Martin K. Dimitrov

In China, as in all communist regimes, there exist two types of media: one is publicly available and the other is restricted and accessible only to regime insiders who possess the proper clearances. This second type of media, known as neibu 内部 or for ‘internal circulation’, has received less attention from scholars. The puzzle as to whether a Mao-era institution like internal-circulation media has survived into the twenty-first century stems from a theoretical uncertainty about the role of internal publications in an age when so much information is accessible to regime insiders via the Internet and social media. This article provides a theoretical argument about the function of neibu publications in China. It then argues that these media have retained their original functions and are still of central importance as conduits for transmitting sensitive information to Party leaders in the digital age.

What are neibu publications?

In contract to the publicly accessible media, neibu publications are restricted to individuals holding the appropriate rank within the Chinese party-state. The classifications of these media range from neibu 内部 (internal circulation) to mimi 秘密 (confidential), jimi 机密 (secret), and even juemi 绝密(top-secret). Here, neibu is used as a synonym for internal publications at all levels of classification. The general principle is that those materials are available to regime insiders, with the circle of recipients becoming progressively smaller as we move up the ladder of confidentiality. For example, Neibu cankao 内部参考 (Internal Reference) was issued as a secret 机密 serial originally limited to Communist Party of China (CPC) Central Committee members and provincial CPC Standing Committee members. Top-secret materials have an even narrower distribution list, generally being aimed at CPC Politburo members and provincial Party secretaries.

In terms of type, neibu publications are mirror images of the kinds of media that circulate publicly. They include books on technical matters like policing or military affairs; detailed government reports, yearbooks, and almanacs; documentaries on politically sensitive issues; academic research reports; and, finally, periodic bulletins containing news and analysis on both domestic and international politics. The same individuals write for both neibu and the publicly accessible media, with final decision about which of the two publication streams is the more appropriate outlet resting with the editors at Xinhua, the major news outlets (which all have neibu publications), the major publishing houses, and so on. The range of these sources is truly extensive.

Internal media under Mao

Scholars of Maoist China have an extraordinary resource that allows them to trace systematically the content of internal media: the secret-level classified serial Neibu cankao, which is available at the Universities Service Centre at the Chinese University in Hong Kong in its entirety for the 1949–1964 period. Analysis and detailed coding of the 3,612 issues published between September 1949 and December 1964 reveals that this serial meant for the top leadership contained a rich array of negative news.[1] Readers were apprised of alarming phenomena such as episodes of famine, shortages of goods, and incidences of bureaucratic corruption, theft, and waste as well as ethnic and religious minority unrest. In addition, Neibu cankao tracked various anti-regime and enemy activities, such as the creation of counterrevolutionary organisations or the infiltration of different parts of China by foreign spies. Most frequent were reports on hostile reactions, opinions, and views concerning the Party and its policies, including occasional dispatches on superstitious rumours. This coverage stood in sharp contrast to that in the officially accessible media, such as People’s Daily, which focused on the Party’s achievements and praise.

Other classified publications have survived from the Maoist period include the initially classified Reference News (Cankao xiaoxi 参考消息), which began as neibu but radically expanded its circle of recipients in 1957 and by the late 1970s had become a newspaper that was readily available both on a subscription basis and through newspaper kiosks.^[2] There are also individual issues of serials, bulletins, and government documents at all levels of classification, as well as Xinhua almanacs that discuss internal reference publications. Cumulatively, these sources, which can be accessed at various archives in Hong Kong and in the West allow us to claim that internal media persisted during the darkest chapters of China’s political history such as the Great Leap Forward and the Cultural Revolution, despite arguments put forward by orthodox supporters of the Cultural Revolution that they should cease publication. The reason for their survival is that top leaders found them valuable. As Vice-Premier Chen Yi 陈毅 opined in 1966, the neibu Reference Materials (Cankao ziliao 参考资料) is ‘our daily bread’ and ‘we cannot work without it’.[3] For their part, Mao and Zhou Enlai insisted on reading Reference Materials and Important News of the Day (Meiri yaowen 每日要闻) right before going to bed.[4]

