Armed mutiny can also happen in China. Plus the chip war heats up & Hong Kong issues cash bounties for democracy activists -- China Boss News 7.14.23
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What happened.
China Boss left town, and the world stopped for a few, suspense-filled days while we watched a large, Russian mercenary outfit threaten to march on Moscow.
After seizing Rostov-on-Don and vowing to overthrow the country's military command, the Wagner Group's chief warlord cut a deal and abandoned course, fleeing, early reports said, to neighboring Belarus. But the ordeal made Russian leader Vladimir Putin’s hold on the Kremlin appear weakened.
Beijing’s response was to describe Yevgeny Prigozhin's mutiny as Russia's "internal affair," as it praised Putin’s leadership and tried to downplay any potential impact on its Strategic Partnership with Moscow. Chinese state media followed with a report that Andrei Rudenko, Moscow's deputy foreign minister, paid a visit to Beijing, but did not indicate whether the meeting was pre-scheduled or an attempt to calm fears.
Then, curiously, the South China Morning Post - the oldest English-language newspaper still printing in Hong Kong, which continues to do some fine work, despite the Chinese Communist Party’s creeping censorship and draconian national security law, released a report, the only one of its kind - as far as China Boss knows - on China's confident "military grip."
It cited a People’s Liberation Army (PLA) newspaper article "published the day after Wagner forces ended their advance" that "prais[ed] the political commissar system" that promotes party loyalty and noted that China had just taken “the unusual step of promoting two political commissars to full generals.”
A shortage of similar reports about other “confident” militaries scurrying to reinforce allegiance within their armed ranks got China Boss thinking: Could an armed mutiny happen under Xi’s rule?
Why it matters.
If history rhymes . . .
Setting aside any talk of PLA divisions and vulnerabilities that Xi Jinping tried to overcome even before he ascended to power in 2012, China’s own and relatively recent history is replete with bouts of warlordism.
According to Encyclopedia Britanica, “[w]arlords ruled various parts of the country following the death of Yuan Shikai (1859–1916), who had served as the first president of the Republic of China from 1912 to 1916.” Up-and-coming rebels of the era “achieved power by backing either of various provincial military interests or foreign powers, most notably Japan.” (Emphasis added.)
Warlords who attached themselves to foreign powers "were the major enemies of China's national revolution,” but China’s communist forefathers got ahead of the threat.
They borrowed from the Soviet system of political commissars - attaching Chinese characteristics, of course - to combine disparate elements of the Red Army, the PLA’s forerunner. That system, implemented in 1929 during the early days of the Chinese Civil War, is still in place today - despite a decade of Xi Jinping’s military reforms and corruption purges.
Xi Jinping: Forever is a really long time
For a modern Chinese warlord-to-be, dictator Xi Jinping’s consistent overreach at home and abroad offers incredible opportunity. His Chairman-of-Everything approach may have helped Beijing re-centralize power, but it, undoubtedly, created a great deal of resentment among the elite who had all formed their own power bases through large networks of patrimonial alliances.
While true that Putin’s misplaced reliance on mercenaries, like the Wagner Group, which evolved to secure the state’s interests in developing countries, is far advanced of Beijing’s nascent pool of independent security contractors that work along the Belt-and-Road, Xi’s new silk route is too vast to be policed by any one state, as Wall Street Journal’s James T. Areddy writes.
James T. Areddy, WSJ:
As the Chinese enterprises expand, Beijing has encouraged a go-global push by commercial security firms such as Huaxin Zhongan Group, China Huawei Security Group and Frontier Services Group’s DeWe Security. …
The bulk of each company’s business appears to be domestic—guarding office buildings and running armored cars—but all advertise the expertise of People’s Liberation Army special-forces veterans and experience securing Belt and Road projects outside China.
Beijing's "drive to infuse political priorities into commercial enterprises" and "use of commercial enterprises to achieve aims, such as fishing boats that press territorial claims in regional waters and internet providers that assist in cyber espionage,” could, conceivably, be incubating new Wagner-type “thought-leaders.” Or maybe they’ll have more robust credentials sprouting from the China-Mexico fentanyl trafficking pipelines.
Xinjiang, the XPCC and the code of survival
But you don’t have to look outside China for remote possibilities of a entity whose structure, tactics and function are pseudo-military. One with unprecedented strength and autonomy already exists in the country today, thanks to Chairman Xi’s extreme assimilation policies.
In 1954, the Chinese Communist Party established the Xinjiang Production and Construction Corps (XPCC) out of “demobilized soldiers of competing Civil War (1927-1949) factions,” with a “mission . . . to ‘cultivate and guard border areas,’” say Laura Murphy, Nyrola Elimä and David Tobin of the Helena Kennedy Center for International Justice at UK’s Sheffield Hallam University.
But, under Xi Jinping, the XPCC’s undertakings have expanded dramatically, and experts now consider it “a state-run paramilitary corporate conglomerate” that “functions as a regional government, a paramilitary organization, a bureau of prisons, a media empire, an educational system, and one of the world’s largest state-run corporate enterprises.”
While arguably different from a band of mercenaries, XPCC is still a strange beast. It lords over life and death in China’s Western wilds, profits substantially from slave labor, and regularly sends soldiers abroad on counter-terrorist missions. Human rights investigators say “XPCC is a colonial institution” that "operates 14 military divisions and 185 regiments.” But, perhaps, its most impressive achievement is its “sprawling” for-profit, corporate conglomerate with holdings, some say, “in more than 800,000 companies and groups in 140 countries.”
Might strain, triggered by, say, an escalation with Taiwan, lead to a formidable rebellion - not from China’s ethnic minorities or global security consultants, mind you, but from one of Beijing’s very much enabled provincial leaders? Maybe it would take less for an international fugitive with the right alliances, it’s hard to say.
But China Boss isn’t here to argue definitively for one scenario or another. The point is that, in authoritarian systems, where “might is right,” no one - not even the supreme leaders themselves, flanked, as they are, by survivors and liars, can ever be certain in knowing precisely where power begins or ends. Through that lens, we might better contemplate Yevgeny Prigozhin’s failed mutiny and China’s “confidence.”
This Week’s China News
The Big Story in China Business
CHIP WAR HEATS UP: China’s Ministry of Commerce (MOFCOM) and the General Administration of Customs (GAC) announced new export restrictions on items related to gallium and germanium in order to "safeguard national security interests."
Tit-for-tat: The restrictions were issued almost immediately after the Dutch imposed new export controls of advanced semiconductor manufacturing equipment which would apply to ASML, the global leader in producing silicon through lithography.
Message received: China dominates the global gallium and germanium supplies. Gallium is used to make chipsets for computers, mobile phones and 5G base stations, while Germanium is key to producing fiber optics, semiconductors, and solar panels.
Companies “race” to secure supplies: Euractiv reported last week that some companies were "caught out" by Beijing's sudden decision to restrict the metals and were rushing to apply for China's new export licenses and diversify supply chains.
Stings a little: Constantine Karayannopoulos, CEO of Neo Performance, a recycler of gallium and manufacturer gallium trichloride, told Reuters that the announced restrictions "[were] probably the least consequential measure (that China could take), since it does not hurt as much as much as other options.”
"On the other hand, it could give very significant impetus to North American and European governments – along with producers and consumers of high-purity gallium outside of China – to consider more seriously what it takes to establish supply chain optionality,” he said.
In other China business news
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