“Qin Peng’s Observation: US Congress Passes 28 Anti-Communist Bills, Triple Impact”

Audience friends, hello, and welcome to “Qin Peng Observation.”

Today’s focus: Top executives in the Chinese financial sector resigning in quick succession, a prelude to financial collapse? Passports being confiscated, leaving nearly ten thousand investment bankers feeling threatened.

The rivalry between the US and China intensifies as the US Congress passes 28 anti-Communist bills during “China Week”. What impact will this have on China? While the Chinese Communist Party threatens retaliation, Ambassador Xie Feng in the US reveals the true “red lines” of the CCP.

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The financial sector in China is in turmoil. From early August to last weekend, 1100 executive resignation reports appeared in the A-share market in just 27 days, with the chairman of China People’s Insurance, Wang Yanke, submitting his resignation, totaling a market value of over 400 billion yuan.

What’s more noteworthy is that a large number of executives from financial institutions also resigned. For example, on August 25th, China Bank announced the resignation of Liu Jin for personal reasons as Vice Chairman and China Bank President; on August 18th, Zhejiang Commercial Bank announced Zhang Rongsen’s resignation as Executive Director and President due to personal reasons; on August 17th, Wang Feng resigned as Vice President of Jiangyin Bank due to work adjustments, and earlier on August 1st, Changshu Bank announced Wu Tiejun’s resignation as Vice President due to work adjustments.

In addition, a group of large state-owned enterprises announced the resignations of their chairmen, including China Railway Construction, China Taibao, Taibao Life Insurance, China National Pharmaceutical Group, and China National Gold Group.

The disclosed resignation reports are just the tip of the iceberg, and the actual situation is more serious than this. Former officials within the CCP system, Du Wen, revealed that currently, numerous high-ranking financial executives within the CCP collectively resigned, with a vast number, but the vast majority of resignation applications have not been approved due to the central government’s consideration of financial stability.

Why are they resigning? Unprecedented anti-corruption efforts in the financial industry by the CCP is a major reason. According to incomplete statistics, at least 67 senior financial executives in the industry have been investigated this year, with 45 facing disciplinary actions. The six big state-owned banks are the main battleground for anti-corruption, with high-ranking executives from Sichuan Bank, China Merchants Bank, Guizhou Bank, Jiangxi Bank, GF Bank, and Chongqing Rural Commercial Bank being under scrutiny.

Securities firms are also under investigation. As of mid-August, 75 sponsor representatives from 24 brokerage firms have been penalized with 200 penalty tickets issued to the brokerage firms. Insiders say they are undergoing “four internal inspections”: checking stock trading accounts, bank statements, WeChat messages, and WeChat reports. Some brokerage firms are even retroactively checking employees’ trading accounts for the past three years.

Bloomberg reported that since the deputy general manager of Haitong Securities, Jiang Chengjun, was apprehended overseas and deported in August, at least three top investment bankers from different brokerage firms have been demanded to surrender their passports and even detained by the CCP government, causing unease and fear in the Chinese investment banking circle. As of early September, there are over 8,700 investment bankers working in 147 brokerage firms in China, many of whom are involved in activities such as IPOs and subsequent stock underwriting.

As is well known, in China, financing and loans, including enterprise listings, involve a substantial amount of power and money transactions, as well as insider trading. A friend and senior figure in the Chinese financial industry told me that Jiang Chengjun of Haitong Securities was also a scapegoat for others because it’s often high-ranking CCP officials, provincial party secretaries, and ministers who first approve, with the financial elite then carrying out their directives. So, who wouldn’t be afraid?

Behind the mass resignations of executives lies another reason: economic deterioration beyond repair, making the financial industry a high-risk sector. As the saying goes, “the duck discerns the warmth of the spring river first,” economic signals mostly materialize in reports and data that are first reflected in the financial industry. Therefore, executives face a dilemma:

First, facing massive local government debt crises, real estate bubbles, shadow banking, and liquidity crises, someone has to take responsibility if things go wrong. Du Wen believes that resignations by these industry elites are proactive moves to shed responsibility before a collapse and avoid becoming scapegoats.

The second challenge is that, in order to rescue the crisis, the CCP will compel banks and other financial institutions to shoulder burdens, such as increasing loans to real estate companies or selling local government debts to individuals or corporations. At this point, as a financial industry executive, do you act or not? Not doing might offend superiors or interest groups, but doing will increase the institution’s substantial risk and might eventually lead to someone being made a scapegoat.

Du Wen also believes, “This is not just a resignation but more like a game of ‘shirking responsibility’—before the crisis erupts, they choose to pass the buck to the next in line, while they exit unscathed. Just think, when even ‘their own people’ are eager to escape, it indicates that internal power struggles may already be out of control, and the chain of interests is collapsing. They are all fleeing, indicating that a complete collapse of the financial system in China is only a matter of time. Undoubtedly, this is the beginning of an irreversible systemic financial crisis. China’s economic system is heading towards a deeper abyss.”