Internal reference materials under Xi

Multiple sources point to the continued importance of neibu publications in the present age. Anecdotally, Chinese academics say that the internal reports they write can lead to bigger bonuses and faster promotions than publications in openly circulating academic journals.[5] Internal reference books and government publications persist, especially in the highly sensitive areas of public security and ethnic affairs.[6] There is also evidence of the screening of classified documentaries on the Soviet collapse to Party cadres.[7] Most importantly, internal reference news bulletins continue to be published. Relevant evidence is provided by the 2014 Jiujiang 九江prefecture Propaganda Department surprise data leak, which revealed the persistence of both central-level and grassroots classified bulletins into the Xi Jinping era. One example from the central level is the Xinhua weekly Public Opinion Observation (party and government edition) 舆情观察(党政版), which contains reports on official Weibo 微博; on social media posts by famous personalities; on the top news items; most frequent keyword searches; most viewed photos, cartoons, and videos; as well as analytical reports on Internet public opinion.^[8] The content of this bulletin suggests that this is the primary way in which the leadership understands the Chinese Internet and social media.

At the grassroots level, Xinhua prepares bulletins on Internet public opinion that are generated through the Xinhua public opinion management system舆情管理系统, consisting of over 700 popular print media from mainland China, Taiwan, Hong Kong and Macau, as well as over 300 major websites and over 300 discussion forums. This system enables keyword searches that can be used to produce reports about public opinion expressed in different localities in China. For example, public opinion about Jiujiang prefecture in one week in October 2014 consisted of 159 items from the traditional print media; 908 items from the online media; and 509 items from discussion forums.^[9] Once identified, these items can be scored in terms of their tone (positive, neutral, negative), with negative public opinion highlighted for additional attention. In general, over the last decade there has been a proliferation of internal reporting tailored for cadres at various levels of the political system.[10]

Do these reports matter? A cliché about communist regimes is that leaders ignore the intelligence they receive.^[11] One feature of the Chinese internal reporting system allows us to test this assumption: leaders have the option to discount the information, to read it, or to read it and to issue instructions (pishi 批示). We have evidence that in 2005 central leading cadres中央领导issued instructions on 1,460 internal reference reports prepared by the Xinhua News Agency; by 2011, the number of reports prompting instructions by the top leadership had risen more than threefold to 4,557.^[12] Since then, attention to these documents has grown further.[13] This rapid increase attests both to the value that leaders attach to internal reporting and to the frequency with which these reports inform policy decisions: according to the internal rules of the Chinese bureaucracy, a report that has received a pishi automatically acquires the status of a policy document.^[14] In sum, internal journalistic reporting remains indispensable to decision makers in the age of social media. These reports allow leaders to react to online and offline public opinion crises quickly and to thus fulfil the paramount goal of Stability Maintenance 维稳.

Why neibu publications still matter

In the eyes of the party, the most important distinction between internal media and publicly available media is the function they serve. Internal periodicals have to contain factual information 信息, while publicly available outlets carry appropriate news 新闻, opinions, and most importantly, propaganda messaging.[15] Xi Jinping for example, called for the public media to ‘correctly guide public opinion’ 正确舆论导向 by ‘emphasising positive publicity’ 正面宣传为主.^[16]

This distinction goes back many decades. During the Mao period, when the People’s Daily avoided reporting on sensitive topics like famine or popular criticism of the regime, Xinhua instructed journalists writing for internal publications to collect information on important events and provide objective, factual reporting not suitable for publicly accessible media. Specifically, this included the political attitudes expressed by ordinary people of different walks of life and their opinions about important domestic and international events. In addition, internal media contributors were expected to track people’s opinions about life and work problems and monitor their views about the leading party and government organs. Finally, internal media had to cover natural disasters and ‘counterrevolutionary’ activities. In sum, such publications were entrusted with a very broad mandate of reporting on negative developments, while the publicly available media carried propagandistic and politically vetted content.^[17]

Academic studies of internal publications have focused on the Mao period.^[18] Given the difficulty of accessing a substantial body of such publications, most research is based on relatively small samples. Nevertheless, it’s clear that under Mao, reporting on domestic news was an important focus of internal media, which covered a wide spectrum of issues from popular reactions to the death of Stalin to the circulation of rumours and the incidence of riots.^[19] Internal bulletins served as a key source of information for the leadership during the Mao period and potentially up until the 1989 pro-democracy protest movement.^[20]

