Source : https://www.bloomberg.com/news/articles/2021-07-07/down-831-billion-china-tech-firm-selloff-may-be-far-from-over
The Chinese government has been making some very unusual moves of late that have made the headlines around the world. Had it not been for the continuing global pandemic and the events in Afghanistan, these moves would perhaps have made even bigger news. Nevertheless, it’s worth trying to understand what is happening.
This is a good twitter thread listing down the changes (which are ever growing of course):
This twitter thread from a few months back does a good job in trying to explain the phenomenon (especially pt 2 I noted above).
And so in conclusion, China is taking a sharp anti free market turn.
Some time back, Noah Smith had an interesting column to discuss these happenings in China.
It is well worth reading in full, but the concluding paras to the piece seem to be getting towards something important.
After the Cold War, our priorities shifted from survival to enjoyment. Technologies like Facebook and Amazon.com, which are fundamentally about leisure and consumption, went from being fun and profitable spinoffs of defense efforts to the center of what Americans thought of as “tech”.
But China never really shifted out of survival mode. Yes, China’s leaders embraced economic growth, but that growth has always been toward the telos of comprehensive national power. China’s young people may be increasingly ready to cash out and have some fun, but the leadership is just not there yet. They’ve got bigger fish to fry — they have to avenge the Century of Humiliation and claim China’s rightful place in the sun and blah blah.
And so when China’s leaders look at what kind of technologies they want the country’s engineers and entrepreneurs to be spending their effort on, they probably don’t want them spending that effort on stuff that’s just for fun and convenience. They probably took a look at their consumer internet sector and decided that the link between that sector and geopolitical power had simply become too tenuous to keep throwing capital and high-skilled labor at it. And so, in classic CCP fashion, it was time to smash.
And so, while the common and basic explanations seems to be that the CCP is cracking down on various types of businesses (some of which may be becoming too big for the CCP’s liking) and organizations to further increase their control of Chinese business and society, but if we think a bit deeper there seems to be a definite method to this madness. The Chinese have recently started talking more about “Common Prosperity”, which ties in nicely with these governmental actions and crackdowns.
A combination of
Classic communist concerns above wealth inequality,
Populist concerns of making things better for the middle classes; and
Nationalistic concerns of channeling capital and labour towards efforts which increase China’s national power and prestige rather than purely consumer/ market driven activities as well as keeping foreign capital out of key Chinese assets;
seems like a good way of understanding what is going on.
Few years back in India, the funny “Aadarsh Balak” memes were quite popular. China, however, seems to be far more serious about their Aadarsh citizen of the future. He or she will not be wasting time on video games or fan clubs, spending money on cosmetics and preferably won’t be working too much on improving “Like buttons” on social media platforms. Rather he or she will be working on AI or some advanced missile technology helping China achieve world domination, all this facilitated by the Chinese state’s interventions making housing , education etc cheaper for the middle classes. Or that seems to be the narrative developing. I think the world has probably not seen such a concerted effort of capital and labour allocation by a rich (relatively) and dominant nation state in the recent past. Time to see if this scale of social engineering works as intended.
Before concluding, I think China has one more goal in mind. We hear a lot about cultural exhaustion and decadence of the west. In my view, China is ALSO trying to pre-empt and prevent decadence that comes about from wealth, comfort, leisure, consumerism, tech & social-media etc and taking active steps to shape a citizenry that is more in sync with it’s collectivist and nationalistic goals rather than let it drift towards a more individualistic and decadent trajectory that it has observed in the west.
PS: This is an excellent podcast to understand in further detail what’s going on: