership of the Communist Party of China is the most essential attribute of socialism with Chinese characteristics, and the greatest strength of this system. The Party exercises overall leadership over all areas of endeavor in every part of the country.
In case you have any remaining doubts, the unique role of the CCP was enshrined into the PRC constitution in 2018 (along with the removal of presidential term limits, a symbolic move that underlined the centralisation of authority under Xi). Article 1 of the amended constitution says:
The defining feature of socialism with Chinese characteristics is the leadership of the Communist Party of China. Disruption of the socialist system by any organization or individual is prohibited
Okay, the Party under Xi wants to monopolise power, you get the point.
But you may still wonder why the Party wanted to consolidate power further? For many, China appeared to be doing pretty well under Xi’s predecessors, so why the tilt towards illiberalism?
The short answer is that the CCP under Xi has become increasingly paranoid about the possibility of losing power. China has been transformed by its opening to the world four decades ago. Titanic forces were unleashed. Party leaders appear to believe that to stay afloat the Party must again reinforce its supremacy.
But, of course, controlling such a big country as China is no easy task, even for a massive and well-resourced party like the CCP. China is not monolithic, it is a complex breathing place home to 1.4 billion people just like you and me.
Xi’s economic statism
In recent years, Xi has tightened Party control over the economy and pushed his brand of state capitalism. His approach has three elements: 1) stronger Party control over economic levers; 2) improved governance system for economic activity; and 3) integration of state and private interests.
Xi is not trying to stifle the private sector, but is trying to control it and harness it in the service of his national rejuvenation agenda. It is too early to tell whether Xi’s economic strategy will work over the long term. But as we noted earlier:
The fundamental problem...is the dominance of CCP’s political writ over economic decision making, public or private. At minimum this leads to inefficiencies, including corruption. At the riskier end, it enables economic catastrophe as shown by the painful lessons from the Mao era.
In any case, what is certain is that Xi’s belief in Marxist political economy is strong, and that in his view, “the mainstay status of public ownership and the leading role of the state-owned economy must not be altered.” In a world of pandemics and rising great power rivalry, economic control and self-sufficiency have acquired added importance.
United fronting the private sector
Having set the scene, let’s come back to the new directive.
This new directive is part of the push by the Party to tighten its grip on the economy. It frames the problem it’s trying to address in the following manner:
As Socialism with Chinese Characteristics enters a new era, the scale of the private economy continues to expand, risks and challenges have increased, and the values, interests and demands of the private sector [elite] people have become increasingly diverse, making the united front work in the private sector face new situations and new tasks.
Let us translate the above: “private sector elites are not loyal to us enough, we must redouble united front efforts to influence them.” An authoritative source from the Spokesperson from the United Front Works Department, in explaining the directive, pointed out that this redoubling of effort is needed partly because of international flux as well as domestic economic uncertainty. As such, the directive calls for the united front system to expand “ideological and political education” among China’s business elite.
Xi’s state capitalism, along with the new united front directive, reminds us of the late-1940s to mid-1950s. Mao and his comrades, after having promised China’s captains of industry that their assets will be safe and their future will be bright under Communist rule, systematically “liberated” them of their assets. Those that did not flee China were targets of prosecution in subsequent political campaigns. Given China’s radical turn under Mao, dirty capitalists make natural scapegoats and excellent targets for denunciation.
It is still unclear to us whether history is, in fact, repeating itself. Xi, unlike Mao, does not seem to have a hatred for capitalists. In fact, he seems to understand the importance of the business elite for China’s economic well being, and by extension, Party legitimacy. The directive acknowledges this in the following manner:
Strengthening the united front work of the private economy is an important way to realise the Party's leadership of the private economy. As an intrinsic element of China's economic system, the private economy has always been an important economic foundation for the persistence and development of Socialism with Chinese Characteristics; as one of our own people, members of the private economy have always been an important force which the Party must unite and rely for its long-term governance.
The relationship between Chinese companies and the Party-state has increasingly come under scrutiny internationally in recent times. We should all be familiar with the heated debates around Huawei, TikTok and WeChat, just to name a few. The latest directive will further add to international suspicion on Chinese companies and their links to the Party.
The problem is that the Party, because of its domestic imperatives, is putting in policies that result in the active blurring of lines between public and private sectors in China. This certainly makes things more difficult for Chinese companies operating overseas.
The broader point here is the domestic driven nature of China’s behaviour on the international stage. In the words of Ryan Manuel at Hong Kong University:
China’s foreign policy today suffers from being too domestically driven to be effective. Take the recent emergence of ‘wolf warriors’, aggrieved and abrasive Chinese diplomats who launch into Twitter tirades against those they feel are hurting Chinese interests. They win no overseas hearts and minds and have little to no success in spreading Chinese values. But they may look tough back home, regardless of their diplomatic self-harm. And this is the audience they care most about, rather than the nation they may be posted in.
To understand the reasons for China’s international behaviour, we must look to the Party’s domestic priorities and internal drivers. The latest directive is a great illustration of this point.
