China: The Imperial Palace of Fools?
I don’t get what China wants presently. They crave to replace the United States as the world’s de-facto superpower but are unwilling to shed the extra weight of their political baggage. Their policies and actions hardly ever suggest their clarity on their vision as time and again they implement astounding policies which counteract any economic progress or global acceptance. The country is in dire need of a PR manager which they don’t understand as is evident in their blockbuster regulations like the complete halt of the Ant Financials IPO and the regulatory notices slapped on Didi days before its IPO. These actions reverberate rather unflattering messages in the global investor communities, especially so at a time when China will need the support of such global investors to help tide over its impending debt bomb.
So what is China doing exactly? An excellent question with an equally excellent answer. No one knows what they are doing. That’s right no has or can, for that matter, comment on the functioning and thinking of the Chinese. They are, my friends, the uber-chic 21st-century cousins of the Soviet Union. They hide their dictatorship behind the convenient address of communism and use the jaded walls of the Communist Mansion to plot their ultra-secret Plan Of Actions. Even then, we cannot just forget their stunning growth, in the past two decades, from being nothing to becoming the factory to the entire world. Their rampant development, technological prowess and farsightedness make them stand out in a world dominated by Western powers; all of whom in fact vie for these very characteristics.
It is indeed pitiful to see their failure to channelize this brilliance towards a more robust political agenda that doesn’t hinder their economic growth. Yes, data is a pressing issue for lawmakers across the globe but none have taken rash actions like China has. All have initiated proceedings to combat this newfound issue, but none have slapped notices on companies at the blink of an eyelid. China’s love for its tech companies seems to have evaporated as the country has been seen bullying the companies not only on a smaller domestic platform but also a much larger and far more disastrous global platform. The implication of such actions seems to be lost on the government as they seem motivated and ready to re-enact these antics again for the amusement of the global community.
Perhaps the gravest assault perpetrated on the tech sector was the outright ban of the Ant Financials IPO. Yes, Jack Ma’s disparagement was unacceptable and needed to be dealt with severely but the answer wasn’t even anywhere close to the ban. They could have very well fined or initiated proceedings against Ma, even though that too sounds completely outrageous. I did not know that exercising free speech was a crime right up until China went ahead with its economic debacle last year. Using the ban to settle personal beef is the biggest sign of their deranged attitude towards their economy. The government’s agenda of self-prominence is not only selfish but detrimental to the long term prospects of the nation. The government must back away from many of its proposed policies because those policies will hurt it the most on the global stage.
It is indeed pitiful to see their failure to channelize this brilliance towards a more robust political agenda that doesn’t hinder their economic growth.
From planning legislation, to prevent Chinese firms from seeking foreign IPOs, to launching targeted attacks on the tech sector is not the PoA(Plan of Action) of a country angling a supreme growth curve. Their actions, proposed or implemented, signal activity that is going to hinder the growth opportunities for Chinese firms. Blocking foreign IPOs will restrict foreign participation as it would ring-fence the prospective investors to the Chinese; and any fund, firm and subsidiary registered in China. This could have ramifications across the Chinese economy as firms will not only have a limited capital base but also a very tight wiggle room to grow. China’s anti-global attitude coupled with these proposed restrictions on foreign capital will together sound the death knell for the phenomenal growth they achieved in the past years.
Their economy will not evaporate because they have a huge demographic factor playing to their advantage. This would help sustain the companies but not necessarily provide a compelling growth opportunity as most of the population has already been spent. They do not have an untapped marketing potential like the Indian rural population which can help them escape the prison chains of the Chinese government. Case in point, Huawei was the poster boy of China’s technological prowess as the company was poised to lead the smartphone category with a huge margin point lead ahead of the Koreans. Their smartphones had captivated audiences and critics alike for the sheer value they offered with feature-packed flagships at pricing undercutting the Americans. This may sound very much like One Plus but the two couldn’t have been more poles apart as Huawei was also the flagbearer of cutting edge innovation and technology in the industry. All these rosy prospects evaporated the moment China launched a full-fledged war with the Americans. The company was the very first MNC to become victim to the government’s unhinged foreign policy and they still haven’t fully licked their wounds as the founder’s daughter is still being prosecuted in Canada.
Ultimately the country needs to realize that they will have to draw the line somewhere. Presently, there is a big disbalance between the corporate sector’s expectations and the government’s policies. While Chinese firms, and also the government want to go global in a big way the foreign policy of the country will be a huge sticking point in these endeavours. China’s attempt to dominate crucial industries like semi-conductors may be short-lived as the G7, with its staggering strength and power is planning to seek and build alternative supply chains for many of the industries China is also vying for. In the short term, China may win but ultimately it will be the foreign policy that will decide the winner of this match in the long term. China could not champion a thoroughbred like Huawei on the global stage even when the company was enjoying unmatched success and reception from customers and investors globally. Their inability to create a truly global smartphone giant is testament enough that in this game no one factor will decide the crucial outcome of this tussle. There are multiple variables involved here, the biggest of which is the foreign policy.