Aug 18, 2022
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New stars of Chinese business

In China, embezzlement worth more than $463,000 is punishable by execution

About five years ago, on a business trip to the Middle Kingdom, I talked about the Chinese economic miracle with a millionaire owner of a factory that produces aluminum products. Among his comments on the success of the Chinese economy, I heard this one: “I, the former secretary of the factory party committee, now the owner of the plant, and my former director is a party organizer.”

Such a simple transformation, multiplied by the traditional Chinese trust in power, makes “socialism with a Chinese face” quite competitive with European capitalism. Thus, about which the British trade unionist and publicist Thomas Dunning (TJ Dunning) XIX century, he said: “Provide 10 percent of the profit, and capital is ready for any use, at 20 percent it becomes lively, at 50 percent it is positively ready to break its head, at 100 percent it violates all human laws, at 300 percent there is no such crime, on which he would not risk, even under pain of the gallows. If noise and scolding bring profit, capital will contribute to both. Marx later quoted these words in Capital.

Unlike a typical capitalist, a Chinese capitalist, no matter how much he stuffs into the money, cannot dictate or impose his point of view on the authorities. Of course, he is also always ready to bribe this government, but since 2016, a law has been in force in China, according to which embezzlement in the amount of more than 463 thousand dollars is punishable by execution. In 2018 alone (there is no recent data), 620 thousand officials were punished for corruption crimes, among them 51 at the level of ministers and heads of provinces. Execution as a guarantee of a clear conscience is valid in China. However, this is not the only reason why my director of the plant declared without hesitation: “The Party will say to return the plant to the state – I will return it.”

Having entered into perestroika almost simultaneously (we have Gorbachev’s, they have Deng Xiaoping), the two countries got very different results.

What about today? What successes does Chinese socialism with a capitalist engine show? An illustrative example. The richest man in China, whose fortune is estimated at 61.3 billion dollars, Jack Ma has recently been a “business card” of Chinese entrepreneurship. Two years ago, his fintech company Ant Group was preparing to enter two exchanges at once – Shanghai and Hong Kong. The triumph did not take place, because a couple of weeks earlier, at a summit in Shanghai, Jack Ma criticized the Chinese authorities for hindering innovation. In response, Beijing “suspended” the listing of Ant Group, and Jack Ma himself disappeared from business radars.

After a conflict with the Communist Party in December 2015, the founder and head of the investment holding Fosun International, Guo Guangchang, who was called China’s Warren Buffett, lay low – his company with assets of $ 115 billion invested in Asia, Europe and North America. In January 2016, the same thing happened to the head of an inexpensive clothing manufacturer. Shanghai Metersbonwe Fashion & Accessories billionaire Zhou Chengjiang. In March 2020, just after he published an essay online criticizing the Chinese government’s handling of the “pandemic”, construction magnate Ren Zhiqiang disappeared from the press.

It is naive to rely on the opinion of Western analysts who lament the fate of Chinese entrepreneurs and claim that the CCP is thus eliminating the growing threats to its power from business. In a country where the gulf between rich and poor is the deepest in the world, only tough (and revealing!) party supervision of the conscience of the nouveau riche millionaires, growing like raincoats after rain, saves the country from a social explosion. Over the past 10 years, China has lifted more than 700 million citizens out of poverty, and no country in the world can match this achievement of Beijing.

However, he writes Economist“in Mr. Xi’s China,” new names and companies are rapidly emerging, which the West can only envy. According to one of the leading American providers of information for professional participants in the financial markets of the company bloomberg, participants have raised a record $58 billion in initial public offerings in mainland China this year, up from $19 billion in the US over the same period and $5 billion in Hong Kong. Plus, about 1,000 more Chinese firms are lining up to go public.

Since the turn of the century, China’s private sector has become one of the most dynamic in the world. It already accounts for more than half of the market capitalization of China’s top 100 listed companies. The private sector employs four of the city’s five workers—about 150 million people. Of the top 500 firms in the world by revenue in Fortune’s rankings, thirty-two are privately held companies from China, while in 2005 there were none.

Over the past two years, a dozen newcomers to China who have made a fortune have amassed a fortune of $167 billion. As The Economist admits, having talked with several new “champions”, their mood is surprisingly upbeat. They are inspired by the fact that China aspires to become the dominant superpower XXI century, “which is both feared and admired.” The Celestial Empire is aiming to take the place of the United States, decisively ahead of the Americans, for example, in terms of the pace of construction of the navy: the Chinese Navy is already larger than the American one in terms of the number of ships. It is inferior to the United States in terms of aircraft carriers and nuclear submarines, but is superior in many other respects. In a year, Beijing introduces into the fleet warships with a total displacement twice as large as the United States.

Founder of Nongfu

China’s economic and technological rise is unique. The combination of social and ideological leverage that allows Beijing to keep its capitalists in check is also unique. Comrade Xi’s plan for private enterprise reform unveiled. The Chinese President called on a new generation of entrepreneurs to “dare to start a business,” promising continued support for start-ups in areas the government considers a priority: cloud computing, clean energy, high-tech manufacturing. According to Comrade Xi’s plan, Beijing wants to create 1 million innovative small and medium-sized firms by 2025, 100,000 of which will receive the status of “specialized new enterprises” and 10,000 of which will receive the status of “small giant.” The status is accompanied by a state share in the authorized capital of the company, access to industrial parks and other advantages in terms of capital and access to markets.

“Little Giants Xi” is attracting investors, gaining access to technology parks like the Zhangjiang Robotics Valley in Shanghai, home to 150 R&D centers, more than 24,000 companies and 400,000 employees. Local authorities command the Valley.

Comrade Xi’s idea is quite understandable: he wants private firms to fill all parts of the “supply chain” around the public sector of the economy, and not compete in the market for customers. Serving society, helping the state, will private business lose its dynamism? Judging by its commercial success, hardly.

cover photo: REUTERS/China in Zhuhai

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