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China’s government owns their economy

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A very good article by Michael Wines in the NY Times should put to rest the notion that China is a growing capitalist society.  The communist government owns the majority of the economy, and almost exclusively owns the companies in the major sectors.  The trade deficit funds the Chinese government just like our energy consumption funds unfriendly dictatorships.

[The Chinese government] never relaxed state control over some sectors considered strategically vital, including finance, defense, energy, telecommunications, railways and ports.

China’s accession to the WTO was designed for a free market trajectory on their part.  It did not happen.  The WTO cannot handle state-managed economies, and our Congress cannot even figure out what they are.

While currency manipulation is a major issue, deserving of our response to neutralize that problem, the fact is the Chinese government controls many industry/economic sectors which are of high volume and high strategic importance.  And they favor their own in many ways that the WTO cannot or does not touch.  Even if technically private, the result is the same.

The biggest private companies often get their financing from state banks, coordinate their investments with the government and seat their chief executives on government advisory panels.

If there was an argument that China was progressing towards economic openness, that argument is gone now.

Mr. Wen and President Hu Jintao are also seen as less attuned to the interests of foreign investors and China’s own private sector than the earlier generation of leaders who pioneered economic reforms. They prefer to enhance the clout and economic reach of state-backed companies at the top of the pecking order.

The Soviet Union was fully centrally planned.  China is centrally planned, but is a hybrid.  That confuses our policy makers in the U.S., and they simply can’t deal with the fact that the geopolitical risk is the same.

But others argue that officials had always intended to create a vibrant state sector that would tower above the private sector in important industries, even as they sold off or shut down money-losing state enterprises that drained capital from the government budget and banking system.

State ownership of oil assets means that our energy consumption funds dictators in unfriendly oil-rich countries.  We finance both sides of the war on terror.

Imagine if we had a massive trade deficit with the Soviet Union back in the day, the result would be U.S. funding of Kruschev and his war machine.

Our trade deficit with China funds their government and their politboro.

“In 2009, there was a huge expansion of the government role in the corporate sector,” Huang Yasheng, a leading analyst of China-style capitalism at the Massachusetts Institute of Technology, said in a telephone interview. “They’re producing yogurt. They’re into real estate. Some of the upstream state-owned enterprises are now expanding downstream, organizing themselves as vertical units. They’re just operating on a much larger scale.”

And they don’t tell the truth.  Remember May of this year, China was going to let their currency float within a limited range.  One blip of movement occurred after the announcement.  One blip.  That’s all.

Take telecommunications. Upon joining the World Trade Organization, China committed itself to opening its communications market to foreign joint ventures for local and international phone service, e-mail, paging and other businesses. But after eight years, no licenses have been granted — largely, the United States says, because capital requirements, regulatory hurdles and other barriers have made such ventures impractical. Today, basic telecommunications in China are booming, and are virtually 100 percent state-controlled.

China is our main global military rival.  Our trade deficit means we send them gargantuan volumes of dollars for the government to build their military.  This is supplemented by technology theft, offshoring of sensitive manufacturing, and their systematic hacking of our computer networks.

This is why I sometimes use the term “wacko free traders.”  They are in a different world that does not exist, because they assume – against all evidence – that this is a free trade world and the U.S. is not alone.  Maybe they should be called “dangerous free traders.”

The quote below shows who is really successful in this era.

Yet it is hard to argue with success, other economists say, and China’s success speaks well of its top-down strategy. Asian powerhouses like South Korea and Japan built their modern economies with strong state help. Many economists agree that shrewd state management can be better than market forces in getting a developing nation on its feet.

Yet our government leadership has not even acknowledged this problem, much less proposed a solution.

One Response to “China’s government owns their economy”

  1. Rider I says:

    I would like to add an article to this myself:

    The Government owned economy that you speak of is referred to by experts as public cartels. The Public cartels use vertical or horizontal business transactions backed by political and legal secret laws to fix prices, create trade surpluses, dumping tactics, and with my (R) theory the Chinese Communist Economic Blitzkrieg they use their SOE’s to inflame leading indicators of recession so as to turn a normal down turn into a proper recession or deep trough. Then they use their padded centralized economy and SOE cartels to acquire major international economic military intelligence positions.

    This is done so that the Communist Political Party can create SOE so called Champions so they can further their dominance through the idea of unfair competition and public cartels. This allows the Politburo to infiltrate economic infrastructures that they see secretable at home yet very innocent and appalled to the idea when a country stops them from purchasing their economic infrastructure with an SOE. When however, that same government would allow an individual or corporations avoid of government ownership to purchase it.

