Caixin’s investigation of CEFC and Chairman Ye Jianming

Ye Jianming - Caixin

Chairman Ye Jianming, photographed by Caixin

On March 1, Caixin broke the news that Chairman Ye Jianming of the China CEFC Energy Co. has been detained by PRC authorities, and is under investigation for suspected criminal activity.

The company initially tried to refute this as “irresponsible” reporting, but investors opted to believe China’s leading investigative journalism outlet, and the company’s bonds dropped by 33% in a day.

But the party-state authorities’ ban on reporting about Chairman Ye and his empire of enterprise (documented here in 2017) remains in place, so Caixin‘s scoop was expunged from the PRC internet within hours.

The news was officially confirmed more than two weeks later, on March 19, when the Czech Republic sent a delegation to find out what was going on with its major source of foreign investment. The delegation was told that Chairman Ye, an advisor to Czech President Milos Zeman, was indeed “being investigated for a suspicion of breaking the law.”

CEFC was ranked 222nd in the Fortune 500 in 2017, and last year stunned the international energy industry by securing agreement to buy a $9 billion, 15% stake in Rosneft, Russia’s state oil giant.

Now the company’s future is as murky as its past.

Caixin reporter Ji Tianqin 季天琴 spent the most of 2017 interviewing CEFC executives, tracking down former associates of Ye, and tracing CEFC’s constellation of satellite companies through the financial records. And the crowning glory: she interviewed Ye himself twice, finding all manner of holes in the stories he told her.

Ji Tianqin is famous in Chinese journalism circles for her award-winning deep-dives addressing, among other things, Wang Lijun’s reign of terror in Chongqing. Considering the difficulty of being an investigative reporter in China today, she really ought to be famous outside China too.

This epic investigation into CEFC reveals how, through party and military connections, turnover figures massively inflated by fake trading, and relentless pursuit of international photo-ops and status symbols, Ye Jianming was able to sell domestic and foreign audiences a mostly vacuous narrative about his rising global energy and finance colossus.

Suffice to say, these revelations extend my record of getting some things right about CEFC, but not very many. I’ll leave that discussion for another post, as my purpose here is to urge China-watchers to invest the time in dipping into the 16,000-word translation below — and to please share thoughts on what it all means. I’d also welcome any translation corrections from people more familiar with financial and business terminology.

This is a spectacular work of Chinese investigative journalism that may contain some profound implications for understanding the PRC’s economy, politics and international relations. 

~

Ye Jianming under investigation, what fate will befall CEFC?
叶简明被调查中国华信命运如何?

Caixin Online

By Ji Tianqin

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Chinese political operations in Australia: a popular pro-CCP reading

“You said what?!”: foreign donations to political parties are legal in Australia

Hua Daodao, a deputy editor in the Huanqiu Shibao‘s commentary department, has written a piece offering useful insights into how the Australian media’s latest exposés of CCP overseas political activities looks from within China.

Being a good patriot, Hua summarily brushes aside all the allegations (which incidentally i tend to think are more an indictment of Australian complacency than anything else) but the article seems to have struck a chord with many politically-engaged Chinese young people, being passed around quite widely on WeChat.

One highlight is the extensive comments from Lei Xiying, an energetic pro-CCP activist who says the Australian media have subjected him to “Cultural Revolution style persecution.”

Specifically, he complains about the labels “nationalist” and “ultranationalist” being used in previous Australian coverage of his public activities and works.

Given the prominence of various kinds of enemies of China in Lei’s work, i think it’s fair to call him a “nationalist.” But “ultranationalist” isn’t accurate, as there are many far more extreme, even outright militaristic, participants in Chinese national identity and foreign policy discourse.

In fact, last year in the wake of the unfavourable South China Sea arbitration result, when the government made clear that it did not want street protests or KFC boycotts, Lei worked to discredit this type of nationalist action as anti-China false-flag troublemaking.

What Lei really is, openly and proudly, is a pro-CCP ideological warrior, who views China as beset by foreign plots to infiltrate its government and manipulate public opinion — a near-perfect mirror image of what the CCP and its “agents” now stand accused of in Australia. This grim irony will presumably pass unnoticed by nationalists on all sides of the ideological war.

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China’s public response to the Mischief Reef FONOP

“Unreasonable”: CCTV’s 10pm Evening News (晚间新闻) bulletin introduces the US FONOP near Mischief Reef, Thursday May 25, 2017.

