Xi Jinping’s close confidant, Chen Yixin, taking charge of the National Security Department (referred to as the National Security Department) has expanded its power beyond the traditional intelligence domain, making statements on “security threats” related to China’s economy, diplomacy, and even culture. Recently, the National Security Department once again discussed “financial security” under the pretext of regime security. However, experts believe that political interference will exacerbate financial market instability, and the expanded powers of the National Security Department pose a great risk to the CCP regime and are a manifestation of the instability of the highest ruler’s authority.
On November 13th this year, the CCP’s National Security Department WeChat public account discussed that “financial security is national security”, first emphasizing the historical importance of finance and then elaborating on Xi Jinping’s so-called “comprehensive national security outlook.”
Citing Article 20 of the National Security Law, the article outlined the National Security Department’s involvement in financial affairs: “Strengthening macro-prudential management and financial risk prevention and disposal mechanisms, enhancing financial infrastructure and capacity building, preventing and defusing systemic and regional financial risks, preventing and resisting external financial risk impacts…”
The article concluded by emphasizing financial regulation and financial security following Xi’s statement: “If finance is mishandled and a financial crisis erupts, economic development will inevitably suffer setbacks, and the modernization process may be delayed or even interrupted.”
On October 31, 2023, the CCP convened the first “Central Financial Work Conference,” and on November 2 of the same year, the National Security Department published an article on “economic security,” claiming that some “bearish,” “short,” “biased,” and “looting” individuals have malicious intentions to provoke financial turmoil in China. The article emphasized that the responsibility of national security institutions is to monitor, prevent, and combat crimes that endanger national financial security.
The CCP’s National Security Department’s high-profile presence comes at a time when China’s economy is slowing down, foreign capital is withdrawing, and financial risks are increasing while the authorities’ market-oriented measures to boost the economy have shown limited effectiveness.
David Wong, an economic scholar living in the United States, told Dajiyuan that the CCP’s National Security Department views financial stability as the “lifeline” of national security and sternly warns against actions like short selling and pessimistic predictions. Behind this lies two important intentions: to prevent capital flight that could impact the financial markets and to guard against any “market variables” that could weaken the ruling foundation.
Statistics show that foreign companies withdrew $8.1 billion from China in the third quarter of this year, reflecting pessimism among investors.
David Wong stated that apart from increasing vigilance against foreign capital risks, the National Security Department also seeks to curb risks related to private capital and shadow banking. The National Security Department may view shadow banking as a “breeding ground for financial chaos,” particularly operations of unapproved capital that may easily flow out of the country or operate in grey areas. Such private capital may be forcibly redirected towards more controllable investment areas like government-supported infrastructure investments or state-owned enterprise bonds.
The National Security Department not only regulates financial activities but also suppresses criticisms of the economic situation. David Wong noted that such actions are evidently aimed at ensuring the “political correctness” of the market rather than economic rationality.
David Wong believes that the National Security Department’s continuous high-pressure intervention in the financial markets under the guise of “security threats” may further drive away foreign capital, exacerbating financial market instability.
The current Minister of the National Security Department, Chen Yixin, is Xi Jinping’s old colleague from Zhejiang, former Secretary-General of the Central Political and Legal Affairs Commission. He began to lead the National Security Department on October 30, 2022.
The elevation of the CCP’s national security status has undergone a transformative process. In the first decade of Xi’s rule, national security agencies were relatively behind the scenes. It wasn’t until May 30 last year that Xi, speaking at the first National Security Commission meeting after the CCP’s 20th Congress, said the complexity and difficulty of national security issues facing the CCP had significantly increased, preparing to face significant challenges. Since then, the exposure of the CCP’s National Security Department has suddenly increased.
It is believed that Xi Jinping clearly prioritizes security over economic growth, and a set of government behaviors oriented towards regime security is gradually emerging.
Since last year, the CCP has cracked down on foreign consultation firms, with multiple companies subjected to surprise inspections and employees detained. After the amended “Counter-Espionage Law” took effect on July 1, a wave of “anti-spy” campaigns were launched. The National Security Department has opened a WeChat public account for the first time and frequently intervenes in various sectors.