In the post-1989 period, foreign scholarship has centred on investigative reporting in the publicly available print media, including commercialised media, and on citizen journalism in social media.^[21] The implicit (and sometimes explicit) assumption is that internal journalistic reporting has either become extinct or has greatly receded in importance due to the rise of useful reporting in commercial media, where investigative journalism of the sort that reveals public attitudes and concerns helps make publications competitive.^[22]

And yet, a leaked 2011 directive on writing internal reports for the party and the government reveals the distinct requirements for internal information that validate the persistence of internal publications into the digital age.^[23] Because internal information reports are supposed to help leaders reach decisions, they need to be presented in an objective and clear writing style. By contrast, publicly available news and reports serve multiple functions: to entertain, propagandise, educate, and guide public opinion and so may use literary devices like metaphors and analogies. This document also specifies the kinds of information (regarding disasters, epidemics, and unexpected incidents), whose casual release to the public could have a negative impact on social stability; such information can appear in the public media with prior approval from the senior leader at the relevant level.^[24]

One theory is that investigate journalism thrived precisely because the regime needed more information.[25] However, given that the regime has abundant sources of information that are not publicly disseminated, investigative reporting may better serve other regime goals such as appearing accountable.²⁶

In July 2024 Beijing News 新京报 published a front-page report on tankers being consecutively used to transport coal-to-liquid fuels 煤制油 and edible oils 食用油 without being cleaned in between.[26] Widely hailed as ‘investigative journalism’,[27] the report acknowledges that this practice is a well-known ‘open secret’ 公开的秘密.[28] What was the purpose of this report? By the end of August 2024, two truck drivers had been arrested and three companies penalised. Most important were the draft regulations laid down in August 2024 by the National Food and Strategic Reserves Administration, which stipulated that containers used for transporting non-edible oils should not be used for cooking oils.[29] Thus, instead of investigative reporting, we most likely have a strategically placed report that aimed to portray the government as responsive and accountable to citizen concerns. Whenever the relevant neibu documents become available, we can check on when a report on unclean cooking oil first emerged in the internal media. This author’s strong suspicion is that this happened months and perhaps even years prior to the Beijing News publication.

In sum, internal publications continue to deliver negative information to the leadership in the Xi era, apprising it of popular dissatisfaction.

[1] Martin K. Dimitrov, Dictatorship and Information: Authoritarian Regime Resilience in Communist Europe and China, New York: Oxford University Press, 2023, p. 132–135.

[2] Xinhua News Agency, Chronicle of Important Events at the Xinhua News Agency, 1950-1976,新华社大事记, 1950-1976, Beijing: Xinhua News Agency, 2002, p. 41; Xinhua News Agency, Cankao xiaoxi: Commemorative Booklet for the 55^th Anniversary of Its Creation (1931-1986) and the 30^th Anniversary of the Expansion of Its Circulation (1957-1987) 参考消息–创办五十五周年(1931-1986)扩大发行三十周年(1957-1987)纪念册, Hefei: Anhui Xinhua Yinshuachang, 1987.

[3] Xinhua News Agency, Chronicle of Important Events at the Xinhua News Agency, 1950-1976新华社大事记, 1950-1976, Beijing: Xinhua News Agency, 2002, p. 88.

[4] Ibid., p. 112.

[5] Author’s conversations with academics in China, 2023–2024.

[6] Third Department of the Ministry of Public Security, Compendium of PRC Household Registration Regulations, 1950–2014 中华人民共和国户口管理资料汇编, 1950–2014, Beijing: Zhongguo Renmin Gong’an Daxue Chubanshe, 2015; Xinjiang Uighur Autonomous Region Local Gazetteer Editing Committee, Xinjiang Gazetteer, 1986–2005, vol. 7: Politics 新疆通志 1986–2005, 第七卷:政治, Beijing: Fangzhi Chubanshe, 2022.

[7] Author’s conversations with academics in China, 2023–2024.

[8] Public Opinion Observation (party and government edition)  舆情观察(党政版), Nr. 16 (17 October 2014).

[9] Jiujiang Public Opinion Assessment Weekly 九江市舆情监测周报, Nr. 40 (6 October–10 October 2014).

[10] Tao Wu and Bixiao He, ‘Intelligence for Sale: The “Party-Public Sentiment, Inc.” and Stability Maintenance in China’, Problems of Post-Communism 67:2 (2020), 129–140.

