Blaming Regulation for Financial Woes? Western Analysts are Mistaken about China
By Caleb T. Maupin
After Chinese stocks fell on July 17, the media based in the United States offered an almost unanimous explanation. According to the U.S. press, the Chinese Stock Market fell in response to the two-day National Financial Works Conference. A headline in the Wall Street Journal from July 18 reads “Beijing Talks Tough, and Stocks Fall.” Editorials and other statements go on to say China is facing potential ruin because of too much government oversight and regulation. This is an ideologically loaded assumption and analysis of events, which misses the overall lessons of China’s recent history.
First of all, it is important to note that U.S. analysts seem desperate to make negative predictions about China’s economy, and look for any possible indicator to point towards. Many will recall how in June of 2015, after turmoil in China’s stock markets, the U.S. media announced a pending collapse and spoke endlessly about a “Chinese slowdown.” The doom and gloom they predicted never materialized, and China has continued to expand. China’s rate of GDP growth remains between 6.7 percent and 6.9 percent, a rate that would be envious to most nations on earth. The USA’s rate of growth for 2016 was merely 2 percent.
Why has China maintained a strong economy for decades? While many countries throughout the world have market centered economies, where the anarchy of profits, not human reason, is in command, China’s economy is subject to very different rules.
The state establishes a Five-year Plan of development, and the private sector is compelled to cooperate with it, regardless of their personal, short-term interests. The 89 million members of the Chinese Communist Party, with their goal of creating a more prosperous society, are the ultimate decision-makers in directing production and economic activity.
Does this mean that the Chinese government works to crush entrepreneurs and destroy their dreams and aspirations?
On the contrary! The vision of “Socialism with Chinese Characteristics” involves strengthening and unleashing the creativity and energy of private capitalists, so that they can build a better life for the country. Often the Chinese Communist Party is a very good friend to business owners, and uses the state to assist their endeavors. However, at the same time, as market forces are aided and encouraged by the state, they are also controlled and directed.
It is this model, where market forces are directed and made to fit into an overall vision for society which has raised China into becoming the second largest economy on earth. About 700 million people have been lifted from poverty, and almost every day a new Chinese millionaire is created. The world tourism industry is now seeing a boom from newly prosperous Chinese families, who now pursue international vacations.
The overall thrust of Chinese President Xi Jinping’s remarks to the National Financial Works Conference was making sure society was protected from market turbulence. He emphasized strengthening the financial sector’s ability to serve the economy, deepen financial reform, and prevent systemic risks. It is widely understood that the central bank will play a greater role in stabilizing the market.
Just two days after the Financial Works Conference, Xi Jinping spoke about the laws regulating foreign investment in China. Speaking to the Central Leading Group on Financial Affairs, Xi spoke about the importance of foreign trade, and how the regulations could be adjusted in order to ensure greater opening up.
The explanation of China’s woes as being caused by “too much government” fits very well into the narrative of neo-liberalism. Western media is saturated with the works of ideologues like Milton Friedman, Ayn Rand and Frederich Von Hayek who say “greed is good” and argue that completely unregulated capitalism will lead to some kind of utopia.
However, academic economists in the USA and around the world overwhelmingly reject these concepts. While such teachings offer simple explanations and sound bites for television, their analysis is not rooted in the real world of economics.
The policies of China’s government, carefully and collectively crafted to ensure growth, have benefited, not hindered China’s economy. That is obvious when reviewing the solid results achieved between 1949 and 2017.
(Caleb Maupin is a journalist and political analyst who resides in New York City focusing on U.S. foreign policy and the global system of monopoly capitalism and imperialism. Opinion articles reflect the views of their authors only, not necessarily those of China Matters)