The state controlling the market
The author is a Beijing correspondent of the JoongAng Ilbo.
China is changing rapidly. Under Xi Jinping, a regulation-oriented socialist state is accelerating. The justification is “co-prosperity.” In June, ahead of the centennial of the Communist party, China celebrated the achievement of “xiaokang society,” where basic living is guaranteed, and now co-prosperity has become the next goal. The wind of change is focused here.
The housing speculation ban has been in place for a long time, but recently, enforcement has been strengthened. It is not permitted to make transactions exceeding the amount set by the government’s real estate guideline, and the annual rate of increase is capped at 5 percent.
Private tutoring is banned by the law for educational equity and afterschool academies are shutting down. That’s not all. Salary reform for top executives of state-run corporations has already begun, and high-income celebrities are “ousted” without exception for tax evasion and scandals.
Above all, pressure from the authorities on financial capital and private companies has become a “constant,” just as the market feared. Alibaba was fined over 3 trillion won ($2.6 billion), and 34 Chinese IT giants, including Tencent and Meituan, are subject to control. In a socialist economy, neutral rules deciding winners and losers are not allowed. The power of the market is used to attain the state’s goals.
Chinese companies are keeping a low profile as the authorities want to reduce income inequality by preventing leading companies’ “winner-takes-all” structure. Lance Gore, a researcher at the National University of Singapore’s Institute for East Asian Studies, said that China is confident of dominating the market to achieve its goals after observing the merits and flaws of capitalism for decades.
Western media point out that China is going backward. Bloomberg reported that it is deviating from the experience of leading the state to prosperity and that the Chinese economy would suffer in the longer run. In contrast, Chinese state-run media say, “The West is putting a political label and saying that China will fail, but the purpose of regulations is to create a market environment for sustainable development.”
It is impossible to know whether the public actually supports government policies in China. The media and the public opinions are controlled. It is hard to openly oppose government policies in China. Last month, Chinese social media site Weibo made an announcement that it would freeze the accounts of 159,103 users accused of posting inappropriate content.
No one opposes the idea of co-prosperity. But it’s a different story if control is the means. Can China’s experiment of the state controlling the market succeed?