[11] Frank Dikötter, Mao’s Great Famine: The History of China’s Most Devastating Catastrophe, 1958-1962, New York: Walker & Co., 2010.

[12] Calculated from Xinhua News Agency, Xinhua Yearbook 2006 新华社年鉴2006, Beijing: Xinhua News Agency, 2007, p.198 and Xinhua News Agency, Xinhua Yearbook 2011新华社年鉴2011, Beijing: Xinhua News Agency, 2012, p. 259.

[13] Xinhua News Agency, Xinhua Yearbook 2016 新华社年鉴2016, Beijing: Xinhua News Agency, 2017.

[14] Wen-Hsuan Tsai, ‘A Unique Pattern of Policymaking in China’s Authoritarian System: The CCP’s Neican/Pishi Model’, Asian Survey 55:6 (November/December 2015), 1093-1115.

[15] Martin K. Dimitrov, ‘The Political Logic of Media Control in China’, Problems of Post-Communism 64: 3–4 (2017), 121–127.

[16] David Bandurski, ‘Under Xi, the Media has Turned from a ‘Mouthpiece of the Masses’ to the Party’s Parrot’, Hong Kong Free Press, 21 June 2016, online at https://www.hongkongfp.com/2016/06/21/under-xi-the-media-has-turned-from-a-mouthpiece-of-masses-to-the-partys-parrot/

[17] ‘Central Committee Regulation for Xinhua Journalists Writing Internal Reference Materials’ 中共中央关于新华社记者采写内部参考资料的规定, July 1953.

[18] Michael Schoenhals, ‘Elite Information in China’, Problems of Communism 34 (September-October 1985), 65–71; Jennifer Grant, ‘Internal Reporting by Investigative Journalists in China and Its Influence on Government Policy’, International Communication Gazette 41 (1988), 53–65; Huai Yan and Suisheng Zhao, ‘Notes on China’s Confidential Documents’, Journal of Contemporary China 2:4 (1993), 75–92.

[19] For a piece based on the systematic analysis of 30 reports published in Neibu cankao in March 1953, see Hua-yu Li, ‘Reactions of Chinese Citizen to the Death of Stalin: Internal Communist Party Reports’, Journal of Cold War Studies 11:2 (Spring 2009), 70–88. On rumours and superstitions in Neibu cankao, see S. A. Smith, ‘Talking Toads and Chinless Ghosts: The Politics of “Superstitious” Rumors in the People’s Republic of China, 1961-1965’, American Historical Review 111:2 (2006), 405-427. For an overview of sensitive issues covered in Neibu cankao, see Dimitrov 2017.

[20] Andrew J. Nathan, Chinese Democracy, Berkeley: University of California Press, 1985, p. 152–157; Zhang Liang, Andrew J. Nathan, Perry Link, and Orville Schell, comps., The Tiananmen Papers, New York: Pacific Affairs, 2002; Daniel Leese, ‘The CCP Information Order in the Early People’s Republic of China: The Case of Xuanjiao Dongtai’, Modern China 49:2 (2023), 135–158.

[21] Zhou Yuezhi, ‘Watchdogs on Party Leashes? Contexts and Implications of Investigative Journalism in Post-Deng China’, Journalism Studies 1:4 (2000), 577–597; David Bandurski and Martin Hala, eds., Investigative Journalism in China: Eight Cases of Chinese Watchdog Journalism, Hong Kong: Hong Kong University Press, 2010; Jingrong Tong, Investigative Journalism in China: Journalism, Power, and Society, London: Continuum, 2011; Marina Svensson, Elin Saether, and Zhi’an Zhang, eds., Chinese Investigative Journalists’ Dreams: Autonomy, Agency, and Voice, Lanham, MD: Lexington Books, 2014; Jingrong Tong, Investigative Journalism, Environmental Problems, and Modernization in China, New York: Palgrave Macmillan, 2015; Haiyan Wang, The Transformation of Investigative Journalism in China: From Journalists to Activists, Lanham, MD: Lexington Books, 2016; Jonathan Hassid, China’s Unruly Journalists: How Committed Professionals Are Changing the People’s Republic, New York: Routledge, 2016; Maria Repnikova, Media Politics in China: Improvising Power Under Authoritarianism New York: Cambridge University Press, 2017; Rongbin Han, Contesting Cyberspace in China: Online Expression and Authoritarian Resilience, New York: Columbia University Press, 2018, esp. p. 77–100.

