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Explained: Why is the Chinese govt going after corporates?
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Explained: Why is the Chinese govt going after corporates?
In case you haven’t heard, the world’s 2nd largest economy beat the crap out of its big corps this year & made Wall Street lose $700 billion.
Some say China’s autocratic government has gone crazy trying to revive communism. Really? What the hell’s going on?
Grab your popcorn 🍿
It started with Chinese government going on a killing spree of big-tech excesses.
Chinese consumer tech giants like Alibaba, Tencent & Didi were kings of the world in past decade.
But since late last year, wind suddenly blew the other direction.
Last Oct, the recording-breaking IPO of Jack Ma’s Ant Financial Group was pulled by the government. In July, it ordered app stores to remove the apps of Didi, the Chinese Uber, for data security violation.
So why is Chinese government going psycho?
Trick question. It’s not.
However sudden the changes in regulations may seem, it’s been a long time coming. Covid-19 delayed things & bunched together various regulatory actions that would have come out sooner.
Even though Chinese consumer internet market is huge, it’s more monopolized than in most countries, w/ ‘super apps’ like WeChat taking up entire market.
But big tech’s contribution to overall economy is dubious at best.
If crypto/web3 is the western version of giving power back to the people, cracking down big tech is the Chinese version of trying to do the same.
(If you disagree, no need to yell at me. I’m only the messenger telling you how you’d look at this if you were the Chinese gov.)
And what’s up with the Evergrande debacle?
For past 20 yrs Chinese economy has grown quickly. But much of it is “bullshit growth”.
Bullshit growth is accomplished by over investment. How does it work?
In a sense this is the sign of our time. Just different renditions in different countries.
The CCP is of course aware of the bullshit, but growth took priority in past 2 decades & much of the talk about income distribution was lip service only.
It’s the “Common Prosperity” szn.
Xi Jinping wants to make Chinese society more equal & competition more fair. And he thinks now that China’s economy has come such a long way, it’s high time to start solving income distribution puzzle.
Plus, Covid-19 exposed the social stability risk of high inequality & made the issue more pressing
(I’m sure the CCP watched the mob takeover of US Capitol w/ interest & took copious notes.)
The recent policy shifts, from regulating big tech to posing borrowing limits on real estate devs, are all trying to walk in that direction.
“Trying” is the keyword here. If these are easy problems, they would have been solved already.
(And the real estate market, fully aware it’s too big to fail, continues speculating on with abandon.)
So the government has to tackle this the only way it knows how— gradually, conservatively, with trials & error.
But is China going back to communism?
Hell no.
But here’s something more important.
Experienced venture capitalists bet on big industry trends & competent entrepreneurs, emphasis on the latter.
This is b/c startup is messy and future uncertain. But if the entrepreneur is experienced & capable, they’ll figure things out.
The same logic applies when you assess a country. Is the leadership experienced and flexible enough to figure stuff out on the fly when they’re trying to steer the country in new direction?
You can answer this by looking at what they did & how they did it in the past.
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