How dangerous is the financial industry now? As I mentioned in a previous episode, while large banks were the safest in the past, with the deepening economic and financial crises, wealth management, rural and urban cooperative banks, commercial banks, are all facing imminent risks as well.

So, everyone, let’s prepare ourselves and listen for more thunder.

Let’s now discuss the US-China relationship. The conflicts and confrontations between the two sides are escalating. Not only is China a major topic in the US elections, with the US House of Representatives passing 28 anti-CCP bills during “China Week” from September 9th to 13th, aiming to counteract China’s actions directly affecting the US. If both parties support these bills, they stand a better chance of being approved in the Senate.

These bills seem to have hit a nerve in the CCP, leading to continuous protests. For instance, the Chinese Foreign Ministry’s office in Hong Kong warned that if “daring to close Hong Kong’s trade office in the US, it will encounter strong countermeasures from China,” and the Chinese Embassy in the US expressed strong dissatisfaction and firm opposition, lodging a formal protest with the US.

The CCP is furious about the “Protection of American Innovation and Economic Security from CCP Violation Act of 2024.” This plan is similar to the “China Initiative” during the Trump era aimed at combating Chinese espionage. The law requires the US Department of Justice to establish a specialized agency to curb espionage activities against US intellectual property and academic institutions and formulate enforcement strategies against laboratories and university researchers.

Both the CCP and their extensive propaganda believe that these laws will lead the US back to McCarthyism. However, more critics argue that the US is suppressing China’s development.

So, how should we view this?

First of all, the confrontation is initiated by the CCP, and the US is forced to retaliate. The CCP poses a threat to world peace and security, being the mastermind behind wars initiated by Russia and Hamas. Recently, both the US and Europe criticized the CCP for providing “very substantial” assistance to Russia’s war machine. Ukrainian President Zelenskyy bluntly stated that the so-called peace agreement proposed by China and Brazil is destructive. Numerous reports have warned against the CCP’s surveillance of Chinese and foreign populations and DNA collection, highlighting their danger. Hong Kong’s imposition of the “23 articles” law and the National Security Law continued to suppress dissent, turning Hong Kong into a city similar to the mainland. Therefore, why should the US grant diplomatic status and a series of privileges to an ordinary mainland city?

Secondly, what results will these laws bring about? I believe they will have three-fold impacts. Taking the “Biological Security Act” as an example:

Firstly, it will cause corresponding industry chains to shift to the US, reducing uncontrollable offshore outsourcing.

Secondly, the profitability of sanctioned Chinese enterprises will be directly weakened, putting pressure on the CCP’s industry policies to lack commercial vitality and operating efficiency.

Thirdly, US partners will benefit from these actions.

In the future, such laws will be copied by other countries, and the domino effect will lead to reduced investments or cooperation with China.

So how will the CCP retaliate?

On one hand, for certain industries and enterprises, the CCP will retaliate or take targeted measures. For instance, on September 12th, Bloomberg reported that the Chinese authorities instructed electric vehicle manufacturers to ensure critical technologies remain in the country, avoiding investments in countries such as India and Turkey. This implies that key components for cars will be produced domestically in China and then assembled in the target markets.

However, on the other hand, as long as the sanctions do not fundamentally undermine CCP rule, the CCP does not actually care. On September 12th, Chinese Ambassador Xie Feng, during a virtual speech at a meeting of the Asia Society in New York, revealed the true bottom line of the CCP.

On the surface, his words are robust, stating that “pressure, sanctions, isolation, containment, and blockade are ineffective” and “on the contrary, they bring troubles caused by themselves, requiring additional work to offset unwanted results.”

Xie Feng outlined four “red lines” in the US-China relationship: Taiwan, democracy and human rights, the system of roads, and the right to development. He deemed the Taiwan issue the most critical in US-China relations and one that must not be crossed; the concepts of democracy and human rights are misconceptions, and negotiations regarding China’s political system and development path are non-negotiable.

However, upon further contemplation, one will realize that Xie Feng’s words conceal a significant amount of the CCP’s personal agenda: the essence of the Taiwan issue is for the CCP to annex Taiwan and dominate the world; as for democratic rights and human rights, they aren’t about protecting the Chinese people’s democracy and rights, quite the contrary, it’s about safeguarding the CCP’s smashing of the people’s freedoms; the so-called system of roads is the CCP’s insistence on its dictatorial tyranny; and the so-called development rights, observe the heavily suppressed private enterprises in China; the real agenda is about protecting the development rights of the CCP interest group in Zhongnanhai…

Therefore, the South China Morning Post directly summed it up: Xie Feng’s strong message is actually: don’t provoke China, don’t seek regime change.

In other words, what the CCP truly cares about is the rule of the Chinese Communist Party. As for national interests and state interests, they are nothing but deceitful tales.

Consequently, Zhongnanhai will only intensify domestic crises in China and continue to deteriorate international relations. It is their unrepentant choice, as well as their inevitable downfall.

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