[22] Peter Lorentzen, ‘China’s Strategic Censorship’, American Journal of Political Science 58:2 (April 2014), 402–414; Daniela Stockmann, Media Commercialization and Authoritarian Rule in China, New York: Cambridge University Press, 2013; Xin Xin, How the Market Is Changing China’s News: The Case of the Xinhua News Agency, Lanham, MD: Lexington Books, 2012; Susan L. Shirk, ed., Changing Media, Changing China, New York: Oxford University Press, 2011; and Yuezhi Zhao, Media, Market, and Democracy in China: Between the Party Line and the Bottom Line, Urbana: University of Illinois Press, 1998. For an exception to this line of thinking, see Dimitrov, Dictatorship and Information.

[23] ‘Some Pointers on Writing Reports for Party and Government’ 党政信息写工作的几点体会, online at http://www.zk168.com/fanwen/fanwenxinde_274744

[24] Ibid.

[25] Lorentzen, ‘China’s Strategic Censorship’.

[26] Dimitrov 2017; Haiyan Wang, ‘A Dog That No Longer Barks: Role Performance of Investigative Journalism in China in the Digital Age’, Journalism Practice 18 (2024), 2240–2257.

[27] Han Futao (韩福涛), ‘An Investigation of Tanker Truck Transport Chaos in Unloading Coal Oil and Loading Edible Oil’ 罐车运输乱象调查卸完煤制油又装食用油, Beijing News, 2 July 2024, online at https://m.bjnews.com.cn/detail/1719878490168127.html

[28] ‘A Rare Exposé’, China Media Project, 10 July 2024, online at https://chinamediaproject.org/2024/07/10/rare-front-page-report/#:~:text=Reporters%2C%20for%20example%2C%20trailed%20one,of%20the%20tank%20in%20between.

[29] https://m.bjnews.com.cn/detail/1719878490168127.html

[30] ‘Chinese Cooking Oil Scandal Prompts New Safety Rule for Transporting Products’, South China Morning Post, 30 August 2024, online at https://www.scmp.com/news/china/politics/article/3276586/chinese-cooking-oil-scandal-prompts-new-safety-rules-transporting-products

The post Eyes Only: How China’s Party Leaders Get Their Information appeared first on The China Story.

Given his apparent lack of expertise in economic and financial affairs, it has long been assumed that Xi’s forte rests in pulling together a personally loyal clique of capable cadres. A master of Machiavellian-style palace intrigue, within ten years of assuming power, he had ensured that his clique dominated all major offices in the party-state apparatus.

However, both former Foreign Minister Qin and General Li – as well as the disgraced commander and political commissar of the Rocket force, Generals Li Yuchao 李玉超 and Xu Zhongbo 徐忠波 – had been considered Xi protégés. The failure to disclose fully to the public the reasons behind their demise testifies to problems Xi is facing in running the party-military apparatus. The lack of due process in senior-level appointments and sackings under Xi has opened him to criticism by other ‘princelings’ (the offspring of the PRC’s founding fathers). In the run-up to the celebration of the 125th anniversary of former state president Liu Shaoqi’s  刘少奇 birthday, Liu’s son, General Liu Yuan 刘源, published an article entitled ‘Affirm and insist upon the system of democratic centralism; strengthen the construction of organization and institutions’ in the official journal Research on Mao Zedong Thought. General Liu – who reportedly does not see eye to eye with Xi – seems to be critiquing Xi’s dictatorial ruling style. Given that his father was persecuted to death by Mao at the start of the Cultural Revolution, General Liu’s statement might have been more pointed than it seemed.

