China’s Red October

1
Image Credit: Dave Simonds

“October turned my maple’s leaves to gold; The most are gone now; here and there one lingers; Soon these will slip from out the twig’s weak hold, Like coins between a dying miser’s fingers”.

The above words of noted American writer Thomas Bailey Aldrich perhaps represent well the thoughts reverberating in Chairman Xi’s mind as China prepares for its week-long festival to commemorate 70 years of CCP rule on October 1, 2019.  It should have been a time of great celebration for Chairman Xi after he crowned himself Chairman for life but a series of events spanning over the last couple of years have proved a dampener for which China is personally responsible.

In our 2016 book, The New Global Order we analysed the Chinese mindset and thought process extensively. This was crucial to gaining insight into what makes China tick. For most of the post-Cold War generation, the enemy has been Islamic terrorism, Russia, North Korea, Iran, Pakistan and Turkey. While their role is not up for debate; this obsession along with US pandering to China due to the corporate obsession with bottom lines has enabled it a free pass for a long time. While we are glad that the world at large has started taking notice and calling out Chinese hypocrisy and abuse, the truth is these acts have been taking place since CCP took over the People’s Republic.

Let’s discuss the multiple issues that are currently plaguing CCP’s control over China. President Trump is going all out in calling out China’s abuse of WTO to enhance its trade surplus and currency manipulation while failing to carry out necessary reforms of private land ownership; opening of the economy, a floating currency, an open banking system and stock market as committed to under the same auspices. When Deng Xiaoping took over China and proposed reforms, he adopted a stance contrary to Chairman Mao’s hardliner approach. The western world embraced China, welcomed it to WTO and thought it had turned over a new leaf and subsequently moved the majority of their manufacturing to China. In return, China demanded technology sharing; what it could not gain lawfully; it stole or borrowed.

Chairman Xi has been promising to open the economy but in reality, he is reversing most of the pseudo reforms that were carried out. CCP occupies positions on boards of all companies operating in China including foreign companies. It guides them with expansion, employment and agenda under strict control and monitoring. For the western world, the going was good till China delivered exponential returns. Sadly, the law of averages and over production caught up. The global recession and President Trump’s trade war forcing US companies to move production away from China has left CCP with excess inventory, increasing unemployment, higher subsidies and slowing growth. What’s worse, is this problem is not cyclical but permanent for the short to medium term at the minimum with President Trump declaring he’s not going to pursue a deal with China by 2020 as part of his re-election plank.

The New Global Order Book

China’s tech giant Huawei is facing unprecedented global flak for espionage and data security concerns. It is estimated to lose $30 billion in revenue. Australia, Japan, New Zealand, USA have banned Huawei from participating in their 5G infrastructure. UK is considering a re-look; India is yet to take a decision but it does not seem promising. Further, Huawei is not just a 5G infrastructure provider, it is also the world’s second largest smartphone manufacturer after Samsung. President Trump has barred US tech companies from partnering with Huawei and it appears that the temporary retrieve granted to Microsoft, Google etc for Huawei will not be extended. This will effectively make Huawei phones that work on Android mere paperweights. Also, since the advantages of the Android ecosystem will disappear, how well people will respond to Harmony OS and what advantages it could offer remain to be seen but in the short to medium term, this is nothing short of a deathblow to Huawei. For CCP, this means a sharp attack on one of its crown jewels that served as its proxy in generating revenues, boosting employment, creating tech and surveillance dominance as well as extending its soft power.

This mess is also entirely of CCP’s own making. Huawei was leading the world in 5G infrastructure at brilliant prices. It had the potential to become the next Microsoft. But CCP’s obsession with control and paranoia meant it would never reveal itself as the real owner of Huawei. Its ownership structure is like a maize, most workers carried out programs with PLA, MSS but Huawei and CCP both insisted they were independent of each other even in the light of glaring evidence. As Huawei’s backdoors and rampant abuse of hardware to plant malware was discovered with other reports showing it helped Iran circumvent sanctions and resorted to espionage, further proof of CCP actions started unravelling.