Chinese media coverage of the recent US naval patrol near its outposts in the disputed Spratly Islands suggests, to me at least, Beijing’s increasing confidence in its handling of public opinion on this sensitive issue. 

In turn, the content of some of Beijing’s publicity offers insight into China’s intentions for the handling of the matter going forward. Specifically, the government’s response suggests a firm determination to avoid escalating tensions. It could even foreshadow an increasingly tolerant attitude towards US assertions of freedom of navigation into the future.

The basis for this speculation is outlined below, but as always i’d encourage readers with other explanations to get in touch or leave a comment.

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China’s “blue territory” and the technosphere

China Dream: “Paracel Archipelago – Woody Island future development.”

I recently contributed an essay to Technosphere, a multimedia online magazine based out of Berlin’s Haus der Kulturen der Welt (HKW): China’s “Blue Territory” and the Technosphere in Maritime East Asia.

According to the magazine’s calculations, it’s a 648-second read.

It’s part of a set of presentations that comprise a dossier on the theme of land and sea. I can recommend checking out some of Technosphere’s other dossiers, especially those on creolized technologies and risk and resilience.

My contribution contains some of the arguments developed in my PhD thesis, which fortunately is now done and dusted. It’s titled “Chinese Popular Nationalism and PRC Foreign Policy in the South China Sea” — as always comments and criticisms are much appreciated, so if you feel like taking a look, you can download it by clicking on the title.

 

 


Comparison of Vietnam and China’s joint statements, 2011-2017

table-prc-vn-joint-statements

Comparison of Sino-Vietnamese joint statements since 2011 (click to enlarge). Links to sources: January 2017 communique (Nguyen Phu Trong visit to China); Sept 2016 communique (Nguyen Xuan Phuc visit to China); Nov. 2015 statement (Xi Jinping visit to Vietnam); April 2015 communique (Nguyen Phu Trong visit to China); Oct. 2013 statement (Li Keqiang visit to Vietnam); June 2013 statement (Truong Tan Sang visit to China); Oct. 2011 statement (Nguyen Phu Trong visit to China).

 

East Asia Forum has kindly published a piece from me on recent developments in Sino-Vietnamese relations. To supplement it, i’m posting here a table comparing the South China Sea-related elements of the last 7 joint statements between the two. 

The comparative table was the basis for the article’s argument that General Secretary Nguyen Phu Trong’s visit to Beijing last month did not involve any softening of Vietnam’s position on the issue.

According to a knowledgeable Vietnamese source, there are three types of Sino-Vietnamese bilateral joint statements issued after high-level meetings. In ascending order of importance these are:

  • Joint press release (联合新闻公报, thông cáo báo chí)
  • Joint communique (联合公报, thông cáo chung)
  • Joint statement (联合声明, tuyên bố chung)

These documents are often not released in English, and some of the translations that have appeared have been incomplete or unreliable, so the table above compares the Chinese full text as published by state media (links are in the caption area above).

The table also includes an item, not discussed in the EAF article for space reasons, on cooperation in public opinion work. In the 2011 joint statement, the two sides pledged cooperation on “strengthening public opinion guidance and management” – which, in the context of several weeks of anti-China protests through the middle of that year, was tantamount to a Vietnamese undertaking to dampen anti-China sentiments.

Interestingly, however, there has been no analogous item in the recent joint documents — even after another, even more intense, wave of anti-China sentiments burst forth in 2014 during the HYSY-981 oil rig standoff. Its omission from subsequent documents might indicate an acceptance on China’s behalf of the strength Vietnamese nationalist sentiments that flow in its direction at times of heightened tensions. Perhaps also an acknowledgement that Hanoi is already doing what it can to promote Sino-Vietnamese friendship? Any other readings?

The EAF piece is reposted below. Based on some early feedback, i should have been clearer that in suggesting . . .

China may have pulled back from its pursuit of particular claims that have no basis in international law

. . . i do not mean the PRC has seen the light and is abandoning all claims deemed unlawful in the UNCLOS arbitration. Just that there are some unlawful aspects of China’s claims that it is no longer pushing, and this has removed some of the major drivers of Sino-Vietnamese tensions.

As always, further comments, arguments, additions and corrections are much appreciated.

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Pistons, PX, petroleum, politics: checking in with Chairman Ye Jianming

The incisive gaze of CEFC (Huaxin) Chairman Ye Jianming

The commanding gaze and handshake of CEFC / Huaxin Chairman Ye Jianming (source).

