Many observers of the financial sector are failing at connecting the dots as there are ample public arguments for the latest Chinese moves against foreign listing of their companies.
1- The CCP cannot allow a real free market economy, with a population able to access credit on their own. This is the primary reason behind Jack Ma’s excommunication, he wanted to bring Western style finance with Ant to the Chinese middle-class.
The CCP is very quickly moving into big tech by forcing CEOs to give up assets and make way for princeling executives to take their place. This shows the world what we’ve always known: the CCP is nothing more than a kleptocratic party, looking out for their very narrow interests before their nation’s. Their pantomimes as nationalists are simply laughable, particularly when faced with demography as destiny. The CCP cannot spin that China’s population is inexorably shrinking, especially its workforce.
2- Jack Ma’s main crime was to be more respected, and potentially richer than Xi. China’s current president has a single mentor: Putin. The Russian leader’s method of managing his oligarchs has inspired Xi, who found the perfect foil with Ma. Xi is a thin-skinned apparatchik whose genius was to be born the son of one of Mao’s lieutenants. He is no Deng, not even a Jiang Zemin. Therefore, Xi is in an asset accumulation frenzy, for himself and his clan. The CCP cannot accept success that’s not on its terms and the foreign listing of companies falls in this category.
3- The CCP is deliberately nuking Hong Kong’s role as China’s outward city-state, because it cannot control it. The latest twin salvo, in the form of the forced shutdown of Apple Daily and the appointment of HK senior counsels from within government solicitors demonstrates the CCP is going to annihilate the remaining scraps of the rule of law in the territory. The so-called HK oligarchs such as Li Ka Shing have failed to convince the CCP to maintain the status quo and they will pay dearly for it.
4- China’s bluster in tech cannot mask that their illiberal contract laws will prevent them from becoming a world-class IP creator. The Chinese tech sector is a complex construct, built with Western capital, Taiwanese know how and mainland China’s workforce. The entire sector rests on clear negatives: China’s byzantine contract customs, also known as their non-respect of most contracts, their non-rule of law and inability to allow capital outflows aside from HK shell companies are the tip of the iceberg. The core challenge for China is that Taiwanese companies who operate on the mainland are the leaders: Foxconn, HTC etc are Taiwanese, not mainland Chinese. Having wrecked Jack Ma’s career, the CCP is content to have their country remain a glorified assembly shop that they control.
China’s mandarin-class mutated from the Manchu empire to Mao’s Communist Party but maintained the same system: hypercentral control from the capital across a huge swath of land.
Xi has managed, so far, to embark his party on the path of faux nationalism, via his campaign against the Uyghur minority. This is a giant distraction, aimed at the Han majority’s increasing fears that the CCP doesn’t know how to manage the future.
This writer is future-casting the following:
President Biden’s administration has already escalated financial sanctions this past week on the Xinjiang issue and will likely keep doubling down. The US will, in time, expand them outside this sole issue and make them as tough as those against Russia and Iran.
These US sanctions will end up de-dollarizing most of China’s elites, who will then be forced to bank outside the international system and the goal is the same as with Russia and Iran: to foster a chasm between moneyed elites and their political leaders.
On his end, Xi’s political calculus is that his unrivalled imperium over the CCP equals control of 1,2B Chinese citizens. This 20th century model works in a closed, backwards Stalinist society but in 2021 Chinese with means can travel and confront CCP propaganda with reality.
The 200M coastal Chinese who benefit the most from a globalized China will increasingly see the CCP as an impediment to their own destinies and will seek a remedy.
Xi has endangered the primacy of the CCP over China by arrogantly asserting all power, he has become the Single Point of Failure. A rebalancing is coming, and soon. There are 3 Chinas he needs to “manage”: coastal China which produces most of the GDP, rural Han China whose population still needs internal passports to move around the country and non-Han China (Inner Mongolia, Tibet, Xinjiang). The CCP has to cater to Jackie Chan at the same time as they listen to their rural members, not the easiest chasm to bridge. The interests of the 3 Chinas are not aligned easily and tensions will flare up because the CCP focus on developing a domestic consumer market will only exacerbate them.
The most probable scenario is a return to a more collegial power structure once Xi has proven his inability to prepare the future