China’s tightening of regulations on the new-economy sector has led to a devastating collapse of overseas-listed Chinese stocks. The measures have not only affected Chinese businesses, they have also hurt foreign investors.
As a countermeasure, Washington has enacted the US Holding Foreign Companies Accountable Act and tightened scrutiny of Chinese stocks listed there.
Chinese President Xi Jinping’s (習近平) tightening of and intervention in the economic sphere, and even the de facto transformation of private enterprises to state-owned businesses — known as guojin mintui (國進民退, or “the state advances, the private sector retreats”) — have made it increasingly difficult to adjust to the differences between the economic systems of the US and China, while the economic decoupling of the two economies has accelerated.
The Chinese Communist Party’s (CCP) strict regulations have caused the value of Chinese stock markets to contract, while world-class businesses that relied on market monopolies, protectionism and state subsidies, such as data, gaming, delivery and tutoring platforms Alibaba, Tencent, Meituan and New Oriental Education & Technology Group — beasts that foraged capital markets — have been tamed by the CCP.
The near total collapse of China-related shares appears to be self-inflicted by the CCP, which makes the sequence of events difficult to understand.
However, a look at the ideology and the nature of the power of the CCP reveals that this was inevitable.
In the past few years, Wall Street has made huge profits from the participation, listing and fundraising of Chinese firms, in effect forming a common interest group with the CCP, and it has invariably been a cheerleader for the expansion of Xi’s hegemony. Having ignored the CCP’s evil, holding blindly optimistic views about China’s economic prospects, Wall Street’s interests have been dealt a massive blow. It has become disillusioned with the China market — which it should have done a long time ago.
Former Morgan Stanley lead economist Stephen Roach’s response to the realization of the CCP’s nature typified the Wall Street reaction.
Roach recently made his first negative comments on China’s economy, writing in a July 27 Project Syndicate article that: “When it comes to the Chinese economy, I have been a congenital optimist for over 25 years, but now I have serious doubts.”
This statement has been characterized as Wall Street’s repentance.
Moreover, Scottish-American historian Niall Ferguson has said that Xi is building a police state and that anything involving China should be taken with a grain of salt, while The Economist has said that the future of China will be less capitalist and more statist.
However, while the CCP’s approach contravenes the premise of a free market, it is the path a communist regime has to follow. In particular, the rise to power of Xi — who is seen as reviving Mao Zedong’s (毛澤東) political line — has accelerated China’s return to a dictatorship, with the party-state controling everything and in which tycoons and their giant private companies go up in smoke.
The turning point in China’s rapid economic growth in the past few years was former Chinese leader Deng Xiaoping’s (鄧小平) adoption of reform and opening up. Although Deng was branded by Mao as a “capitalist roader” during the Cultural Revolution, his so-called “capitalist approach” was not that of a Western free market, but merely a way of borrowing capital, technology and talent from capitalist countries, and the Chinese community in Taiwan and Hong Kong, to develop his own nation’s economy.
This is a political economy that aims to “learn from the barbarians to control the barbarians.”
Moreover, it has a nationalist flavor.
What is thus euphemistically called a “market economy” is the application of protectionism to block foreign competition and foster domestic industry. When the country has grown stronger, it uses economic resources to support its outward expansion.
This makes it clear that although a tiny window has been opened on the Chinese market and people’s desire to make money has allowed it to blossom, the CCP dominates everything from behind the scenes. This is a “socialist market economy” model, and a political and social system referred to as a “socialist democracy with rule of law.”
All economic resources will, one way or another, return to the CCP’s control. Xi, who has a strong desire for power and seems to be possessed by Mao, abolished the term limits on his office to protect his own power. He is clearly the best choice to end the capitalist experiment in China.
Xi’s focus is external expansion, and the “great rejuvenation of the Chinese nation” and the “Chinese dream” have replaced Mao’s world revolution.
However, when faced with external countermeasures, Xi and Mao responded with “self-reliance.”
The focus of self-reliance is on ideological purification to hold on to the stronghold of communism and protect it from the “corruption of capitalism.”
The CCP’s ultimate goal, then, is to confiscate privately owned assets by advancing the state at the expense of the private sector and to suppress businesses, such as online platforms, in the new economy so that the energy of the private sector released by the reform and opening up can be brought back under the control of the CCP.
Deng opened a small window on economic vitality, but once the private sector went too far, perhaps the quantitative changes led to qualitative changes that backfired on the CCP.
At this point, the CCP would either have to follow a path toward greater democracy and openness, or retreat into a more authoritarian and dictatorial hold on power.
Xi turned back, abandoning the false pretense of domestic reform and opening up, instead engaging in “wolf warrior” diplomacy in an attempt to establish hegemony.
How can an unjust regime that faces enemies domestically and internationally sustain itself?
As the US and China have substantially delinked their economies, Taiwan has only one choice: to stand firmly with the democratic camp, and help defend world peace and universal values.
Translated by Perry Svensson
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