Since this blog last checked in with Ye Jianming in 2013, the youthful Chairman and his $40 billion CEFC (Huaxin) oil trading, storage and finance conglomerate have gone from strength to strength. It now ranks as the world’s 229th largest company by revenue.

CEFC originally attracted my attention due to Dai Xu‘s South China Sea warmongering under a “CEFC Strategic Analyst” title between 2011 and 2013. The company hasn’t been associating itself with that kind of militarism of late (at least not publicly), but its mystique has only intensified as various new information has come to light.

Here’s a brief rundown of what’s emerged since 2013:

  • Chairman Ye Jianming is not Lt-Gen Ye Xuanning’s son, nor Marshal Ye Jianying’s grandson. Far from being a princeling — my own and others’ best guess as to his background — he was born into a family of boatmen in the Fujian hinterland.
  • However, just as a blood relationship was finally disconfirmed, Chairman Ye turns out to be business partners with Ye Xuanning’s daughter in an entity bearing the PLA’s famous Carrie (凯利) brand.
  • The company’s oil trading business originates with assets confiscated from Fujian smuggling kingpin Lai Changxing, which it acquired in 2006. Chinese financial media reporting indicates that before becoming an oil baron, Ye made pots of gold by purchasing a state-owned piston factory, and wholesaling the industrial chemical PX.
  • Evidence of Chairman Ye’s involvement in the PLA General Political Department Liaison Department’s (GPD-LD) CAIFC system has continued to accumulate. Yet the GPD-LD’s fortunes appear to have been falling almost as fast as Chairman Ye’s have been rising.
  • There are signs the rise of Chairman Ye may be related to the rise of Chairman Xi — from Fujian via Shanghai, to Beijing, and out onto the Belt and Road. CEFC/Huaxin laid the groundwork for Xi’s triumphant state visit to the Czech Republic in March 2016, establishing a “key link” in his signature foreign policy initiative.

For those who find this all as irresistably intriguing as i do, these points are detailed below, followed by a selection of aphorisms from the expanding corpus of Ye Jianming’s Thought, and a brief personal disclaimer.

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[Updated] Defining the post-arbitration nine-dash line: more clarity and more complication

The Central Party School's article, headlined, "China does not accept the jurisprudential legitimacy of the SCS arbitral tribunal's decision," PLA Daily, p.6, July 18

The Central Party School’s article, headlined, “China does not accept the jurisprudential legitimacy of the SCS arbitral tribunal’s decision,” PLA Daily, July 18, p.6

One week on from the UNCLOS arbitration ruling on the South China Sea, the PRC’s response continues to somehow both clarify and complicate the issue at the same time. The latest episode in the unfolding mystery of the nine-dash line seems to diminish the line’s linkage with oil and gas claims designated unlawful by the Tribunal, while ramping up its associations with “historic title” over large sweeps of archipelagic waters [but seemingly not the entire Spratly archipelago – see update at the bottom]. 

On Monday an article published on p.6 of the PLA’s official newspaper offered a clear and detailed post-ruling definition of the nine-dash line from authors at the Central Party School. One of its main purposes was to refute the Tribunal’s inferred reading of the nine-dash line as a blanket claim to historic rights within the area it encloses. (Grateful HTs to Bill Bishop for digging it up and Bonnie Glaser for drawing attention to its significance.)

The article offers a more complex clarification of the line’s meaning than my optimistic reading of last week’s PRC Government Statement: whereas i read the Statement as implicitly separating the nine-dash line from China’s maritime rights claims, this article spells out at least some explicit links between the two.

On the other hand, it offers little or no support to the expansionist reading of the line that has underpinned many provocative PRC actions in recent years. In particular, the CPS scholars’ definition does not appear to support a claim to oil and gas resources out to the edge of the nine-dash line. This was a key element of the implied reading of the nine-dash line that the Tribunal struck down as unlawful. It’s a position that the PRC has backed up with coercion against other claimants’ energy survey ships in the past, and it’s also the basis for the notion, widespread in PRC domestic discourse, that rival claimants, especially Vietnam and Malaysia, are “plundering” China’s resources.

The writing of this article is attributed to CPS Postgraduate Studies Institute Deputy Dean Wang Junmin 王军敏, but the newspaper byline attributes it collectively to the CPS Center for Research on the Theoretical System of Socialism With Chinese Characteristics. It is, as such, not a government statement, but it’s very detailed, takes into account the Tribunal ruling, and could end up being close to the interpretation the PRC goes forward with in the wake of the ruling.