Now we come to Taiwan and Hong Kong. CCP has consistently used censorship of the media and internet and education as propaganda to further nationalist sentiments in the country to justify its consolidation of power. It has created the image that only CCP can save China from stumbling again to justify its extreme practices. CCP has used jingoism to the time for this purpose. It has created a culture of zero tolerance for dissent, free speech and complete worship of communism with Xi’s characteristics as the only form of worship. Resultantly, in the last couple of years it has targeted Taiwan’s independence agenda aggressively even breaking off relations with countries that recognize Taiwan and forcing companies doing business in China with identifying Taiwan as a province of China. Things seemed relatively alright till this point. In March, this year with growth on the mainland slowing down and the Chinese people in Hong Kong who were used to freedom and democracy refusing to kowtow completely to Beijing in all manners, CCP did something that led to a tipping point. It proposed a controversial extradition bill that would permit citizens to not be tried by the Hong Kong justice system where the rule of law prevailed but the kangaroo courts of CCP on the mainland.

What followed was an organic mass movement and uprising that was absolutely unprecedented by the very peaceful and law-abiding Hong Kong citizens. The country has effectively been under siege with the world attention showing CCP’s dishonouring of its commitment of – One country, Two systems. As the protests gained momentum, Beijing backed triads based in Hong Kong were activated to attack the peaceful protesters, the police carried out brute actions. Tanks were seen on the roads from Shenzhen to Hong Kong while Carrie Lam called upon the protestors to back down to no avail in the face of such violence. Thousands were placed in detention centres while Beijing threatened violence but it was all the talk of a paper tiger. CCP threatened to invoke martial law but that talk was simply for domestic consumption as in reality, it pulled back the controversial bill. Carrie Lam still refuses to resign, CCP has no eligible candidate to replace her. Lam has now stated that no protestors will be held at the detention centre but refused to call for a probe in the violent use of police force. Despite all this, the protests continue.

Hong Kongers are aware that Beijing is simply bidding its time and hoping for things to cool down so they have refused to back off. Thus, while CCP will be celebrating 70 years of their rule in October, Hong Kong will be continuing to protest against the Sinicization of Hong Kong in all manners simultaneously. Hong Kong is one of the world’s global powerhouses. It is a major financial centre. The movement of big capital away from Hong Kong does not present an optimistic future for CCP. It is pertinent to note that Hong Kong dollar is pegged against the US dollar in real time unlike Yuan which is not a floating currency.

RMB, China’s onshore currency is the only currency issued by a major economy that does not float and is used by Bank of China to stimulate sentiments domestically. Since it is not floating, it means that Bank of China can assign virtually any rate it wants to for facilitating trade and investment within China. The onshore currency cannot be used for international transactions; those take place in its offshore Yuan called CNH which operates on a completely different set of demand and supply conditions. CNH is deliberately maintained strong to ensure high overseas purchasing power to create artificial shortages as and when necessary to boost global spending. This has significantly helped China maintain a global trade surplus simply because China is a manufacturing powerhouse under CCP. Now let us imagine for a minute that this position gets diluted because Chinese manufacturing hegemony gets weaker. As such, Bank of China cannot command CNH rates at will as creating an artificial shortage would become relatively difficult. This would automatically impact the level of forex and future soft power. In such a situation, the loss of Hong Kong as a financial centre or worse, a Hong Kong with a government that is not pro-CCP would be simply terrible. CCP has already bailed out and taken over 3 banks on the mainland in 2019. It knows there are many more in the pipeline. CCP is quite aware of the looming financial crisis and thus would do everything to prevent an election in Hong Kong that would bring independence loving parties to power. Finally, the handover of Hong Kong to China from UK marked a key moment in China’s avenging its Century of Humiliation. Thus, chaos in Hong Kong that undermines CCP rule when it is celebrating 70 years of power makes the emperors crown very thorny.

Now we come to Xinjiang. China’s imprisonment of Uighurs and Sinicization is being covered extensively by global media. Uighurs are the natives of China’s autonomous province Xinjiang which they consider East Turkestan that has been forcefully occupied by China. Uighurs are Muslims and in atheist CCP rule, religious practices are not permitted. Uighurs are being forced to cut their beards, eat pork, drink alcohol and locked up in detention centres called re-education camps that are a modern-day version of concentration labour camps. Most don’t make it out alive and those that do are scarred for life. Uighurs live under heavy surveillance and are denied most citizen rights which is a saying something as Chinese citizens effectively have no rights. A country has every right to protect its borders and sovereignty. Any use of violence by secessionists must be retaliated and for this, there is no disagreement. However, when law is not made available to people simply because they hail from a certain region regardless of their inclinations; this amounts to abuse. This is what CCP is guilty of in Xinjiang. Reports have emerged that CCP is also profiteering from concentration camps by harvesting the organs of dissidents. China runs a highly lucrative organ transplant business at cheap prices. The graphic nature of the reports elaborating how Uighurs are not even given general anaesthesia before their organs are harvested reveal a diabolical side of CCP which borders on evil. We can understand how the transplants in China are cheap and guaranteed. For those getting surprised, let us refresh your memory about CCP’s treatment of practitioners of Falun Gong. They met with the same fate, now it’s the Uighurs and gradually it will be all Chinese citizens that don’t share the Han origin of CCP. In simple terms, this is genocide and ethnic cleansing.

