Ricochet is the best place on the internet to discuss the issues of the day, either through commenting on posts or writing your own for our active and dynamic community in a fully moderated environment. In addition, the Ricochet Audio Network offers over 50 original podcasts with new episodes released every day.
Quote(s) of the Day: The Economic Straitjacket Tightens in Communist China
The title of the story in the Wall Street Journal on Tuesday is: “Ant Falls in Line as China Tightens Oversight” (behind paywall).
For those who don’t recognize the name, Ant Financial is the financial technology (fintech) arm of the great Communist Chinese company Alibaba, and it is run by Alibaba’s former CEO, billionaire Jack Ma. Last year, Ant Financial was right on the cusp of going public, at an estimated value of $300 Billion. Less than three days before that, the Communist Chinese government put a halt to it, claiming that the company was violating its laws. There was also the issue of the speech Mr. Ma gave, mocking and criticizing the Chinese financial regulators. We all know that Communists don’t have much of a sense of humor. Here is a selection of quotes from the article, describing the new way that Ant Financial will be doing business.
Ant representatives were summoned to a meeting Monday with four regulatory agencies that also included the country’s banking, securities and foreign-exchange overseers, the People’s Bank of China said. It said a “comprehensive, viable rectification plan” for Ant has been formulated under the regulators’ supervision over the past few months.
The directive follows an intense regulatory assault on Mr. Ma’s business empire that began with the suspension of its initial public offering in November.
…Ant, which owns the ubiquitous mobile payment and lifestyle app, Alipay, will have to correct what regulators called unfair competition in its payments business and improve its corporate governance. The Hangzhou-based company will have to reduce the liquidity risks of its investment products and shrink the assets under management of Yu’e Bar, its giant money-market mutual fund. Ant will also be required to break an “information monopoly” on the detailed consumer data it has collected, the central bank said. [this sounds to me like the Chinese government resents that a “private” company has more data on Chinese consumers than it does. Can’t have that.]
…In a statement, Ant said it “will spare no effort in implementing the rectification plan, ensuring that the operation and growth of our financial-related businesses are fully compliant.”
…”We will put our growth proactively within the national strategic context”, Ant said, adding that it will “strive to create societal value.”
…The regulators’ disclosure of Ant’s plan comes shortly after Ant’s sister company, Alibaba Group Holding Ltd., was fined the equivalent of $2.8 billion by China’s antitrust regulator, which accused the e-commerce giant of abusing its dominant market position to the detriment of rivals, merchants, and consumers. In addition to the record penalty, Alibaba agreed to undertake a comprehensive revamp of its operations and ensure its compliance with fair competition rules.
We have known for a while that Xi Jinping has been moving the Communist Chinese economy away from the “capitalist characteristics” initiated by Deng Xiaoping, and back toward the centrally-planned Communist style of economy. Many Communist Chinese companies from diverse industries have gone public on Western stock exchanges, and become very large. Papers like the Wall Street Journal have been slobbering over how wonderful the Chinese economy is, and how their home-grown companies have been expanding worldwide. Sometimes, I think that they lose sight of the incontrovertible fact that China is a Communist Country. This article may possibly open some eyes. Personally, I would never invest in any Chinese company, but I can’t control the mutual funds that do.
Published in Group Writing
Alipay no doubt will be the mechanism for the coming vaccine passport as soon as the Big Guy gets his 10%.
When we shifted our mutual funds a couple years ago, I specifically asked for one with no Chinese ties. The ChiComs may still have some interest in other companies, but least the ones we have aren’t outright Chinese, or they have no controlling interest . . .
One point is not a trend. But, one can hope the leaders of Red China are like the Bourbons of France.
I think we sometimes forget that China was one of the poorest countries in the world up until 1980. Even moderate reforms, like those of Deng in the 1980s, is bound to have some positive effect and fairly rapid growth. Despite this growth, China’s per capita GDP is still only 10,000 USD. The more the CCP stifles creativity and entrepreneurship with central planning, the harder it will be for China to sustain growth and technological development. (That is why they have to steal everything.) I think this hurts them in the long-term.
You may be correct about about the CCP’s stifling of creativity and entrepreneurship but with their success (so far) with the Belt and Road Initiative (sometimes called the Silk Road and One Belt, One Road), I’m not sure if that will really matter.
I believe that something like 80 countries have signed on to the Initiative; thus guaranteeing their future servitude to the CCP. In some way, I can understand an impoverished country in Africa getting into bed with the CCP but a country like Italy? Hard to comprehend.
If anyone wants to read an excellent account of how the CCP is attempting to replace the U.S. as the #1 global power, I highly recommend Hidden Hand by Hamilton and Ohlberg.
I am aware that China is still a poor country. They have a significant number of peasant farmers, whose methods are still quite primitive. Their youngsters move to the cities for jobs, but still return to the farm on big holidays. The CCP has issued edicts to the hinterland governments that they must affirm that their areas are no longer poverty-stricken; the governments do so, but they are lying and they know it. Their farms are tiny, and have few modern conveniences. They keep small numbers of animals, and the animals live in close proximity to the people, thus helping to spread all sorts of diseases. Remember the bad epidemic of African Swine Fever that decimated Chinese pig farms? It is still going around, but the Chinese keep that information private.