China expert Wang He told Dajiyuan that the current high-profile and assertive status of the National Security Department creates a “chilling effect” in society while also causing displeasure among other departments due to its cross-border power struggles.
“Wherever national security expands its power, it will cozy up to any benefits. Finance is a very corrupt place and also where the most money can be made. Originally, the benefits were already divided up, but with the National Security Department now reaching in, it has altered the past financial benefits landscape. Other departments, like the Ministry of Public Security, the Securities Regulatory Commission, and the Financial Committee, are very resentful of it. So, there is bound to be infighting.”
The CCP’s financial system has always been controlled by princelings from privileged backgrounds. In recent years, the Xi Jinping regime has intensified its cleansing of the financial sector, believed to be aimed at seizing the financial assets from the privileged elite. The number of high-ranking CCP financial officials under investigation has been rising year by year in recent years.
David Wong stated that the CCP’s anti-corruption campaigns are closely related to power centralization and power struggles within the regime. The current “financial security” actions of the National Security Department are likely to usher in a new wave of purges targeting “financially destabilizing behaviors” of financial enterprises and crackdowns on private capital.
David Wong believes that the proportion of loans to private enterprises in China has dropped to historically low levels, and after the National Security Department’s intervention, private enterprises may face stricter constraints on their capital activities, such as overseas listings and foreign capital introductions. This will lead to private enterprises being confronted with existential crises, accelerating their exits or “state-ownedization.”
On April 29 this year, Chen Yixin published an article in CCP media claiming that the National Security Department must be “anti-subversion, anti-hegemony, anti-secession, anti-terrorism, anti-spying,” and to “pull out nails and eliminate traitors.”
Xi’s loyalists have long been appointed based on their origins and the regions where they launched their careers. Huang David stated that Chen Yixin from the Zhejiang faction now essentially serves as Xi’s spokesperson, with his actions aimed at silencing opposition voices and even establishing substantive “power seizures” in some areas. Chen Yixin’s interference in the financial sector may provoke strong reactions from other factions like the Fujian clique and the Shanghai clique, leading to even greater internal divisions.
Wang He noted that the current internal struggles within the CCP are intricate and cannot be easily categorized simply based on factions like the Fujian clique and the Zhejiang clique. Because Chen Yixin’s National Security Department falls within the Political and Legal Affairs Commission, and it is also a subsidiary of the National Security Commission, which is mainly controlled by the Fujian faction’s Cai Qi, while the Financial Committee is headed by the Zhejiang faction’s Li Qiang, with the Fujian faction’s He Lifeng underneath him, and Chen Yixin, who is originally from Zhejiang and enjoys Xi Jinping’s trust, it is a complex intertwining of forces, making it difficult to clearly define the situation simply based on the surface Fujian faction or Zhejiang faction.
David Wong stated that in Mao Zedong’s era, having Kang Sheng in charge of the intelligence system gave rise to significant troubles due to the immense power. Deng Xiaoping later required the National Security Department not to meddle in domestic politics, but when Zhou Yongkang became the Secretary of the Central Political and Legal Affairs Commission, the national security system was used for internal struggles. When Xi Jinping came to power, he removed key figures in the National Security Department, like Deputy Minister Ma Jian and Beijing Municipal Public Security Bureau Director Liang Ke. However, due to the unique nature of the national security system, Xi did not carry out widespread purges, including the former Minister of State Security Chen Wenqing, who was not part of Xi Jinping’s core faction. It wasn’t until Chen Yixin came into power that Xi ultimately gained complete control over the National Security system.
Wang He said that although Chen Yixin is just a Central Committee member, the current high profile of his actions is surprising. Behind this, the background should be understood as Xi Jinping being in a dangerous power struggle where he lacks other means to intimidate others, so he had to bring the National Security Department to the forefront. In this regard, his appointment of Chen Yixin carries special significance. However, historically, if a regime elevates espionage to such a high position, it is in itself a sign of political crisis.
“While the CCP’s National Security Department has privileges, its strength is relatively limited because its responsibilities mainly lie in the intelligence system, which is constrained by the Ministry of Public Security, the Armed Police, and the military systems. Chen Yixin’s National Security Department, by being so high-profile, is essentially placing itself in harm’s way,” he said.