China under CCP has become the world’s second largest economy with an incredible success story. This makes China a very powerful country and with great power comes great responsibility. While it is true that fortune favours the brave, it is equally true that goodwill harnesses luck and when you repeatedly commit bad acts, at some point your luck runs out and your citadel starts crumbling like a pack of cards. Something similar happened to China last year. China has seen many famines such as 1916-27 during the Warlord Period, 27-49 during the Nationalist Period and of course the Great Chinese Famine from 1959-1961.

Pork is a part of China’s staple diet and Chinese consider pork consumption as a symbol of prosperity. CCP has built its rule on the premise of delivering harmony, prosperity and stability of a strong China to its people. Hence, pork and Chinese prosperity are linked. It is thus unsurprising that China is home to the largest pig population on the planet. However, last year African Swine Flu impacted over 25 % of its pig population and shrunk China’s pig herd to 200 million. CCP claims only a third of its population has been affected but reports that are emerging indicate it is as high as 50% making the figure irrecoverable in the short to medium term. China has been forced to slaughter millions of pigs as a result which has resulted in a loss of $140 billion. Pork prices domestically are through the roof with an increase of 46% and their shortage has also raised the prices of alternate meat such as beef, chicken, lamb exponentially. China is on a pork buying spree from other countries and is investing in large numbers of pig rearing centres via artificial insemination but will be unable to do anything about the resultant food inflation when domestic growth sentiments are already bearish.

China’s Vice-Premier Hu Chunhua has already announced that food inflation will be under extremely “severe pressure in the last quarter of 2019 and the first half of 2020”. Pork prices are expected to double next year and maintain their upward trajectory for the next couple of years. China has already dipped into pork reserves and is issuing pork rationing coupons to its citizens. Even though other daily essentials are available in abundance, pork rations remind Chinese citizens of Chairman Mao’s time when pork coupons were considered a luxury for celebrations. Thus, a shortage of pork in China takes on the psychological impact of a national or dire emergency for CCP. A shortage of abundance in times of celebration is definitely not good for CCP. While the other pork producers would be salivating at the prospect of profiteering, it is impossible to compensate for a 50% loss in production of a vital food item that is directly linked with citizens emotional and financial health and a time-honoured symbol of living the good life.

For countries with large populations, food security is tantamount to maintaining law and order. A real or perceived shortage is a dangerous tool in the hands of its enemies. CCP must pray that swine flu does not target other countries pigs for the sake of its own survival. CCP has censored conversation about the Great Chinese Famine under Chairman Mao under the Great Leap Forward when over 30 million Chinese citizens died and cannibalism was rampant. The book Tombstone written by Yang Jisheng details the tragedy of the famine in which he lost his father. The book banned in Mainland China explains the role of the cover up by CCP, their indifference and the impact on the citizens mentally, physically and emotionally. Similar to the situation today where CCP refuses to admit it has a problem, the book lists the head of food production stating there is a food production issue with the leadership replying “That’s right-deviationist thinking. You’re viewing the problem in an overly simplistic matter”. This is clear reflection of the moral and mental compass of CCP. Admitting to any failure might mean admitting that its systems are a failure and by extension, itself. CCP’s obsession with not repeating the Soviet plunder led it to allow cannibalism and the loss of millions of lives when it could have simply opened up the grain godowns. Chairman Mao simply said “to distribute resources evenly will only ruin the Great Leap Forward. When there is not enough to eat, people starve to death. It is better to let half the people die so that others can eat their fill”. Ruthlessness runs in the blood of CCP. Last time during the Great Famine, CCP let millions die to ensure its agenda. This time around, who will be the victims? A look at the treatment of Uighurs and other ethnic minorities could provide a clue for the same. Either way, the answer is very horrifying to comprehend.

The above is a brief summary of the situation Chairman Xi finds himself and CCP in as they celebrate 70 years of rule. The confidence in their rule is visible when they employ US satellites to carry out domestic surveillance on their citizens to control chaos, dissent and any uprising. China’s domestic security budget is at an all time high. Its debt to GDP ratio is insane. Its aggressions of ownership in South China Sea in contravention of all globally established norms and law have been answered by US, British and French warships sailing in the Taiwan strait to show the accepted norms of freedom of navigation.

