"The nascent consensus on China also reflects that fact that Beijing has come to represent a major ideological threat. In the 1990s and early 2000s, it was widely assumed that ideological conflict was a thing of the past, because Beijing would eventually liberalize both economically and politically. Now, that rosy scenario has largely been abandoned." was my personal belief as well. Feeling quite betrayed.
（about google/Silicon valley) “To help an authoritarian regime strengthen its power while recoiling from involvement with the Pentagon bespeaks a special kind of corporate moral illiteracy. It is also short-sighted, because American firms will lose out if China becomes the technological, economic and geopolitical superpower of the next century. And, of course, it undermines any strategy that requires harnessing private-sector innovation to enhance U.S. national security capabilities, while also carefully calibrating U.S. economic engagement with China to limit the creation of dangerous dependences.” As I posted earlier. Again WTF, google.
Below are collected from my notes in a talk:
About China's industry over capacity and the "one belt one road" project, or, as people who know about Chinese internal politics like to say, it is about communist party officials and State Owned Enterprises projecting domestic political power overseas.
How is that?
Let's say a party secretary of Hebei province is newly elected appointed by the higher ups. He needs to demonstrate his ability for leadership to the communist top leaders. The benchmark for this in China has been economical development, that is ever since the "opening up and reform" era has begun. So that is GDP. How does one juice up GDP? 3 ways, as economists tell us: Consumption; Export; Investment. Consumption is by the common folks, he has some control but not directly, and more importantly, it takes too long. Export is from... well America, mostly outta his control. Investment, however, is within his control. And so he decides to build a huge new steel manufacture plant. Because it offers a lot of jobs (social stability, yes?); it is big, annual production value is in the billions; state owned lenders like it, because it needs a lot of capital. So, Hebei does it.
The plant offers multiple benefits. GDP check; Jobs check; Lending check; Provincial production check... Most importantly, it offers great benefits to the party secretary personally. The steel plant needs raw minerals, yes? My son will be in charge of importing it from Australia or Brazil. The plant needs long range transport, yes? My nephew will be in charge of running the transportation company. You need to dispose industrial waste, yes? My some other relative or friend will provide for that.
Seeing these benefits, all the other provinces replicates it. "China needs steel," they say. Indeed, housing, roads, railways, cars, everything needs steel. Xinjiang, Inner Mongolia, Shanxi, Gansu, Heilongjiang, Liaoning... Almost every province invested in steel. And it sells well. If it doesn't, no matter, the steel plant will supply the province itself via local protectionist policies. The province can be self-sufficient in steel. No problem! Thus, China's steel production becomes the first in the world.
Steel is like this. It is also like this in other sectors. Concrete, glass, bricks, railways and subways... Automobiles. Almost all provinces have car manufacturers. From Shanghai to Guangxi. Car supply is over flowing. But that doesn't matter. You! Local taxi companies! You will not use cars from other provinces, but only from our own province - Such is "state policy"! If one visits China, the taxis in every province is different. They're all from local manufacturers.
Every county, city, province needs his own thing. Everybody is replicating everybody. "Eastern China is more developed, we at the western areas can't rely on them and buy from them! We need our own as well." There is no innovation, no new ideas, nothing, just everybody copying everybody. At the beginning, this sparked inter-county economical rivalry. It was a good thing for progress because the economy was so backward. But it gradually spiraled to the province level and became hugely over-blown. It has exploded.
Is it due to demand from a free market? Of course not.
If one is in a position to check, the production chains of such industries are filled with government officials' relatives and friends. This is where wealth comes from.
A company being big means being influential. Your company is employing 40 or 50 thousand ppl. While the company may be losing 400 or 500 millions a year, it doesn't matter. You are a heavy weight. The province secretary is your friend; the state bank owner will meet you; the treasury department director will meet you. Because you are big. And will continue to be bigger - and will ofc continue to lose more money, but nobody cares. You, cannot, die. We will further honor you with a title, like a National People's Congress representative，or even a member of the Political Consultative Conference. Your survival is vital, because party officials' political power is riding on you. This is a source of power.
--OTOH, you might be a very successful company, being innovative, offers good products to a market sector where there's strong demand/severe lack of goods, has good marketing strategies, with 100% yearly net gains. The only problem: you're only employing 40 ppl with a value of 40 million. Sorry, nobody cares about your survival. You are too small and would have no friend in high places, even a mayor wouldn't meet you, banks won't lend you money. Tomorrow a policy might come out stating your business is illegal - either pay a heavy fine and adjust your business, or liquidate. Your choice. The solution, as advisors offer to these companies: sod your net gains. You are to rapidly expand. When you become big, you would have power. You would stay ahead of policy changes; you would get easy access to capital; you would be a NPC representative and meet core political leaders. This is survival. Winning or losing money? That doesn't matter.
Anyways, the central government sees this can no longer continue, and asked to put a lid on things. But in doing this, the central government isn't suppressing production output. It is suppressing local government officials political achievement, hence his political power, and secondarily his wealth -- in China, as previously demonstrated, power dictates the distribution of wealth. It is also depriving the survival of big business owners.
