Why is President Xi cracking down on the private sector?
https://www.quora.com/Why-is-President-Xi-cracking-down-on-the-private-sector
What appears to be a CRACKDOWN to Western Systems Or Indian Systems is in fact very much something that is a part of a MIXED ECONOMY that China is
There are some laws in China that Private Companies have to follow which aren’t prevalent in any other country: –
- Social Responsibility Cess
Every Private Company has to pay a certain portion of their revenues or profits towards either contributing to building roads or homes or schools or community centers OR buying interest free infrastructure bonds payable after 5/7 years at no interest
- R&D
Tech Private Companies not under the Subsidy Program or under the 3 Year Startup Rule have to use a certain portion of their revenue to fund Research
For instance, My Son works in Shanghai Jiaotong University but his Research is funded by a major Chinese Tech company and his salary comes from that company
Private Companies either do their own R&D but if they don’t, they pay Universities to do Research
Additionally, Xi Jinping has passed a lot of laws related to: –
- Listing of Private Companies – The Rules have become much tougher for IPOs including a 3 Year Mandatory Profit Plus Maximum Valuation at 50% to 130% of Assets
- Technology Control – Unique Technology owned by Private Entities cannot be licensed or sold without Permission of the State
- Mandatory No Exit Plan for VCs – VCs cannot exit from their investment for minimum 2/5 years post IPO. It’s why 80% VCs have disappeared from China in the last year or so.
- Profit Cap and Listing Bans on Key Sectors – Xi imposed a Profit Cap on Tuition and Healthcare of 16% annually and banned strategic private companies from being Listed for minimum 10 years and listing value not exceeding 30% of Maximum Market Capitalization Potential
Is this a Crackdown?
China says No
China says it’s part of Common Prosperity
China says it’s the only way to ensure growth of a company helps the nation grow
For the Ultra Capitalist system, it’s absolutely a crackdown
Yet for those who understand China – it’s very much normal and routine
Take Alibaba
Despite their IPO plans and their Shadow Banking plans being scuttled by the State – Alibaba has filed many patents and have made astounding technological strides
They have their own core technology in 7 Areas now compared to only 1 in 2017
Baidu, Huawei, Tencent, Bytedance & Sensetime have all got Critical Technology Approved Licenses in the past 3/4 years
Outside China, in Asia – in the past 4 years – only Toyota and Samsung have managed the same
Of the top 20, Six are Chinese
In 2018 it was ONE (Huawei)
All of this after the harsh private sector laws came into play
Another example
China had 42 Skilled Certified Technicians to work with DUV Lithography machines made by ASML
Today they have 4,100
They expect this to rise to 12,000 by 2030
Netherlands has only 1,872
Taiwan has 6,300
So China has seen its workforce rise by 10,000% compared to 2015
So today when US imposed or forced Netherlands to impose a ban on servicing, China can scoff and show the middle finger
That’s because the State forced private players to fund the training of skilled personnel and getting them certified
Otherwise why would any Private Player want to pay for getting people trained in DUV lithography.
They would say “Why bother? We have Netherlands and Taiwan. Why spend money? Let’s raise profits instead and get share value higher”
Likewise, China who had no EUV skilled workers for servicing and maintenance until 2022 and 50 workers last year are expecting over 1300 workers by the end of this year
So I find these ‘Crackdowns’ beneficial
It’s one reason why China is still packing punch after punch despite so many obstacles placed in its path
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Common Prosperity
In today’s world, the Washington consensus believes that policies should benefit the top quintile of people at the expense of everyone below, because eventually that wealth will trickle down and support the rest of the economy. This is popular among capitalist countries as it benefits those with the most capital. China, on the other hand, has decided that the top quintile should suffer so that the bottom four quintiles can succeed. This policy is called Common Prosperity. https://en.wikipedia.org/wiki/Common_prosperity
What “cracking down on the private sector” really means is that the top quintile is complaining that they are being shafted by the government. This is genuinely true. It is, however, not because the Chinese government likes cruelty and does not tolerate competition to its power (this is what the anti-China people constantly assert). Instead, it is to allow for the existence of policies that benefit the masses:
David Fishman
@pretentiouswhat
https://x.com/pretentiouswhat/status/1836004698563981545
This is a long, wonky, data-driven, meandering thread about real estate & median lifestyles & home affordability in China.