Further, for the celebrations, CCP has enforced strict rules. The Parade which is supposed to be a show of strength displaying China’s nuclear arsenal and aimed at motivating and mobilizing CCP as well as ensuring the Chinese youth’s commitment to CCP has seen all foreigners asked to vacate Beijing. A strong security crackdown with sniffer dogs, police and military personnel have become omnipresent as have propaganda posters of Chairman Xi hailing his vision of the Chinese Dream. There is a complete ban on flying kites, drones, pigeons and balloons. Officials have been barred from consuming alcohol. The local residents are being forced to live under curfews during practice and to ensure no dissent or chaotic activities take place. People are not allowed to leave their homes after 5pm and have to keep their curtains closed. The officials and citizens marching in practice have been given adult diapers to wear to prevent time waste in bathroom breaks.

The above seems exponential even by CCP’s authoritarian standards. What it tells you is a story about CCP’s obsession with power and control at the cost of everything and everyone. It is no different than a mafia state with the policy of silver or bullet. Considering China is the world’s second largest economy, these human rights violations actually make it the most horrifying country on the planet as it is in the position of being able to make a difference and behave rationally but it chooses not to do so. This only means that this behaviour is normal and acceptable for CCP and a representation of socialism by Chinese characteristics. In the UNGA 2019 address, President Trump said – Communism and socialism are only about one thing- power for the ruling class and have claimed the lives of 100 million people. CCP is clearly only interested in maintaining its hold at the cost of the Chinese people and is nothing more than a party’s endless appetite and ego for power and should be called out for exactly what it is. The citizens of China deserve better.

Notes:

