1 September 2021 — Moon of Alabama
In December 2001 China became a member of the World Trade Organization. That opened new markets for China’s industry and attracted a lot of foreign investment.
The growth in GDP that China has achieved since is breathtaking.
This development allowed China to make enormous investments in infrastructure. It also generated the resources necessary to eliminate poverty.
It is no coincidence that this development happened while the U.S. was wasting money on wars in the Middle East. As the U.S. is now step by step retreating from those wars to confront China the country needs to prepare itself for the new environment.
The introduction of more and more capitalistic features into China’s economy over the last 20 years has created imbalances. Business tried to ignore or to gain influence over government structures and regulations. Companies abused their workers. Speculation by rich people created bubbles in the housing markets. Cultural excesses that emphasized individualism threatened national unity.
These imbalances let the description of China’s economy as ‘socialism with Chinese characteristics’ look empty. Over the long run they would lead to dissatisfaction of a wide range of the public with the ruling political establishment. It was high time to eliminated the excesses the ultra fast development had created.
The government had to act to avoid future internal conflicts. Since the end of last year it has done so with the same efficiency that allowed it to stop and eliminate Covid-19 outbreaks. It does this ruthlessly without regards to stock values or investor interests.
Some six weeks ago I argued against Stephen S. Roach’s take on new Chinese regulations and described why the wider public in China will not care about ‘investors’ and will support those steps.
Since then the regulation campaign has continued with astonishing speed and breath. Here is a collection of headlines, published since my last take, that detail the development and the flood of new regulations and laws designed to set things right while keeping China’s economic growth going.
- China Stocks Tumble in ‘Panic Selling’ Amid Broad Crackdown
- China market regulator boosts food delivery worker protections
- China moves against private tutoring companies, causing shares to plunge.
- China’s private tutor ban kills another profit center
- Wipeout: China stocks in US suffer biggest 2-day loss since 2008
- Why China’s crackdown on tech and education won’t scare off global investors
- Tencent Is World’s Worst Stock Bet With $170 Billion Wipeout
- China Doesn’t Care How Much Money You Lose
- China Seen Ushering in New Era as it Puts Socialism Before Shareholders
- China Orders 25 Tech Giants to Fix Raft of Problems
- China’s campaign to regulate Big Tech is more than just retaliation
- China’s Sweeping Crackdown on Big Tech Is a Wake-Up Call for the U.S.
- Rosy upsides to Xi’s neo-socialism
- Xi Sends Warning to Investors With Delayed Huarong Lifeline
- China passes tough new online privacy law
- Wealth gap sparks Xi’s call for ‘common prosperity’
- China blasts ‘996’ excessive work culture
- With new privacy law, China could reshape cross-border data rules similar to Europe’s GDPR
- Unpacking China’s game-changing data law
- Xi Jinping says Big Tech crackdown is making progress, calls for Communist Party to ‘guide’ companies
- China limits children’s online gaming to three hours a week to combat ‘addiction’
- China moves to cap the cost of renting a home in cities
- Beijing’s regulatory crackdown is no flash in the pan
The new slogan for this era is now ‘common prosperity’, a policy that will reduce large wealth gaps while keeping reasonable monetary incentives and the market economy alive to allow for further development.
A pamphlet, written by a minor Maoist figure, that justifies these measures and puts them into a larger political context was widely published by Communist Party organs:
A commentary published widely in Chinese state-run media described President Xi Jinping’s regulatory crackdown as a “profound revolution” sweeping the country and warned that anyone who resisted would face punishment.
“This is a return from the capital group to the masses of the people, and this is a transformation from capital-centered to people-centered,” the commentary said, adding that it marked a return to the original intention of the Communist Party. “Therefore, this is a political change, and the people are becoming the main body of this change again, and all those who block this people-centered change will be discarded.”
The author then goes on to set the ‘profound transformation’ into a wider, geopolitical context:
“China is currently facing an increasingly severe and complex international environment. The US has implemented military threats, economic and technological blockades, financial strikes and political and diplomatic siege against China,” Li wrote.
“The US has also launched biological warfare, cyber warfare and public opinion against China.”
“If we still have to rely on big capitalists as the main force of anti-imperialist and anti-hegemonism, or still cooperate to the US’ ‘tittytainment’ strategy, our young people will lose their strong and masculine vibes and we will collapse like the Soviet Union before we are attacked,” he said, claiming that the US had launched a color revolution against China through different channels.
The “profound transformation” underway in China aimed to respond to the US’ brutal and ferocious attacks as well as the current complicated international situation, he said.
The curbs on the entertainment sector were far from adequate as ordinary workers and people should become the main characters on screens. People would benefit from the “common prosperity” goal after the education, medical and property sectors were reformed, he wrote.
While this sounds like Culture Revolution 2.0 it is assured that there will be no rampages of Maoist students through libraries or reeducation camps for party members.
Predatory capitalist George Soros claims in the Financial Times that these moves it will doom China’s economy. (See Michael Hudson’s counter here.) But people who, like Soros, argue against strong regulations forget that there are would be no markets without them. Companies that only look at shareholder values are not sound and do not allow for a healthy society. Just look Boeing and at the homeless camps in U.S. cities.
Aside from the ideological underpinning the new regulatory moves are populist. The masses will like them. They guarantee President Xi Jinping’s reelection at next year’s national party congress.
They will strengthen China’s unity in its competition with the United States.