I see a people discussing Chinese homes and wages and affordability on here think about it in a kinda one-dimensional way, and I hope this adds context.
Glenn
@GlennLuk
When people say “China is destroying the middle class”, they are actually referring to the upper quintile of Chinese society.
The 50th percentile Chinese HH is a family or worker that moved from the village into the city in 2011 and does not have full hukou yet.
5:54 PM · Sep 17, 2024
These two threads are great explanations on why narratives from the top of China sound so grim, but the country is doing just fine. It is also why you can’t really listen to overseas Chinese whose personal connections are almost entirely in the top quintile of Chinese society.
To be quite honest, the phrase “cracking down on the private sector” is a new neoliberal coat of paint over the very American practice of trust busting. It is an attempt to vilify what was necessary for American prosperity in the past, because such actions made life worse for owners of the markets. For Americans I would like to point out a basic phenomenon— do you really have local mom and pop stores anymore? For the vast majority of suburbia, they are a vanishingly rare occurrence, and nearly all are struggling against big box corporate stores. This is a clear sign that a bunch of trusts need busting, but our neoliberal consensus tells us that doing so would be “unfair” to those who have “earned their wealth.”
As for those Chinese policies, I think it is worth pointing out that our expectation, had China kept adopting neoliberal policies, was that the green trains of old would go away. This has not happened, much to my surprise (and to perhaps many others). I rode one of those trains back in 2017 and chat with some of the riders, and the explanation they gave was that these trains will forever be in service because the standing tickets cost 3–5 yuan each and are useful for rural folks who are moving goods into cities.
Jono dW
@jono_dw
https://x.com/jono_dw/status/1836204365130154127
More convenient and time efficient absolutely but the existing buses and slow green trains were more affordable surely?
David Fishman
@pretentiouswhat
https://x.com/pretentiouswhat/status/1836208514802553325
Actually most routes still have a handful of those old green trains for those who need them. Even a route served by dozens of HSR trains a day like Shanghai–Beijing still has a few.
Again check out the whole thread, Glenn points out a bunch of very basic socialist policies that never get mentioned in English language media.
The green trains make their money through the folks who buy the soft bed tickets (we did). It is a subsidy that goes straight into the wealth accumulation of the bottom quintile rural folks.
It is policies like these that give me strong confidence that China is a socialist state. Fascist states believe fundamentally in a social hierarchy, which makes it laughable whenever I see people asserting that China is “the most mature fascist state.” They are speaking strictly from a neoliberal lens, where fascism means “totalitarian state with capitalism,” and is ideologically defined in a way that makes fascism distinct from neoliberalism. Whether this convinces you or not is really a question of how one defines fascism— and of what inconvenient parts you are cutting out of the equation. (And just as a reminder, it’s a hard sell that a state is fascist if they have a requirement for all non-international university students to take courses in Marxist theory.)
Ultimately, if people are writing that China is “cracking down on the private sector,” they are trying to reinforce this image of a tyrannical government that brooks no challenge to its authority, while simultaneously pushing the Reaganite message that there is never a single good case in which wealth should be redistributed for the betterment of the masses. The reality is that we have a set of countries that are designed to support the existence and exploitative power of multinational elites, and a set of countries (a mix of left and right) that value sovereignty more and want better for the masses rather than their urban elites. This message is propaganda from the former, attacking the latter.
And just to get the conservative talking point out of the way here, no I am not “jealous of successful people.” I myself am in the top 5% of the US. What happened is that I look around, see how the economy and new development is essentially designed for people like me, and despair because I know that most people up here are here because they are opportunists and that all of the Americans who sacrificed for the betterment of their communities are left holding the bill. Those of us up here with hearts feel trapped because we can tell the system exists to be controlled by the greediest, most sociopathic Americans.
Why is President Xi cracking down on the private sector?
