Opinion: China is tightening its grip on outspoken CEOs. That is bad news for entrepreneurs.

Many foreign managers, investors and government officials, who once thought that China would gradually emerge as a democratic market economy, now fear the end of Chinese capitalism. Many feel a paradigm shift towards Maoist principles, guided by an authoritarian regime now more powerful than ever.

But the truth is that this is not a paradigm shift. The West is just beginning to realize what China’s self-selected label of “Chinese-style socialist market economy” is all about. China’s leaders, current and past, have at no time committed to Western-style capitalism. The government has always maintained a high degree of direct political control over the economy to ensure the long-term survival of the regime. That control rules out a non-intervention regulatory approach.

In the 1980s and 1990s, markets for information, capital, land use rights, and natural resources were partially liberalized: planned prices were replaced by market prices and gradually new non-state competitors entered the scene. But these markets were still strictly regulated, giving political leaders ample latitude to influence market outcomes when deemed necessary, not only for economic and social reasons, but also for political reasons. the government it continued to influence decisions on loans, public contracts, and land allocation.
In addition, the government has continued to operate state-owned companies to maintain control of critical industries, such as telecommunications, banking, energy, and mining. Although the government has gradually allowed the emergence of a thriving business sector, with millions of small and medium-sized enterprises providing employment to the masses, it has simultaneously strengthened and modernized the country’s state economy by auctioning off small and medium-sized enterprises. large companies, often even former company managers, employees or outside bidders, to concentrate state support and financial resources to modernize and expand their large corporate giants. With considerable success, at least in terms of scale: 82 out of 135 Chinese corporations listed in the Fortune Global 500 Index are state-owned.
The Xi Jinping administration is eager to frame current policies targeting the private tech economy as part of a broader effort to reduce extreme income inequality. Reference to “common prosperity” – a term initially used in 1953 – evokes the ideas of Mao Zedong on the equitable distribution of wealth. The narrative is engaging, especially for those who lagged behind in the country’s rapid rise to global wealth and power. But as long as the government avoids standard fiscal tools to redistribute wealth and reduce income inequality on a larger scale, “common prosperity” will remain elusive. If inequality were really a central political concern, why not rely on systematic tax reform and the extension of public services? Why target selected entrepreneurs and their businesses at the cost of creating uncertainty for investors and entrepreneurs?
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The timing of the events suggests a different motivation. The start of the new era of intervention coincides with Ant Group co-founder Jack Ma’s outspoken criticism last year of the country’s antiquated financial regulation system, and the government’s immediate decision to withdraw. Ant IPO. Ma’s business lost billions in value. The lesson is clear: Even China’s highly visible tech champions are not out of the government’s grasp.

Of course, China’s high-tech entrepreneurs have long been aware of the delicate balance they had to strike to scale in their specific niche. Most of those who have been successful so far have done so thanks to close business-government relationships and active support of government priorities.

However, as the technology gap with the West narrows, China’s desire to self-sufficiency gets up and once servile entrepreneurs they have become increasingly outspoken in their criticism of China’s economic system. Government control is tightening to bring back into the fold those who could pose a threat to the government. communist party. Some of China’s once-famous entrepreneurs have resigned, including Colin Huang, former CEO of e-commerce platform Pinduoduo, and Zhang Yimin, founder of ByteDance. Ma, once an outspoken and critical commentator on current affairs, avoided public remarks for months. For those tech entrepreneurs wishing to continue operating in China, they will have to seek even closer business-government alliances, especially those that own and manage resources that the government deems valuable for their own survival.


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