The Belt and Road Initiative seems to me more like the Soviet satellite states in Eastern Europe than a blueprint for global domination. It breeds resentment among the local populations and substitutes an aggressive foreign policy to mask domestic insecurity. I won’t pretend that I am an expert on this issue, but I find it hard to believe that a country with the same per capita GDP as the Dominican Republic is capable of supporting a program of global power. No doubt China want to challenge the US, but I doubt a centrally planned economy is not going to get them there. Command economies and mercantilist practices have been discredited.
A timely post. In one of those episodes of quantum weirdness that affect us all every now and then, I recently had a scare with my bank card, receiving an email that $1.00 had been charged to it from “AliExpress.” (Sometimes, $1 is charged to place a hold on the account while the actual charge is computed, especially as if it’s a credit card sale. Most of the time, this happens with gasoline purchases.)
Knowing this, and also aware that the listed payee doesn’t always correspond to an outfit I might have purchased something from (they usually tell you that when you buy online), I checked out “AliExpress” which, I find, is a “global commerce platform” based in Hangzhou, China. And yes, they’re a sister company of, and are owned by the same umbrella company as, AliBaba.
I’m very sure I’ve never done any business with the “global commerce platform” AliExpress.
So this email I received sent up flares for me. (I have both my debit and credit cards set up to alert me via email when any transaction is made. Highly recommended. The small amount of time it takes to review the messages is well worth it, and has already resulted in my having to get my card replaced when someone was using my account to buy…well, never mind.)
What was particularly weird about this AliExpress “transaction” was that it never landed in my bank account. So, in spite of the fact that the email came from the bank (which they acknowledged it did) the $1 debit never hit my account. It was almost as if it was a trial balloon to see if they could access my account, and perhaps one they later reversed so it never actually showed up as a debit. (Conspiracy theorist, thy name is “She.”)
Of course, I took remediative action. And I’m just mentioning this in case anyone else comes across something similar.
Thanks for this post.
***
This is the Quote of the Day. Our sign-up sheet for April is here and there are several days still available. We welcome new participants and new members to Ricochet to share their favorite quotations.
Another ongoing project to encourage new voices is our Group Writing Project. April’s theme is ‘April’s Showers Bring….‘ If you’re looking to share your own thoughts rather than those of others, please sign up for Group Writing too!
I don’t believe the comparison between the CCP and the Soviet satellite states is a valid one. The latter were already militarily subjugated. With the Belt and Road Initiative, countries are voluntarily inviting the CCP into their infrastructures. Aiding in this is the perception that the U.S. is on the decline (which might be more than a perception).
The question of their per capita GDP isn’t really an issue. The CCP has money to spend overseas and it isn’t shy about spreading it around.
Good points. Global power and influence can take a lot of different forms. Even within the Iron Curtain it took different forms. Soviet power exerted over Poland was not the same as Soviet power exerted over Czechoslovakia (and both were different from Soviet power exerted in Angola, which was different from Soviet influence in Cuba). We shouldn’t be worrying about whether CCP power takes a particular form so much as what effect it will have on us and whether/how we should try to do anything about it.
Of course it hurts them in the long run, but that’s after they’ve shackled our economy with Democrat cooperation. Once we’re back to more or less where we were in total real numbers we’ll be flat and less creative, less dynamic and less in charge.
I question whether China is really a Communist country..is their approach to the economy something that either Marx or Lenin would look on favorably? Seems to me it’s more Corporatism or Economic Fascism, and the ‘Communist’ part is a matter a branding and a projection of historical continuity.
Structurally they have become a hybrid, though nominally still Communist through the Party name and order. Chinese corporations appear to operate more like Fascist captives of the state, but Totalitarian in all the ways that matter. They are expanding their reeducation camps for Christians while also adding capacity to permanently hold more Christians and Uyghurs.
If the Democrats more and more resemble the CCP, and Big Business acts more and more like captive Fascist corporations, it’s because Xi is a lavish provider of bribes whereas Americans actually expect duty, honor, country. There is a reason Washington, DC is under military occupation.
Xi is getting more control over all the big public companies. Where they were allowed to operate quite freely in the past, they are being reined-in now. The Party is adding political commissars at most big companies, and their lines of business are being overseen and adjusted so government control is more obvious. They are also merging big state-owned firms in particular lines of business, such as energy and chemicals, to create state-owned “champions”. No Chinese company is out of the control of the Party. Huawei may say that they would never spy on other countries through their equipment, but it is widely known that, if the government asked, they would have to do so.
Huawei equipment has been shown to be performing surveillance missions in other countries, we are way past conjecture and suspicion. The tightening of governmental control of Chinese corporations has an obvious upside, while company assets will be weaponized, company management will suffer and real output will suffer. The well known quality problems will worsen.