Business In China, A Game Of Snakes And Ladders

In a bid to battle the pandemic induced recession, China has recently announced on January 4, 2021, a streamlining of administrative procedures and government regulation in an attempt to ease the business environment amidst attacks by its regulatory bodies on some of the largest Chinese corporations such as billionaire Jack Ma’s Alibaba.

This comes across as a definite oxy-moron as China for decades has stifled global trade and innovation.

From social media to e-commerce, China uses its homegrown alternatives to Facebook and Amazon such as Xiaonei Network and Alibaba. If their motivated attempts in 2021 to promote businesses sound farcical, then it probably is, as recently in the month of November 2020, the Chinese government launched an antitrust probe into Alibaba and its affiliate fintech Ant Group.

The claims of the Chinese authorities to streamline businesses sound dubious due to its historical and systemic behavior of giving an unfair advantage to state-run enterprises and its mercantilist policies, designed to maximize exports and minimize imports to promote imperialism, tariffs, and subsidies on traded goods.

China has been known to structure unfair policies that create severe competitive pressures due to which many foreign companies have either closed or cut back on their research and development expenditure. China is also strongly pushing its Made in China 2025 plan, which will likely cause even greater harm to the overall rate of global innovation progress.

Xi Jinping’s sea change in economic policy structuring has ensured a greater role of the state in both state and private enterprises. In 2017, the CCP sought to increase its overreach into the boards of private entities by directing them to write the party into the company’s articles of association.

In 2018, China’s securities regulator followed this up by issuing a new corporate governance code requiring listed firms, at home and abroad, to include in the company’s internal guidelines an extensive and larger role for the party.

This is an indicator of how while China looks to streamline the business environment, it also clearly yearns to keep an overarching reach into the way private businesses function in China, indirectly surveilling their activities, which is a detriment to free trade and growth.

These are efforts towards maintaining the superiority of state owned enterprises over private-run businesses which directly threaten the expansion of state business.

Having seen businesses threaten to take over the state in Russia, Xi Jinping seems to be determined that the same adversity does not occur in China.

China’s prominent internet corporation, Tencent, a large private enterprise operating in the sector of messaging and gaming, lost $200bn in its market capitalization in 2018 when the regulators did not approve its new online games thus pushing the company out of the world’s top 10 rankings by share market valuation.

This approach was then extended to Alibaba’s Ant Group whose $34 billion IPO offering was canceled by China. How China, therefore, intends to streamline the “business environment” is left to pure imagination.

Their declaration to ease business regulations therefore seems paradoxical as increased government surveillance into corporate boards and chilling antitrust probes into its most successful private enterprises not only impede the company’s growth but also economic progress.

China’s continued oscillation between authoritarian communist control and free-market capitalism befuddles entrepreneurs into thinking in one direction as private company CEOs seek to please the state in a bid to secure their company’s future while endangering innovation.

The private sector in China contributes almost two-thirds of the country’s growth and nine-tenths of new jobs, according to the All-China Federation of Industry and Commerce.

China must therefore rethink its overarching breach into the private sector and let the market operate independent of the government to truly streamline the business environment.