Reformability of China

Xi Jinping cemented his power, becoming President for life, creating the potential for a key-man risk in China (1). Chinese SOE’s are responsible for 45% of Chinese debt and could pose a risk to free enterprise in the economy (2).

China moves further down the road of totalitarianism and central economic planning, making use of advancements in big data and AI (3) while propping up GDP growth with excessive building projects (4).

China’s Social Credit System is an elaborate plan to control people’s behaviour and turn them into “model” citizens, and it seems to be working (5)!

Potential crack down on Chinese shadow banking system could lead to losses for foreign investors (6).

Regulators in China have allowed global asset managers including JPMorgan Chase to raise funds from Chinese onshore clients for investment in offshore hedge funds (7).

What direction Xi Jinping will choose in the future is, as of yet, unclear. However, previous movements seem to indicate that he would be unwilling to bite the bullet and decrease growth and asset prices in order to slowly resolve their over-indebtedness problem (8).

China’s grip on both their citizens and on economic activity is getting tighter. In the long run, that can be detrimental for innovation and the development of a real knowledge-based economy, but in the short term the Chinese government can allocate and control its resources and thus preventing any major crisis.

China slowly adapts a more open and transparent system. Nevertheless in the near future only very specialized and local experts can perform good investment and can deal with all the creative accounting and fraudulent practices among Chinese corporations.

 

References

  1. Party Fears Two

  2. Are China’s state giants reformable?

  3. China Uses ‘Digital Leninism’ to Manage Economy and Monitor Citizens

  4. Visualizing China's Keynesian Utopia

  5. China has started ranking citizens with a creepy 'social credit' system

  6. Foreign AMs hit roadblock in China

  7. China eases capital controls as cash outflow fears subside

  8. China: Japan 1970 Development, Japan 1989 Debts