Suspicious death of Hunan official sparks speculation

Welcome to Foreign policyChina Brief.

This week’s highlights: The suspicious death of Hunan Province Finance Chief causing speculation in China and beyond, a Japanese student is murdered in a knife attack in Shenzhen, and The central bank of China presents a new stimulus plan.

Welcome to Foreign policyChina Brief.

This week’s highlights: The suspicious death of Hunan Province Finance Chief causing speculation in China and beyond, a Japanese student is murdered in a knife attack in Shenzhen, and The central bank of China presents a new stimulus plan.

A mysterious death in Hunan

The death of Liu Wenjie, the finance chief of Hunan province, in a fall last week has set off a flurry of rumors in China. Liu’s body was found outside her apartment building in Changsha early Thursday morning. Police say she was murdered and have named two men — who also fell from the building — as suspects.

Liu, 58, had been head of Hunan’s finance department since 2022, but before that she spent a decade working on finance and statistics in the large southern Chinese province. The case has captured the public imagination, even as censors try to suppress rumors about it.

The official story is implausible, suggesting that Liu was thrown over the balcony of her apartment and that her attackers also fell and died accidentally. One of them is said to have tried to escape by sliding down a rope made of tied curtains. (Oddly, police also said the attackers used nylon rope as a tool.) In China, it is rare to enter homes, especially heavily guarded official residences like Liu’s.

People online have speculated that the two men were innocent bystanders or that they were involved but killed by police or accomplices. On Chinese and diaspora social media channels, others have claimed with little evidence that Liu was tied up or interrogated, that she personally guaranteed a debt of 60 million yuan, and that other provincial leaders rushed to the scene of her death.

So what’s really going on here? Unlike Russia, where defenestration is an occupational hazard for the politically connected, Chinese Communist Party (CCP) politics rarely involve direct assassinations. Instead, the power of the security services is often used against perceived enemies. Deaths in custody or under torture are often accidental, in part because there is a heavy emphasis on extracting confessions from targets.

Liu’s official obituary was sparse, but it made clear that she had a good reputation with the CCP. Whatever she was involved in, it likely involved organized crime and probably borrowed money. That could mean involvement with the Hong Kong and Macao triad syndicates, which do a lot of cross-border debt enforcement. But big cities like Changsha also have their own criminal syndicates.

As criminologist Federico Varese wrote in a definitive study of transnational organized crime, gangs are deeply intertwined with ordinary businesses and local CCP officials in China. Local and even provincial governments have turned to unconventional methods of financing, sometimes backed by organized crime, with corruption blurring the lines between personal and official finances. Even regular debt restructuring in China can involve kidnapping and extortion.

The role of so-called black gangs, as China calls organized crime, in local government is well known and is being cracked down on by the central government. But in practice, crackdowns often involve swapping one criminal group for another. Last week, China announced a central oversight agency in Beijing to lead the “fight against organized crime and evil.” That may be sorely needed as local governments face mounting debts, and not just from banks.

What we follow

Japanese student murdered in Shenzhen. A 10-year-old Japanese boy died a day after he was stabbed at an international school in Shenzhen, China, last week. The tragedy was followed by both government censorship of mourning and attempts to reassure Japan that it was an isolated incident. That may not assuage the concerns of Japanese citizens and businesses in China, as the attack follows a similar attack on children at a school bus stop in June.

Japanese media have accused China of stoking anti-Japanese nationalism, and a further decline in Japanese investment in China is likely. While ultra-nationalism may play a role, knife attacks on children have followed a similar pattern to school shootings in the United States, with a series of incidents since 2010 that have left more than 100 people dead. A man in his 40s has been arrested in connection with the Shenzhen attack.

As with school shootings, social contagion appears to play a major role in knife attacks at schools in China. The absence of guns makes them less deadly, but those responsible tend to target young children more often than their American counterparts.

Taiwan arms sales lead to asset freeze. China announced last week that it would freeze the assets of nine U.S. military companies within its borders in response to U.S. arms sales to Taiwan — specifically a $228 million sale of spare parts approved on Sept. 16. The move highlights one U.S. advantage: It’s unclear whether the Pentagon-linked companies have assets in China or if the move is purely symbolic.

While U.S. companies may come under pressure from the Chinese government for their investments in the country, Beijing is still far from controlling the bottlenecks in global finance as Washington does. This would allow the U.S. government to wield sanctions and freezes with real power.

Technology and business

Central bank presents stimulus measures. China’s central bank announced a broad stimulus package on Tuesday, sparking a small rally in the stock market. Chinese President Xi Jinping has been reluctant to attempt large-scale stimulus measures similar to those that propped China up after the 2008 financial crisis, but disappointing economic data this summer means China is likely to miss its 5 percent economic growth target this year without significant action.

The measures focus primarily on liquidity, but also include mortgage rate cuts and lower down payments in an attempt to revive the property market. That is unlikely to work: although property prices continue to fall, they are still being artificially inflated by local governments putting pressure on property companies not to sell below certain levels.

Officials fear social instability as protesters hold the government responsible if their investments fail. But as prices are not allowed to bottom out and real estate giants are slowly falling apart, sales are still falling.

Economist disappears. Prominent Chinese economist Zhu Hengpeng was arrested months ago for criticizing Xi’s policies in a closed WeChat group. Wall Street Journal reported Tuesday. Zhu was the deputy director of the Institute of Economics at the Chinese Academy of Social Sciences (CASS), the country’s top humanities institute, and a frequent commentator on economic issues.

This is a bad sign for a couple of reasons. First, it shows how insecure the Chinese leadership, and especially Xi, is that even technical, private criticism will provoke this kind of overreaction from the security services. It goes without saying that disappearing someone—rather than the police simply “inviting them in for a cup of tea” to issue a warning—is a serious step.

It also has a profound chilling effect on other experts, undermining the ability to challenge bad government policy. According to the report, Zhu’s arrest was part of a broader purge of CASS led by a Xi loyalist. China has lost financial talent through both purges and pay cuts under Xi’s “common prosperity” drive, leaving ideologues in prominent positions. That makes a proper handling of China’s recently announced stimulus unlikely.

Most read FP this week

A little bit of culture

Han Yu (768-824) was a Tang scholar-official, poet, and essayist. This is the eighth poem in a series of 11 entitled “Autumn Feelings.”—Brendan O’Kane

“Autumn Feelings – 8”
By Han Yu

Whirling, whirling, falling leaves
Blow on the wind along the balcony,
Murmuring like whispering voices
As they spin around and chase each other away.

In the golden twilight, in my empty hall,
I sit there in silence, not saying a word.
The servant boy comes in from outside,
And he puts the lamp he has trimmed down before me.

He asks me questions that I don’t answer;
Bring me a meal that I will not eat;
Withdraws and sits by the western wall,
And reads a poem out loud a few times.

The poet was not a man of this time
(A thousand autumns separate us)
But there’s something in his words that touches me
And the sadness hurts again.

I turn to the servant and say to him:
Put the book down and go to bed.
A man has moments when he has to think,
And the work to do that never ends.