🌍 Xi purges a survivor

Your Insider’s briefing:
— Xi purges a survivor
— Another town under siege
— Finns love puppies

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1.9 million hectares

That’s a conservative estimate for how much land Indonesian wildfires have burned in the first nine months of the year, sending haze across the region.

If Beijing's political-economy were a prime-time drama, the showrunner (let’s call him Xi Jinping?) just executed the ultimate plot-twist, waiting until right in the middle of a heart-warming economic comeback montage to then abruptly kill off one of the show's longest-surviving main characters.

First, the economy:

China's Q3 growth just accelerated to 4.5% (yoy), up from 4.3% in Q2. That puts the Party's hallowed 5% target within reach, but how? Local consumers still seem a tad gloomy, with retail sales crawling at 1% while property investment (the store of most household wealth) plunged another 20% the first nine months.

So what's driving the growth? That $194B in ultra-long special sovereign bonds Beijing poured into state priorities has partly fuelled a 14.3% jump in high-tech manufacturing, helping explain China's 5.5% surge in industrial output.

But... if consumers are so cautious, who's buying all this stuff? You are. High-tech and industrial goods made up 64% of all China's record new exports in Q3.

The takeaway? Xi is still trying to stabilise his economy the way he knows best: using state cash to replace missing confidence at home with subsidised demand abroad.

So then if the GDP numbers look stable, what's with all the...

Second, political intrigue:

Authorities just confirmed that 74-year-old Huang Qifan, one of the ruling Party's most durable political survivors, is now under investigation for "serious violations of discipline and law", which is Marxist-Leninist for corruption and disloyalty.

Why such a big deal? As the long-time mayor of Chongqing (pop 32 million), he somehow survived the purges of not one but two disgraced bosses (including long-time rival to President Xi himself, Bo Xilai), navigating decades of factional warfare to end up a high-profile economic commentator today.

So then why suddenly fall now? The three main theories are...

Theory A — The receipts caught up: given the scale of deals Huang oversaw as mayor, it's entirely possible the dude is corrupt, and Xi's anticorruption hounds are only now simply asking about all the "irregularities". Or...

Theory B — He talked too loud: instead of retiring to a leafy VIP compound, Huang actually grabbed the mic, i) warning that China's real estate sector had "kidnapped" the broader economy, ii) urging Beijing to prioritise household consumption over factory subsidies, and even iii) subtly defending big tech during Xi's crackdown. So perhaps President Xi simply had enough. And/or...

Theory C — Pre-plenum discipline: with Xi's high-stakes Fifth Plenum kicking off next week to strengthen Party governance, maybe dropping the hammer on arguably the Party's most famous "untouchable" sends a stark warning to the 300 other top cadres assembling in Beijing: no factions, no unaligned elders, no back-channels.

The Party's opacity means we'll probably never know, but our bet is it's a mix of all three, with A providing the pretext, B the actual offence, and C shaping the timing.

While these two tales of economic pragmatism and political purging might look like they’re rowing in opposing directions, President Xi could well see them as two sides of the same coin.

First, think of the…

While these two tales of economic pragmatism and political purging might look like they’re rowing in opposing directions, President Xi will see them as two sides of the same coin.

First, think of the economy: facing an historic real estate drag and cautious domestic shoppers, the Party’s economic strategists know they can’t engineer internal demand overnight. In fact, Xi himself has long opposed two of the most obvious ways to get there (direct household transfers and a stronger safety net), on the grounds of avoiding idleness, but surely also the power dynamics: when you shift cash from loyal SOEs to free-thinking households, you also chip away at central control.

But while running a state-subsidized, export-heavy growth machine might preserve the macro numbers to hit that sweet sweet 5% target, it also shifts your own imbalances and associated political risks out into a world you can’t control: ~half the world has now opened trade-defence investigations into China’s exports, and we’re not just talking the usual Western suspects. Even China’s own vaunted Global South partners like Brazil, Malaysia, South Africa and Turkey are tentatively pulling up their own drawbridges rather than watch their own factories hollow out.

Of course, as the world’s top customer for ~half the world’s countries, it’s got immense leverage to pressure individual capitals into keeping their doors open and acting as China’s continued pressure valve. But as these trade probes multiply faster than Beijing can manage them, relying on foreign markets to correct internal imbalances will look increasingly (even if gradually) like a very risky bet.

So second, maybe that’s where the political purge comes in: if your external environment looks darker and your internal model is running on state-injected fumes, a single-party system like China’s probably sees even less room in the cockpit for anything approaching policy dissent. Purging a respected economic pragmatist like Huang sends a pretty clear signal ahead of some key leadership meetings: we’re not taking feedback at this time.

Or to put it all another way, maybe the common thread between these economic and political updates is that, together, they’re yet another reminder that President Xi will still do what it takes to maximise stability and control.

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Everyone loves puppies. That’s a simple truth, but it’s one the Finns have now astutely applied to their entertainment offering.

Anyone tuning into broadcaster Yle’s channels now gets a 24/7 livestream of Hilkka, a Lagotto Romagnolo, and her six adorable puppies. Born on 10 October, the pups aren’t yet doing much beyond eating and sleeping, and if that sounds halfway between adorable and boring, that’s exactly the point: it’s a form of the ‘slow TV’ genre pioneered in neighbouring Norway with a mix of real subjects and slow pacing.

So anyways, if you’re tired of doomscrolling live election coverage, may we recommend tuning in for the puppies’ next weigh-in? They’re approaching the kilo!

Yesterday’s poll: On average, world leaders travel...

🛋️ Too little (10%)
🚀 Too much (53%)
👌 About right (37%)

Your two cents:

PS — shout-out to ‘JS’ and ‘SB’ in the group-chat for today’s Nothing to Xi here and Purge ‘n splurge headings 😄. Become an Insider and join the chat today!