This interpretation can be summarized as follows. The nine-dash line is not a blanket claim to historic rights over all waters within, but rather to three distinct sets of rights across different geographical areas:

  1. Sovereignty over the islands within the line (the original meaning of the line when the KMT government published it in 1948)
  2. “Historic title” (历史性所有权) to waters enclosed by straight baselines drawn around island groups within the line (definitely including the Paracels, for which the baselines have already been announced, but not necessarily for the whole Spratly group)
  3. Non-exclusive fishing rights in others’ EEZs where (a) they overlap with the line and (b) Chinese fishers traditionally fished under high-seas freedoms

The article begins by arguing the UNCLOS does not constitute the entirety of international maritime law, and that customary international law continues to apply on matters where rules are not provided for in UNCLOS. In particular, the authors argue,

“The UNCLOS did not provide rules for the issue of territorial sea baselines for continental countries’ archipelagos; nor did it provide rules for historic rights, although it affirmed their status in international law.”

The author(s) state that the Philippines “distorted” the nine-dash line by (a) presenting it to the arbitral tribunal as representing a Chinese claim to sovereign rights and administration over all of the waters and seabed within; and (b) by arguing that the PRC claims “historic rights” (历史性权利) within the line, when in fact the PRC claims “historic title” (历史性所有权) over areas within the line, putting the case outside the Tribunal’s jurisdiction.

This line of argument appeared, fleetingly, in China’s 2014 Position Paper, which noted that disputes concerning “historic bays or titles” were exempt from compulsory dispute resolution under Article 298. According to the author(s), China has “historic title” to internal waters within archipelagic straight baselines.

So the authors say the Philippines “slandered” China’s nine-dash line by providing a distorted reading of its meaning to the Tribunal. Here’s how they explain its true meaning:

First, looking at China’s practical exercise of state power, China has never claimed all the waters within the line as its territorial sea or internal waters, exercising state sovereignty there. In fact, the 1958 Territorial Sea Declaration, at the same time as proclaiming the applicability of the straight baseline system and setting the breadth of China’s territorial seas at 12nm, implicitly noted that international waters [exist] between the Chinese mainland and coastal islands, and Taiwan and surrounding islands, Penghu, Pratas, Paracels, Zhongsha, Spratlys and other islands belonging to China [ZH]. In 1996 the Declaration of Territorial Sea Baselines announced the territorial sea basepoints and baselines for the Paracel Islands, thereby implying that within the ‘nine-dash line’ China would, in accordance with the UNCLOS, take the Paracels as an integrated whole entitled to territorial seas, contiguous zone, EEZ and continental shelf. Likewise, China’s 2011 note to the UN Secretary General claimed that the Spratlys also enjoy territorial seas, EEZ and continental shelf. This implies: China has never claimed all the waters within the ‘nine-dash line’ as China’s historic waters or that it enjoys historic rights .

Second, the Philippines used the Chinese expression ‘historic rights’ (历史性权利) to argue China had not claimed ‘historic title’ (历史性所有权). As everyone knows, historic rights in international law refers to the rights enjoyed continuously by a state in certain waters since ancient times. Historic rights include historic title and non-exclusive historic rights. Waters subject to historic title are called ‘historic waters’ (历史性水域), these are part of a coastal state’s internal waters or territorial seas, and mainly include historic bays. other coastal waters adjacent to the coast, and the waters within archipelagos. Non-exclusive historic rights are divided into historic rights of passage and historic fishing rights. The former refers to innocent passage through internal waters, specifically all countries’ rights of innocent passage through areas not originally regarded as internal waters, but which became enclosed as such through the coastal state’s application of straight baselines.[ZH] The latter refers to non-exclusive rights to fish in areas that were previously fished in accordance with high seas freedoms but which have now become a coastal state’s EEZ [or] archipelagic waters.[ZH] The mere use of ‘historic rights’ in the PRC EEZ and Continental Shelf Law, by MFA spokespersons, and by Chinese scholars, does not imply China does not claim ‘historic title’. In fact, our country has historic title and historic fishing rights in different areas within the nine-dash line.