You can try to learn the Chinese government’s governance philosophy
The Communist Party must protect people’s livelihood, but private enterprises only have interests in their eyes. For the sake of interests, capitalists will sell out the people
Let me list two things:
When international grain players (such as the four major grain traders A, B, C, and D) shorted Chinese soybeans, they first spread the news of soybean production gaps everywhere, and even let the US Department of Agriculture release a false report of soybean production reduction, which caused panic and soybean prices to rise. Many farmers chose to grow soybeans because of the considerable returns. Chinese edible oil companies in panic bought a large number of American soybeans that had already risen in price. Then, when the soybeans were still being transported on merchant ships, they announced a large amount of soybean storage, causing the price of soybeans to fall below the bottom line, causing thousands of Chinese edible oil companies to lose all their money and be acquired by them. International grain traders therefore controlled China’s main oil extraction industry.
Although this caused many Chinese soybean farmers to go bankrupt or even commit suicide, democratic citizens in democratic countries believe that this is a market behavior and the government should not intervene.
What role did Chinese private enterprises play in this matter?
Small businesses cannot see the market rules clearly, and consortiums with huge funds choose to cooperate with ABCD. They think that since international grain traders are profitable, they can also follow suit and make a fortune. They do not consider the losses of farmers.
Therefore, when international grain traders come back and intend to short Chinese grain, the Chinese government warns and restricts the participation of Chinese private enterprises, while letting state-owned grain enterprises purchase Chinese grain at a loss and release it at a normal price. International grain traders rely on their strong funds and intend to eat up all the stocks of Chinese state-owned enterprises, but Chinese state-owned grain enterprises deserve the second food war with their massive stocks. Although they also lost a lot, they only lost money. Farmers did not go bankrupt, and many people died less in China. Although some capitalists lost all their money in this game and jumped off the building, such people deserved it. The Chinese government has already warned them.
Darian Brook If you doubt everything, you can believe your own eyes. China has a 240-hour visa-free policy. You can go to Xinjiang to see for yourself. Many Europeans have already done so. You can also ask Falun Gong survivors in person and let them tell you what the false reports of the United States will not write, instead of Americans taking a few photos of Chinese textile factories and saying that this is a concentration camp. In addition, I came to the Internet here because Americans came to the Chinese Internet first. TikTok refugees told me that I can feel the stupidity of Americans here. I really believed your nonsense about freedom of speech. There is no freedom of speech here now.
Darian Brook You look at everything with prejudice, so you put all kinds of labels on things before you see them, as if you know China better than I do as a Chinese. You are telling a Chinese: No, you are wrong, that is what I think China is like. You haven’t even been to Xinjiang to take a look. You don’t believe me, so you think I am lying, but I am 100% not lying. You are just a stubborn person who adheres to double standards.
Darian Brook In addition, no one is paying me, no one is writing the script, and there is no freedom of speech in the United States. For example, you are now unilaterally restricting my right to speak.
Darian Brook I saw a lot of Americans sending videos, sharing their lives, or writing texts using translation software on the website. There are a lot of them, and these things are also being discussed on American social media, so I believe that Americans have flooded into Chinese social software. Now you tell me that this is fake, this is not true, OK, I can believe it.
Then, adhering to the principle of fairness, which eye of yours has seen China persecuting the Uyghurs? And forcing them to work? You would rather believe something you haven’t seen, right?
You blocked me because you think you have freedom of speech. This is the double standard that Westerners always like. Obviously, you don’t have the ability to distinguish real information. In 1942, when there were no smartphones, the Germans massacred the Jews and left tens of thousands of video materials and notes. Now everyone’s mobile phone has a camera. If you go hunting in the forest, 50 satellites will fly over, but the Americans can’t get a few decent video materials? The report you gave only has text, no video materials. Do you believe that Falun Gong can become a god? Falun Gong will tell you yes, you can become a god. When I was in school, Falun Gong was very serious, so I have a clear and complete impression of Falun Gong. I believe that practicing Falun Gong can make you become an immortal. When they think they are almost there, they will not eat, then pour gasoline on their bodies and set them on fire. To this day, there are still Falun Gong survivors who set themselves on fire in China. Her face was destroyed. It was her mother who set her on fire. Also, your numbers are not accurate and are probably made up.