Xi purges a survivor

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.