  • 2019 Is a Sensitive Year for China. Xi Is Nervous https://www.nytimes.com/2019/02/25/world/asia/china-xi-warnings.html
  • China plans triumphant 70th anniversary despite headwinds https://timesofindia.indiatimes.com/world/china/china-plans-triumphant-70th-anniversary-despite-headwinds/articleshow/71286816.cms
  • Xi to Deliver Speech as Pressure Builds at Home and Abroad https://www.bloomberg.com/news/articles/2019-08-29/xi-to-deliver-speech-as-pressure-builds-at-home-and-abroad
  • China Fears A Soviet-Style Collapse in Hong Kong https://nationalinterest.org/feature/china-fears-soviet-style-collapse-hong-kong-65341
  • Hong Kong May Topple Communism https://www.wsj.com/articles/hong-kong-may-topple-communism-11569453043?reflink=share_mobilewebshare
  • China’s economy faces a ‘triple threat’ – and one economist says the trade war is only part of the story https://www.businessinsider.in/chinas-economy-faces-a-triple-threat-and-one-economist-says-the-trade-war-is-only-part-of-the-story/articleshow/71207854.cms
  • Donald Trump’s ready to escalate US trade war if deal not agreed soon, says top White House adviser Michael Pillsbury https://amp.scmp.com/economy/china-economy/article/3028164/donald-trumps-adviser-china-michael-pillsbury-says-president?utm_term=Autofeed&utm_medium=Social&utm_content=article&utm_source=Twitter&__twitter_impression=true
  • U.S. Sanctions Chinese Firms for Allegedly Shipping Iranian Oil https://www.wsj.com/articles/u-s-sanctions-chinese-firms-for-allegedly-shipping-iranian-oil-11569424569?redirect=amp#click=https://t.co/YIEdA2Smgp
  • US Sanctions Chinese Companies for Iran Oil Imports: US Sec of State Mike Pompeo https://www.news18.com/amp/news/world/us-sanctions-chinese-companies-for-iran-oil-imports-us-sec-of-state-mike-pompeo-2322655.html
  • China Factory Deflation Deepens Signaling Worsening Economic Slowdown https://www.bloomberg.com/amp/news/articles/2019-09-10/china-factory-deflation-deepens-consumer-price-gains-stabilize?__twitter_impression=true
  • China to become more selective in supporting distressed banks, say Moody’s and Fitch https://amp.scmp.com/business/banking-finance/article/3026505/china-become-more-selective-supporting-distressed-banks?__twitter_impression=true
  • Chinese scientists develop handheld sonic weapon for crowd control https://www.scmp.com/news/china/science/article/3028071/chinese-scientists-develop-handheld-sonic-weapon-crowd-control
  • What Holds China Together? https://www.nybooks.com/articles/2019/09/26/what-holds-china-together/
  • Xi’s Leading China Toward Stagnation https://www.bloomberg.com/opinion/articles/2019-01-13/xi-s-leading-china-s-economy-into-the-middle-income-trap
  • China’s Debt Ratio Is Growing as Its Economy Loses Steam https://www.bloomberg.com/news/articles/2019-07-16/china-s-debt-growth-keeps-marching-on-as-economy-loses-pace
  • Steve Bannon Declares War on China https://www.theamericanconservative.com/articles/steve-bannon-declares-war-on-china/
  • US-China trade war inactivity could lead to the ‘worst recession in recent Chinese history’, says scholar https://www.scmp.com/economy/china-economy/article/3004143/us-china-trade-war-inactivity-could-lead-worst-recession
  • Closing My Curtains for Xi Jinping and His Grand Parade https://www.nytimes.com/2019/09/23/world/asia/china-xi-jinping-communist-party-70th-anniversary.html
  • A Crackdown on Islam Is Spreading Across China https://www.nytimes.com/2019/09/21/world/asia/china-islam-crackdown.html
  • China’s fury: US Senate pass bill to free imprisoned Uyghur minority and impose sanctions https://www.express.co.uk/news/world/1180604/china-news-latest-us-senate-uyghur-camps-imprisoned-xi-jinping-chen-quanguo-marco-rubio
  • The story of China’s great corporate sell-off https://www.ft.com/content/eaa59fea-da01-11e9-8f9b-77216ebe1f17?segmentid=acee4131-99c2-09d3-a635-873e61754ec6
  • End of road for China-Pakistan Economic Corridor? CPEC projects come to a ‘grinding halt’, claims report https://www.timesnownews.com/international/article/end-of-road-for-china-pakistan-economic-corridor-cpec-projects-come-to-a-grinding-halt-claims-report/491480
  • China to impose ‘social credit’ system on foreign companies https://www.ft.com/content/726905b6-c8dc-11e9-a1f4-3669401ba76f?segmentid=acee4131-99c2-09d3-a635-873e61754ec6
  • Trump administration designates China as currency manipulator https://amp.axios.com/treasury-china-currency-manipulator-f96ff077-2beb-4ec0-b3aa-4276535b0246.html?__twitter_impression=true
  • China using U.S.-made satellites for internal security, WSJ reports https://www.japantimes.co.jp/news/2019/04/24/asia-pacific/china-using-u-s-made-satellites-internal-security-wsj-report/#.XY23fUYzbIW
  • China is harvesting thousands of human organs from its Uighur Muslim minority, UN human rights body hears https://www.businessinsider.in/China-is-harvesting-thousands-of-human-organs-from-its-Uighur-Muslim-minority-UN-human-rights-body-hears/articleshow/71294997.cms
  • China’s consumer price index remains flat despite almost 50 per cent spike in cost of pork https://amp.scmp.com/economy/china-economy/article/3026454/chinas-producer-prices-pushed-further-deflation-weak-demand?__twitter_impression=true
  • Will pork imports from Denmark and Brazil save China’s bacon after African swine fever hits supplies? https://www.scmp.com/news/china/diplomacy/article/3026574/will-pork-imports-denmark-and-brazil-save-chinas-bacon-after
  • Deadly Pig Disease Has Cost China More Than $140 Billion: Professor https://www.caixinglobal.com/2019-09-25/deadly-pig-disease-has-cost-china-more-than-140-billion-professor-101466143.html
  • Deadly Virus Has Slashed China’s Pig Herd by Half, Rabobank Says https://www.bloomberg.com/news/articles/2019-09-27/deadly-virus-has-slashed-china-s-pig-herd-by-half-rabobank-says
  • China’s big pig problem https://world.wng.org/2019/09/china_s_big_pig_problem
  • Why soaring pork prices are a touchy problem for China’s leaders https://www.scmp.com/week-asia/opinion/article/3027205/why-soaring-pork-prices-are-touchy-problem-chinas-leaders
  • The Great Chinese Famine https://alphahistory.com/chineserevolution/great-chinese-famine/
  • China’s Great Famine: the true story https://www.theguardian.com/world/2013/jan/01/china-great-famine-book-tombstone
  • The Great Sparrow Campaign was the start of the greatest mass starvation in history https://www.mnn.com/earth-matters/animals/stories/the-great-sparrow-campaign-was-the-start-of-the-greatest-mass

1 COMMENT

Leave a Reply