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Author: Editorial Board, ANU
Your friends on the left will be ready to tell you about the contradictions between capitalism and democracy. Similarly, the hidden influence of big business can be a bulwark against authoritarian governments’ desire to monopolize political and social control.
Today’s China is neither democratic nor truly socialist. However, for those reasons, it is the most prominent challenge in the world to create certain tensions between the markets and the new national agenda of the party-state and an undoubted advance in the country’s political, economic and social life.
As Yvette explains in this week’s lead article, China’s technology industry has been a key area where these tensions have played out in recent years. The technology sector is unique in that the leadership of private companies – often founded by charismatic and outspoken entrepreneurs – plays a major role in the SOE sector. According to him, these companies’ ‘rapid growth in size and wealth, as well as evolving business models, will inevitably create new challenges and uncertainties’. A key component of government demand is the amount of user data stored by technology firms and businesses rather than government demand.
These are not unusual tensions in democracies and other polities, whose solutions are not as clear or clean as we sometimes pretend.
In China, not only private actors, but also managing information in China and ensuring that it is used for the benefit of the Party and the public remains a key logic in the management of the Chinese Communist Party. This logic is enshrined in the Data Security Act and the Personal Data Protection Act, which together encourage the localization and optimization of data by public private organizations. Alongside this, tech companies have been employed as agents of the government’s industrial policy to boost China’s leadership in critical technologies, providing subsidies and government investments into tech conglomerates.
Moreover, as the real estate sector plunges, the government is rightly concerned about the vulnerability of the financial system, and fintech companies have become an increasingly important source of consumer credit, drawing the ire of regulators. “Despite the importance of financial technology,” he writes, ‘without adequate collateral, excessive microcredit can create a financial bubble, posing a systemic risk to the national financial system’.
After Jack Ma and Ant Group – the parent company of Alipay, the world’s largest e-payment service – were effectively forced out of business and pulled out of China, it became an example of the technology crackdown when authorities decided to make an example of it. . Much has been speculated about the political motivations behind Man’s fraud, but Seaton Huang argued that aside from politics, ‘Ant’s correction was deemed necessary because of concerns that it could overtake the functions of traditional state-run financial and banking institutions’. . Alibaba confirmed on May 19 that it will publicly list its cloud services division in response to increased scrutiny from Beijing.
As in other countries, there is real public interest in China for technology sector regulation to contain the growth and power of the industry. But Beijing’s agenda goes beyond disciplining what it calls cowboy entrepreneurs and controlling public loyalty. The big-picture effect of the regulatory sticks and carrots applied to technology companies is a waste of strategic leverage to demonstrate the sector’s political independence and at least partially redirect it toward development and national security goals.
The picture is a resurgence of state capitalism under Xi, which the IMF says could slow China’s ability to shift from its current investment-led growth model to a model of domestic consumption and efficient capital allocation. . In the year In February, the IMF projected China’s GDP growth to 5.2 percent by 2023, but it singled out the SOE issue.[s]Fundamental policy trends are dimming medium-term growth prospects amid weak productivity growth, largely due to the declining role and business activity of low-productivity firms owned by the state.
The implication is clear: a false economy exists where the national economic advantage lies in using government regulators to direct corporate behavior to government ideals. It is also a mistake being made in Western capitals as protectionism and large-scale industrial policy rear their heads again. But China is grappling with looming demographic challenges and problems that arguably still have the potential to double down on its economic model, replacing less efficient use of public funds and corporate capital and selecting state winners as sources of innovation. Growth model.
Ironically, the concern about using industry to serve the government’s vision of national strengths will in the long run inhibit the economic freedom that will make China prosperous and a center for the global economy.
The EAF Editorial Board is based at the Crawford School of Public Policy, College of Asia and the Pacific, Australian National University.
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