China is becoming more communistic

I’ve written quite a bit about China’s international moves to expand their sphere and scope of influence, and about the US’s and EU’s response — and all of that is certainly of global economic import; but this week China made a really interesting internal move. Remember, China is the second largest economy in the world — which also means it’s one of the largest markets in the world. You may not see this in your day-to-day life, and may not even know anyone that does business in China, but, just as one example, Ford sold more than half a million cars in China last year, and Apple is selling more than 3 million iPhones per month there. It’s a big market, and not just for Chinese companies. And all of that makes it all the more problematic that Xi Jinping has basically announced a public plan for the communist party to take control of private industry. Everyone in the West was already concerned about party influence in private industry (hence the recent TikTok kerfuffle and the ongoing, global Huawei issues), but this makes it public. Of course, one could read the announcement from Beijing as far less worrisome than that — all it says is that some opinions are being offered:

In order to thoroughly implement the major decisions and deployments of the Party Central Committee, to further strengthen the Party’s leadership of the private economic united front work, and to better integrate the wisdom and strength of private economic personnel to the goal and task of achieving the great rejuvenation of the Chinese nation, the following opinions are hereby offered.

What are those “opinions”? Well, there are 100 of them, probably chief of which are private businesses will need to have a certain number of CCP registered employees, and that one of the goals is to “continuously improve law abidance and moral standards of private citizens”.

Anyone who thinks this is something less than the government taking control of private industry needs to go read some history on the USSR.

The question, though, is what does this mean for the rest of the world, and China’s strategy? The Chinese don’t throw these things together at the last minute, and they don’t focus on short-term plans: even if this is just a Putin-esque consolidation of power (and money) into Xi’s hands, this is part of a longer-term strategy. And it seems very, very certain to exacerbate tensions between China and the developed world. In fact, it seems certain to lead to far more restrictions on Chinese companies than we’ve already seen. So what’s going on here? One possibility is, of course, that China is looking inward, and perhaps becoming isolationist. That, however, seems incredibly unlikely to me. Instead, I see this as them working to draw a clearer and brighter line between them and the rest of the developed world — with the ultimate goal of getting the developing world on their side of that line. If that’s true, then there’s going to be a bigger and bigger economic proxy war between the US and China in developing countries — and this almost certainly spells disaster for the developing world. Look at how well things worked out for Afghanistan. If you’re investing in or working with the developing world, the next few decades are going to be rough, and you’re going to have some hard decisions to make. On the other hand, now is probably not a bad time to be a metaphorical pirate — strife creates lots of opportunity.

Posted in Economy, Global Business, Newsletter, Politics and tagged .

Chris Richardson has strong opinions on just about everything. Just ask.