In general, the party-state apparatus since the 20th Party Congress has been dominated by apparatchiks (political officials responsible for issues including ideology, national security, personnel and propaganda) and not technocrats (often English-speaking cadres who might have been trained abroad in science or technological fields or economics, and who understand economic principles, modern financial tools and international trade). While quite a few of the current Xi-appointed Politburo have at least bachelor’s degrees in technology-related subjects, they have built their careers in party affairs, especially ideology or organisation. The best example is the Vice-Premier in charge of finance and economics, He Lifeng 何立峰, who worked with Xi for more than ten years when the latter was based in Fujian. He has Xi’s full trust, but he is not a technocrat and is a newcomer to policy-making in the areas of finance and international economics. He is therefore a far cry from his predecessor, former Vice-Premier Liu He 刘鹤 (in office 19 March 2018 – 12 March 2023), an economist with a masters degree in public administration from Harvard. Liu He was in charge of negotiations with the United States over tariffs and other financial issues during a particularly tense time in bilateral relations. Liu He was also a close adviser to Xi before retiring. Meanwhile, the older generation of technocrats employed by Premier Zhu Rongji and his successor Premier Wen Jiabao in the late 1990s and early 2000s – including former People’s Bank of China Governor Zhou Xiaochuan 周小川 and Minister of Finance Lou Jiwei 楼继伟 – have all stepped down due to age requirements.

The rise of the ‘national security faction’

The only Politburo Standing Committee (PBSC) member accompanying Xi during his recent summit with US President Biden on 15 November in San Francisco was Cai Qi 蔡奇. Although ranked fifth in the PBSC pecking order, he controls the police-state apparatus in his capacity as a vice-chairman of the Central National Security Commission 中央国家安全委员会 as well as being its head of the General Office. His formal title is head of the CPC Central Committee Secretariat 中共中央书记处; other members of the Secretariat include the Minister of Public Security Wang Xiaohong 王小洪 and the Minister of State Security Chen Yixin 陈一新. It is the first time in CPC history that heads of the ministries of public security and state security have had slots on the Secretariat, signifying the centrality of security to Xi’s administration. Moreover, Cai is director of the CPC Central Committee General Office 中央委员会办公厅主任, which controls all party-related decision-making and implementation. The General Office is the nerve centre of the entire party apparatus. It is the first time that a PBSC member has held this critical position. Cai is also responsible for the well-being and safety of Xi in his capacity as head of the Party General Secretary’s Office 国家主席办公厅.

There is speculation that a subtle power struggle has erupted between Cai Qi’s faction of national security apparatchiks and Premier Li Qiang’s 李強 State Council bureaucrats. Li Qiang is ranked No. 2 in the PBSC pecking order, just behind Xi. Yet his performance as premier – in theory the person responsible for the whole economy – since assuming the post this year has been low-profile and lacklustre, especially compared to his predecessor Li Keqiang 李克强, who was deemed a committed market-oriented reformer. Li Qiang has said publicly that the role of the State Council is to implement decisions made by top party committees – for example, the Central Commission on Finance and Economics – headed by Xi. Under Xi’s instruction that party organs should take the lead in policy formulation, the status and power of the State Council has been truncated.

Li Qiang (a former governor of Zhejiang Province, where Xi worked from 2002 to 2007) represents the Zhejiang subfaction of Xi Jinping’s faction. Cai Qi and He Lifeng represent the Fujian subfaction (where Xi worked from 1985 to 2002). Appointments since the 20th Party Congress have demonstrated that the senior cadres of the Fujian subfaction have outnumbered those of the Zhejiang subfaction.

Policy-making mismanagement

Xi’s failures in managing high-level personnel and his apparent lack of success in putting together a team that can reverse the economic slowdown has been responsible for a series of ill-conceived policies, discussed below.

Putting national security concerns above attracting foreign direct investment

The weeks after the Biden–Xi summit in San Francisco witnessed more multinational corporations pulling out of the PRC. The purported ‘smile diplomacy’ pursued by the Xi delegation in the United States produced very little in terms of reviving the domestic economy. Foreign investors and businesses are aware that the Ministry of State Security has stepped up its harassment of foreign firms, particularly those handling due diligence, accounting and consultancy. It has launched a propaganda campaign urging Chinese citizens to report foreign spies, liberally defined, and even issued an instruction warning businesspeople (domestic and foreign) ‘not to short’ the stock market. Several senior staff (including Americans) working for the China-based offices of multinationals have not been allowed to leave the country. Despite repeated requests from the CPC administration, Washington has yet to relax efforts to cut China off from US investment (including wealth funds) and from the global supply chain in high-tech areas such as IT, AI and pharmaceuticals. According to JPMorgan, in the second quarter of 2023, foreign direct investment fell to its lowest level in twenty-six years. It is likely that the pace of foreign direct investment leaving China will further accelerate. Yet even when Beijing talks about luring back multinationals, it has announced no favourable policies such as allowing them a bigger share of the market or giving them more flexibility in moving foreign exchange in and out of China. The Free Trade Zones advertised by the Chinese government in the past few years have failed to attract significant investment from multinationals, meaning that they are not attractive to potential investors in China. Initial public offerings (IPOs) of Chinese firms in both China and Hong Kong have also shrunk in both numbers and size of capital.

