The Real Face Of Chinese-Style “Capitalism” Is Revealed

Since the mid-1990s, liberals and many free-market conservatives have maintained the view that China’s human rights abuses should be ignored because the Chinese economy was evolving in the direction of U.S.-style capitalism. The view was that the Chinese just “needed time” to catch up, but sooner than later they would be “just like us.”

This view was bolstered by the fact that many Chinese elites attended U.S. universities like Stanford, MIT and Harvard where they sat side-by-side with U.S. peers on their way to jobs at McKinsey or Goldman Sachs. Once they got back to China, they would steer their less educated colleagues toward the neo-Keynesian outlook that their Western classmates espoused.

I always thought this view was nonsense.

It’s true that Chinese students swarmed to top U.S. schools for the latest technical training. It is also true that China adopted many market mechanisms in order to grow its economy and build hard currency reserves. Still, the resemblance stopped there.

The Chinese were always loyal Communists, and they were merely acquiring Western intellectual tools so they could beat us at our own game. The “just like us” theory was made of whole cloth and bound to be disappointed. That time has now come, as reported in this article.

Jack Ma was one of the most successful entrepreneurs in history. Ma actually did personify the type of Western-oriented capitalist hoped for by the liberal elite. He founded the Alibaba Group, which is a Chinese e-commerce giant (similar to Amazon) and owns part of the Ant Group, which is a financial affiliate of Alibaba.

Ant operates a payments system called Alipay, which is one of the world’s largest payment apps with over 1 billion users. About two years ago, Ant Group was headed for a $37 billion IPO, which would have been the world’s largest at the time. Instead, Ma was placed under house arrest by Communist Party officials, the IPO was canceled, and Ma was forced to give up his control of Ant.

It is expected that Ant will pay a $1 billion fine for various regulatory violations. This is not just another case of corporate wrongdoing. In fact, there’s no evidence that Alibaba and Ant did anything wrong at all. Instead, the Chinese Communist Party (CCP) is flexing its muscle and showing entrepreneurs who’s really in charge.

The fact that this behavior has economic costs is also irrelevant. Nothing is more important in the minds of Communist Party officials than party supremacy and the elimination of ideological, financial or technological competition.

China doesn’t mind if some Chinese businesses achieve multi-billion-dollar valuations or use Western business techniques to achieve massive scale. They do mind if private capital starts to rival the CCP in power and influence. Once that happens, the hammer drops and the CCP takes over.

In China, Communist ideology always comes first. Just ask Jack Ma.

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