Tea Leaf Nation

Clash of the State-Owned Titans

Why did China's largest broadcaster attack China's most important bank?

In a rare incidence of one Chinese state behemoth directly attacking another, China Central Television (CCTV), with access to over one billion viewers, ran a report on July 9 accusing the Bank of China (BOC), the nation's largest foreign exchange lender, of money laundering. China maintains strict controls on capital flows, implementing a $50,000 cap on how much of the Chinese currency renminbi a single individual can convert to foreign currency each year. According to the report however, BOC operates a service called "Youhuitong," or "Superior Exchange." Not advertised on the BOC website, the program allegedly allows bank patrons to transfer large sums of money out of the country, for a substantial fee. (BOC issued a statement the same day refuting the allegations and calling Youhuitong "completely legal.")  

CCTV running a take-down on a major brand is not unusual. Roughly every six months it lambastes foreign or domestic companies for high prices, poor customer service, low quality, or potential security threats. CCTV targeted Apple in March 2013, Starbucks in October 2013, and most recently China's e-commerce giant Alibaba in March 2014. But to go after BOC -- one of China's big four state-owned banks and a government heavyweight in its own right -- is an extremely curious move. 

Due to the mud-like opacity of China's one-party political system, it's near impossible to know what big power struggles may be playing out behind the scenes. But here are three possible scenarios underlying this unusual turn of events:

1) Another bold move in the deepening anti-corruption crackdown. Chinese President Xi Jinping's ongoing "tigers and flies" campaign has cast a wide net to root out corruption among government officials. One embarrassing thorn in Beijing's side has long been "naked officials" -- government officials who send their assets and family members abroad, sometimes as a precursor to themselves fleeing the country. On July 2, the latest campaign netted 1,000 of these officials in the wealthy southern province of Guangdong, reportedly the only province where BOC operates Youhuitong. Stronger enforcement of China's capital flows restrictions -- highlighted in CCTV's broadcast -- would likely hinder the attempts of would-be naked officials to send assets abroad.

2) A further consolidation of Xi's power in the banking and financial sectors. At the Third Plenum, a landmark Communist Party meeting in November 2013, the party set out an ambitious slate of economic reforms geared at helping China transition from an export-oriented to a services-oriented economy. But big banks in China have significant political clout. They may oppose reforms such as interest rate liberalization, which might force them to increasingly compete for customers. Exerting pressure on China's banking sector may provide Xi with greater traction as he prepares to push forward with economic reform.

3) The right hand doesn't know what the left hand is doing. The most obvious explanation is that this simply represents a state-owned media organization outing the allegedly shadowy dealings of a state-owned bank. Perhaps no top officials manipulated CCTV, and instead the network decided to conduct excellent investigative journalism.

Or perhaps CCTV attempted that, and made mistakes with their reporting. According to a report in the newspaper Time Weekly, the Guangdong branch of the People's Bank of China, China's central bank, chose BOC to launch a program allowing individuals to transfer funds internationally. In its statement issued in response to CCTV's allegations, BOC stated that it began operations of Youhuitong only after "reporting to the relevant regulatory authorities." If these reports are accurate, then CCTV was either not privy to that information or chose to omit it from the report.

The broadcast only happened July 9, and more information will likely come out in the coming weeks. But don't expect to see anything else like this anytime soon.

AFP/Getty Images

Tea Leaf Nation

'The Anti-Japanese War Had Nothing to Do With Your Most Honorable Party'

Some Chinese may really hate Japan -- but that doesn't mean they love the Party.

On July 7, Chinese awoke to a blitz of state media coverage commemorating the 77th anniversary of the Marco Polo Bridge incident, which marked the beginning of Japan's invasion of China and a bloody eight-year war between the two nations. State media outlets featured interviews, historical footage, social media posts, and editorials reminding readers of the importance of history. Headlining most major news sites was a full transcript of President Xi Jinping's scathing speech at a Marco Polo Bridge memorial ceremony in Beijing, in which he castigated Japanese attempts to whitewash history and praised the Chinese Communist Party for "shouldering the historical responsibility of national salvation" and the role it played in ousting the Japanese.

Playing to popular anti-Japanese sentiment has sometimes helped the ruling Chinese Communist Party maintain legitimacy. But while hatred of Japan runs deep and wide in China, some Chinese resent the party's attempt to co-opt history to glorify itself. One Weibo post by party mouthpiece People's Daily commemorating  the anniversary was re-tweeted over 50,000 times and garnered more then 8,300 comments. But far and away the most up-voted comment on this post read, "The anti-Japanese war had nothing to do with your most honorable party" -- a reference to the officially ignored fact that the then ruling Nationalist Party led the wartime effort against Japan. State-run television broadcaster China Central Television also posted a series of wartime photos on its Weibo account. The most popular response read "Never forget that the legal government of China at that time was the Republic of China, and China's supreme commander was Chiang Kai-shek," the wartime Nationalist leader now vilified by the party. Hu Xijin, outspoken chief editor of the fervently nationalist newspaper Global Times, defended historical memorializing in a widely read post on July 7 -- but the top-rated comment blasted Hu for turning the Marco Polo Bridge incident into a "political tool," brandished whenever relations with Japan became especially strained.

While commemoration of important World War II anniversaries is nothing new in China, this year has seen a marked uptick in anti-Japanese memorializing. In February, the government announced two new anti-Japanese national holidays, the "War Against Japanese Aggression Victory Day" and "Nanjing Massacre Memorial Day," marking the December 1937 Japanese invasion of the southern city of Nanjing in which Japanese soldiers slaughtered an estimated 300,000 people. The increased anti-Japanese rhetoric is a reaction to long-simmering disputes over islands in the East China Sea. And Japanese Prime Minister Shinzo Abe's recent amendment to the island nation's historically pacifist constitution -- which will allow Japan to send troops abroad for the first time since World War II -- has further heightened anxieties between the two countries.

Chinese authorities may hope to fan and then funnel the rising anti-Japanese sentiment to exert pressure on Japan, and to improve the party's image. Some Chinese netizens, however, have their own message: Being anti-Japan doesn't so easily translate into being pro-party.

AFP/Getty Images