Too little too late in saving the real estate sector

It was only in mid-November 2023 that the State Council announced one trillion yuan of low-cost financing to help a select list of struggling real estate firms to restructure their loans and ensure that they complete unfinished apartments already sold to customers. This is a case of too little too late. After Evergrande, the biggest developer in the PRC, announced its insolvency in late 2021, other property firms, including HK-based Country Garden and China Vanke, followed. Yet the party-state apparatus has done nothing to stop these overleveraged firms from continuing to draw huge loans from friendly state bankers and to raise bonds (for which they cannot even make the minimum interest payments). It is understood that these firms pay hefty bribes to bankers and bond issuers for their services. Anti-graft operations have yet to start in earnest.

In September 2023, in response to massive complaints from home buyers – including millions who faced difficulty paying mortgages for unfinished apartments – Beijing dangled the possibility of the state rolling out ‘subsidised housing’ 保障房. Under the so-called Singapore model, by which the government provides good-quality subsidised flats to residents, state-backed housing would play a big role in China’s housing market. This would put to an end the monopolisation of the housing market by developers of expensive ‘commodity flats’ 商品房. At this stage, details are lacking. State Council Document 14 on the this subject simply states that there will be a return to ‘subsidised’ housing. At time of writing there have been no detailed announcements as to who will be entitled to subsidised housing.

Widening social economic unrest

After the official statistics showed that youth unemployment had risen to 21 percent in the first quarter of 2023, the State Statistical Bureau stopped releasing new figures on this sensitive issue. Findings by a Peking University professor claim that as many as 46.5 percent of young people are jobless.

A related point is the shrinking population. Government subsidies amounting to RMB 3,000 or more for urban couples to have a child are not working because raising a child in a city has become prohibitively expensive even for middle-class families – not to mention labourers who are struggling to make ends meet. As with the sudden ban on tutoring schools and restrictions on the hours students can spend on online gaming, it is a case of poor planning and untimely execution of policies. These decisions have not been popular and have hurt business confidence.

As a result of unhappiness with such policies and the economic downturn, protests have increased in dozens of cities and towns. Protestors including laid-off workers, labourers who fail to receive their pay cheque in time, distressed mortgage payers, and depositors who could not withdraw money from accounts with local government banks.

Meanwhile local administrations have piled up debt amounting to 92 trillion. Local-level government bankruptcies means that not only civil servants and teachers but also police and people’s armed police (PAP) members cannot get their salaries. A big chink in the armour of China’s surveillance and police apparatus has appeared. In response, various levels of party cells have asked state-owned enterprises (SOEs) to revive their own security teams, which were active during the Mao years. Called renwubu 人武部 (people’s militia departments), these security teams are paid for by SOEs but also keep an eye on law and order in their areas.

The increasing police-state atmosphere has particularly alarmed members of the 400 million members of China’s middle classes. The increasingly stringent control over the movement of foreign currency in and out of the country has made it difficult for Chinese who want to emigrate to Western countries. But this has not stopped frustrated Chinese from taking dangerous and often illegal paths to leave China. The number of ‘refugees’ or ‘escapees’ from China trying to reach the United States by traversing dangerous terrain in South and Central America testifies to the loss of faith among many Chinese in the communist system.

As of this writing, the Xi leadership has still not convened the much-anticipated Third Plenum of the 20th Central Committee. Usually, third plenums, which discuss economic and sociopolitical policies and reforms, are called in October or November. Xi’s failure to assemble and keep a capable leadership team, or to introduce timely measures to address the nation’s multifaceted problems, have cast on doubt Xi’s ability to remain a ‘leader for life’ – and even, perhaps, the Party’s own ‘mandate of heaven’.

The post The Mystery of Xi’s Disappearing Officials appeared first on The China Story.