2. WeChat and TikTok ban
It’s finally here, the US Government is banning WeChat and TikTok. The Commerce Department has announced some specific transactions that will be prohibited, including:
Any provision of service to distribute or maintain the WeChat or TikTok mobile applications, constituent code, or application updates through an online mobile application store in the US;
Any provision of services through the WeChat mobile application for the purpose of transferring funds or processing payments within the US.
The short announcement was not accompanied by any official guidance notes, so exactly what it means for current end users is still up for speculation. The only clear thing certain is that WeChat and TikTok will not be available on Google or Apple US app stores. The announcement does not ban US companies from using WeChat in China. But it’s unclear whether, for example, sideloading the apps (possibly via VPN) is feasible. However, many US users of WeChat (mostly in the Chinese diaspora) are preparing for the end of WeChat.
But just because TikTok [and WeChat] poses a national security risk does NOT mean that banning it is the best policy response. Democracies need to be careful that in countering China, they do not become like China. While China exploits an asymmetry in information flow, democracies must consider the potential cost of turning this asymmetry into symmetry — sacrificing openness in the name of security. An alternative response to a ban may be to develop country-agnostic regulation.
The American Civil Liberties Union said:
This order violates the First Amendment rights of people in the United States by restricting their ability to communicate and conduct important transactions on the two social media platforms. […] To truly address privacy concerns raised by social media platforms, Congress should enact comprehensive surveillance reform and strong consumer data privacy legislation.
Unlike WeChat, the ban on TikTok allows for the sale of TikTok to Oracle et al, a deal that has received the “blessing” of the US President. Such a deal would give Oracle control over TikTok’s US data. This seems to indicate that the US administration is not concerned about data, privacy, or information manipulation, but merely that TikTok is a Chinese company. Further, last week, the President also demanded that the US government be compensated for allowing such a sale — a demand that smacks of crony capitalism and corruption. This week, it emerged that the company has pledged to put $5 billion into an education fund. (As an aside, the US President has also pushed for “patriotic education” this week, sounds familiar?). Oracle also happens to be a big donor to Trump’s re-election campaign.
From China’s side, as we have come to expect, the response was swift. China’s Commerce Ministry has announced new details of the “Unreliable Entity List”. Companies on the list would be restricted or prohibited from imports, exports, or investing in China, and its personnel from entering or staying in China. No companies have been named yet, but one possibility is Apple, as it’s a technology company with big exposure to the Chinese market, in both manufacturing and sale.
All these developments will further accelerate the trend towards decoupling, and technology may only be the start.
3. Data leak
A database of 2.4 million people has been leaked from a Chinese company, Zhenhua Data. According to some analysts, most of the data appear to be taken from other providers such as Factiva or LexisNexis, as well as scraped from public social media accounts. There are very little additional analysis and the data is not “useful enough for military or intelligence targeting”.
Zhenhua appears to have high ambition for the big data service it can offer to its clients, including the Chinese government. But at the moment, there is no evidence yet that the Chinese government is using this database.
Many companies are scraping open-source information, including public social media accounts, and are looking for ways to sell these data. However, Zhenhua’s leak has created a sensational story (“China’s hybrid war”). Such stories confirm many people’s perception of China’s efforts at mass surveillance and intelligence gathering.
There is little doubt that China is using open-source intelligence and big data for its own purposes. But Chinese companies are not the only ones doing it. In fact, much of Zhenhua’s data comes from US companies. And it is possible for the Chinese government (or any government) to buy data from US companies directly.
The ‘data leak’ story shows that heightened sensitivity around China’s actions means any China-related story drives immense interest and sometimes a degree of sensationalism. The risk of myopia is ever-present when we overly-focus on the China-connection. This story also demonstrates the sort of information that can be gained from just open-source research. No doubt more and more companies will be moving into this sector as the value of the data continues to be explored.
Shen Zhihua, China’s foremost Cold War historian, reflects on the craft of a historian in an article both intimate and powerful.
Sinologist Orville Schell recommends four independent Chinese voices outside of China (with their own YouTube Channels):
A new Australia-China Research Institute research report examines China’s economic coercion against Australia, including with respect to beef, students, wine, coal and barley.
Fairbank Centre on China Studies at Harvard launched a very useful cleaning house for webinars on China issues.
This week on China Story:
Beyongo Mukete Dynamic, COVID-19 prompts China to plug gap in its Africa health policy: Experts have long warned that bilateral and national-level healthcare approaches to addressing global health pandemics may be ineffective, due to weaknesses in disease detection and prevention systems, and poor coordination in effective disease control and prevention strategies. The COVID-19 outbreak has exposed these weaknesses in developed and developing countries alike. China’s announcement in August of its intention to fast track the construction of Africa’s Centre for Disease Control and Prevention suggests that Beijing is attempting to respond to the urgent demand for continental-wide health initiatives in Africa.
David Brophy, No one wins in a race to the bottom on national security: Let the Chinese academics back in: Secret raids on four Chinese journalists and the effective exiling of two Chinese academics from Australia mark a new low in the state of Australia-China relations. They also take us across a dangerous threshold in the use of national security provisions to exclude non-citizens from this country. Far from upholding liberal values, heightened sensitivity towards “foreign interference” is putting those values at risk. If politicians don’t change course, the deterioration of Australia’s relationship with China will go hand in hand with the erosion of our civil liberties.