System Risk, With Chinese Characteristics

Chinese Twitter has been in full meltdown mode for the past couple of days after official announcements that Zhang Youxia (CMC vice chairman) and Liu Zhenli (Joint Staff chief) are under investigation for “serious violations” — which, in the Chinese system, is widely understood to mean the verdict is already set, while the details will be released later in whatever format best serves the political agenda. Zhang was long portrayed as Xi’s most trusted ally, and he’s also the longest-serving CMC vice chairman still standing, after multiple peers have already been taken down.

This comes on top of the earlier purge wave that reportedly swept up seven full generals just a couple of months ago. A system that normally runs with 35–40 active full generals now seems to have only a handful genuinely “still in post.” There are no clean numbers because many simply disappear — no announcement, no explanation, just the usual vanishing act.

Now let’s see what Hong Kong does tomorrow. In almost any other country, your top military power-broker and your operational commander going down together would scream political shockwave — and markets would reprice instantly. Instead, the “trusted” investment banks are… admirably silent. Probably they’re just waiting for the official script to drop—so they can quote it with great confidence.

To me, it looks like a painting: the surface is polished glass, calm enough to fool the eye—while underneath, unseen currents prowl, restless and hungry, surging with quiet violence. Private capital has been heading for the exits for years, and this will exacerbate it. Some estimates put private outflows out of China at $500–600 billion last year.

China remains the only market where the house can be on fire — and the official statement is “temperature normal.”