    This blitz is done by using multiple facets of the SOE cartels from financing, dumping, acquisition and even media or intelligence agents in the wanted economic infrastructure. The then normal business cycles of the free market become vulnerable to Chinese SOE attacks. As yes it is true our government recognizes Russia’s cartel’s and regulates them properly. However, since China is so good at the non brute force and propaganda of cloaking their cartel strategies our politicians have a hard time understanding what is happening to our economics.

    What is happening is that in a normal free market you have a supply and demand curve which does affect the business cycle. As such because of free markets allowing the use of Communist SOE cartels in manufacturing and other areas of the market place, they have lost their ability to be able to hold a strong business cycle. This means that it is easy for the Communist SOE finacing companies to create a bubble in stock markets like we saw before the free market recession as the Chinese SOE financing companies raised their stocks hugely. This then creates a bubble. This bubble is easily then also played upon by dumping tactics. Which means that right before a normal down turn the Communist SOE cartels will do a blast of dumping of products in a market to keep the domestic job supply down. After this, the Communist SOE cartels just wait for the trough or recession based on the strategic nugding and centralized strategies of the SOE cartels.

    This centralized strategy based on by the government of China know as the Communsit Political party allows them to not think about liquidity at the time of strategy yet but future political gain by artifically investing in SOE’s to beef them up or by artificially creating bubbles.

    Once these bubbles have popped helped along by the Communist SOE cartels. They then switch strategy from trade surplus peak spike inflaming of the business cycle and turn to SOE acquisition of key point economic infrastructures. This allows huge SOE economic bases for their government unfair cartel SOE’s to act like old time militaries attacking and setting up bases for control. However, these ungonged strategies will increase the wealth and strength of the Communist Political Party and Chinese government without due care for a competitive international market without huge government subsidies, price fixing, straight line business tactics, legal political and propaganda.

    This will leave as stated in the article here a very similar affect to the Russian end game of them being the center of the international economic world and then having satellites that depend solely on them. Which in turn creates an international totalitarian economic control. As any country that wishes to go against the Communist Political party trade or ideas of so called reunification or what Westerners cal expansion would then not be able to move. As the SOE’s Blitzkrieg strategy would have grabbed their economic infrastructures and laid bases for internal Communist spy infiltration. Much like what we say in America with the President Clinton Administration leaking the biggest technological advances every in the world through pure economic SOE cartel benefits of President Clinton selling off our military bases to gain a monetary income from leasing one of the West coasts only deep water ports to an arm of the SOE public cartels.

    The end game is simple. The Chinese much like any government wish to create world that does not oppose them and if they do they can properly control their opposition. However, if one has every studied Chinese military warfare. One would know that the least amount of draw to ones strategies the more favorable you become to the domestic audience.
    This style of Keeping their SOE’s out of the public eyes of free countries has allowed them to act like they are conforming to free economics through selling off SOE’s and also not prorogating them into gigantic government owned business. However, truly an expert would be able to sit down and say:
    China has funded its SOE’s through SOE banks with unfair terms compared to its SME’s or PCB’s. Along those lines the SOE cartels prefer to conglomerate their SOE’s and take market shares instead of allowing the SME’s or PCB’s to grow into those shares as the SOE’s can no longer sustain do to bad loan repayment and the multiplier effect of economics not balancing out. Then they perpetuate the idea that it is protectionism if a country does not allow their SOE’s to acquire their economic infrastructures when China pads the worlds biggest market at a high percentage of 40% to be held by the Chinese government. Which then uses its SOE’s against its propaganda projections to purchase non secretable industries like hotels, entertainment, certain non stable food types etc.

    All in all this leaves the Chinese government the biggest abusers of SOE cartel strategies since the fear of the Russian creation of satellites and centralized reliance on it. This is a problem as the free world markets believe in fair trade and a competitive marketplace. This allows all countries to be able to compete fairly for international market shares and it makes sure that underdeveloped markets can obtain resources to compete and proceed with a civilized world for their country without cartel activities using slight erosion techniques to control the market place.
    Therefore, good article. However, mine caries the winds of the East xxxooo, South xxxooo, North xxxooo and humbly last the and respectfully with the West xoxoxo.

    Rider I
    You’ve been gonged. All ideas are thoughts of the Rider I. The theory of the Chinese Communist Economic Blitzkrieg lays at hold and rights with the Rider I Research and Analysts. Therefore, you may use it to start a research idea or to cite its main principles. However, like our forefathers speaking out against feudalistic style economics and the imperialistic creation of unfair markets through Public cartels I ask you cite my pseudonym to bring joy to those who know.
    http://rideriantieconomicwarfare.blogspot.com/

    Late night canlde light sorry no readin over just darn putting it down. Got to go to bed.

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