So "cutting over capacity" has been going on for years, to no avail. It started when steel production was at 600mil tons. It grew to 1 billion tons while the capacity is being "cut". Right. Well some did indeed get cut. The small ones. Steel plants below 5 million tons are to be disassembled - "state policy" said. State Owned Enterprises got the news first. Well fine, I'm gonna upgrade my plant to 8 million tons first before the policy comes out. Smaller privately owned plants have no such access to political info. When the policy comes out they are like "what?!" and are forced to close. This did nothing to reduce capacity - remember the SOEs' upgrade - except making the entire economy less free and more state party owned. "State goes forward, people goes backward." As the saying in Chinese goes.
The force of industrial capacity expansion is internal, driven by the political system itself. It is not from economical factors or free market demand, but from political turf war and the need for power. Industrial capacity expansion is political power expansion. For party officials, it is a sweet ride, by using taxpayer money to climb the political ladder while gaining massive amounts of wealth. As long as politics is deeply rooted in the economy, such a problem will never cease to exist.
This created many "firsts" in the world in production figures. But also a few other world firsts: environmental pollution; inequality; corruption; and immigration (private company owners who were "killed", party official family members, business leaders from these production chains.... these are the immigrant people we often see. The ones left in China, are party officials themselves, shouting "cutting over capacity" day in, day out. Bah.)
And people then started panicking. Because China finally is full. There is no room for more. For about a year or so, there was real panic. But the Chinese people are smart Chinese communist party officials came up with an idea. Inner Mongolia officials saw Outer Mongolia. Northeastern provinces saw Russia. The seaside provinces saw Southeast Asia. Southwestern provinces saw India and Latin America. The inner provinces saw Africa. Each industry saw it too.
Hey, we can do the same thing in these places all over AGAIN! Hooray.
We see Chinese steel going into India and Brazil. The energy sector, CNPC, China Sinopec, CNOOC goes to Saudi Arabia and Middle Asia. The transport sector, CRRC, CCCC, goes to Turkey, Africa, Middle Asia - terrible roads, these places. We build them!
So the political power expansion continues. Guangxi province goes to build a water dam in Thailand. Guangdong province will build another in Cambodia. Fujian province will build a railroad Pakistan. These places don't have a lot of money. ...But when was that ever a problem, remember? So these province officials apply for dedicated national funds, gets them, and bring them overseas for construction. Will Thailand, Cambodia and Pakistan ever pay it back? Who knows, who cares.
Will this get rid of extra production capacity? Likely not. When the Brazilian local governor is paid off and in my pocket, and my steel plant is up to speed, it might call for more downstream productions. Like finely crafted steel products. Cutting capacity is cutting my NPC representative political title, that is a big no no. I need to aim for scale on par like Dalian Wanda Group. Or CNPC. Their top ranks joined the Political Consultative Conference, didn't they. I must do that as well. Such is the order of things.
What is worse. Investments in Africa are not regulated. There is not CCDI(Central Commission for Discipline Inspection, which is used to charge government officials with corruption crimes). A 10 billion project can be actually done with just 2 billion. What happens to the other 8 billion? Who knows, who cares. Lots of asset management companies doing business in Africa are registered in the Cayman Islands or Virgin Islands. They're lawfully, privately, owned... or are they.
It is intriguing that a PLA department and its director is the target. It is common practice for CCP officials to hide personal wealth overseas. The sanction is speculated to be the first action in what could be a financial face-off between 2 world powers.
On Chinese communist party's actions in recent years
Massive surveillance State and the planned social credit system; Great Firewall of China on the internet; Persecution on religion, Christians, Buddhists, Muslims... One belt on road project and the "debt diplomacy". Sri Lanka, Venezuela... Various attempts to influence domestic US politics (What the Russians are doing pales by comparison); Requirement on US ventures in China to establish "Communist party department" within the company (WTF?!); Restrictions on US companies on actions unfriendly to Beijing's interests; Control and censorship on media, both foreign and domestic; Control and censorship on academia.
All were reported. Have read most. Some of which have seen photos and videos.
Quotes that I like.
"After the fall of the Soviet Union, we assumed that a free China was inevitable." (Never assume anything...)
"Previous administrations made this choice in the hope that freedom in China would expand in all forms – not just economically, but politically, with a newfound respect for classical liberal principles, private property, personal liberty, religious freedom, and the entire family of human rights… but that hope has gone unfulfilled. The dream of freedom remains distant for the Chinese people. And while Beijing still pays lip service to “reform and opening,” Deng Xiaoping’s famous policy now rings hollow."
“For a time, Beijing inched toward greater liberty and respect for human rights....” (True...)
"America will always believe that Taiwan’s embrace of democracy shows a better path for all the Chinese people." (Hyaa!!)
"For example, Google should immediately end development of the “Dragonfly” app that will strengthen Communist Party censorship and compromise the privacy of Chinese customers…"