Third, China’s ‘nine-dash line’ rights claims mainly comprise: 1. China has territorial sovereignty over islands, reefs, cays and shoals within the line; 2. China has historic title to waters within archipelagos or island groups that are at relatively close distance and that can be viewed as an integrated whole, these areas are China’s historic waters, they are our country’s internal waters,[ZH] and China has the right to draw straight baselines around the outermost points of these waters and claim state administrative zones such as territorial seas, EEZs and continental shelves etc. in accordance with the UNCLOS. 3. When waters within the ‘nine-dash line’ become [part of] another country’s EEZ or an archipelagic state’s waters, China has the right to claim historic fishing rights or traditional fishing rights in the overlapping areas.

The many references to non-exclusive fishing rights contrast sharply with the complete absence of any mention of claims to oil and gas rights. As noted, it was precisely that (implied) claim that led to the line being designated unlawful. The 2012 CNOOC oil blocks, especially, convinced the Tribunal that China was acting in accordance with this reading of the line (see especially the Award paragraphs 208-214). But under the above definition, the nine-dash line seems to have no significance at all to the geographic scope of China’s energy rights claims.

2012 CNOOC oil and gas blocks, noted by the Philippines vs China arbitral tribunal

2012 CNOOC oil and gas blocks, noted by the Philippines vs China arbitral tribunal

The other striking thing about this definition is the heavy focus on the issue of historic title over internal waters enclosed within straight baselines around island groups — an issue addressed in an excellent article by Yanmei Xie over the weekend. There is plenty of reason to think that straight baselines might be about to enclose the Spratlys, a move that would significantly harden the PRC’s position.

But there might be yet another strange twist here. Looking again at the third paragraph above, the Party School authors define China’s claim of historic title to internal waters as existing in “archipelagos or island groups that are at a relatively close distance and that can be viewed as an integrated whole (my emphasis).” Which kinda seems to suggest the historic title aspect might be referring to the Paracels but not the Spratlys.

I’ve heard the “can be viewed as an integrated whole” argument for archipelagic straight baselines in the South China Sea numerous times from PRC sources, but i’ve never come across the “at a relatively close distance” criterion before. Why else might they have included this?

Here’s the answer (update 21/7):

Dylan Jones points out that the relatively close distance criteria refers to the distances between the islands, and a careful re-reading of the article confirms this. Here’s the Central Party School authors’ detailed explanation in translation:

“Most international legal experts consider state practice is forming, or has already established, international legal norms regarding continental states’ offshore archipelagos: the straight baseline system’s applicability to continental states’ offshore archipelagos is restricted to those archipelagos that can be seen as an integrated whole, with relatively small distances between the islands, and intimate connections between the waters and the mainland [. . . ]

The most likely and most appropriate method for China’s territorial sea baselines in the Spratly Islands is to imitate the method used in the Diaoyu Islands, for example, taking the main islands and reefs such as Itu Aba, Pagasa, West York, Spratly and Mischief as the centre, and linking together the surrounding reefs to establish baselines [. . .]”

“Looking at historic rights, China has historic title to waters between the relatively close, intimately connected islands that qualitatively comprise a unified whole, these waters are historic waters, China’s internal waters . . . China has the right to take those groups of islands within the Spratlys that are relatively close to each other as a single entity to establish territorial sea baselines,[ZH] and China’s Spratly Islands in the SCS have maritime administrative zones such as territorial seas, EEZ and continental shelf.”

So the author(s) do in fact believe a “historic title” claim over “internal waters” enclosed by straight baselines exists in the Spratlys — but rather than covering the entire archipelago, as per the Paracels baselines in 1996, it would only cover those parts within the archipelago that are close together. Here’s the Diaoyu example they refer to:

Diaoyu Islands straight baselines submitted to the UN in 2012

Diaoyu Islands straight baselines submitted to the UN in 2012

The authors repeat this “within the Spratlys” + “close together” + “intimately connected” recipe for Spratly straight baselines (and thus the scope of internal waters subject to historic title) no less than 6 times, so it’s fair to conclude this was a point they were keen to get across. That would be a tough sell domestically given that it would probably exclude James Shoal, that shallow patch of ocean considered by many (probably most) Chinese people to be the southernmost point of the nation’s sacred territory. This would be one reason to think the party might not make a Spratly baseline declaration in the near future after all.

Another rambling post…i really ought to shut up and let things run their course. But the riddle of the nine-dash line continues to string me along rather compulsively. If any readers have made it this far then at least i mustn’t be the only one.