CHINAMacroReporter

'China’s Pro-Monopoly Antitrust Crusade'

‘But Chinese regulators are unlikely to stop at Alibaba; China’s entire private sector has a target on its back.’
by

Minxin Pei | Claremont College

|

Project Syndicate

January 6, 2021
'China’s Pro-Monopoly Antitrust Crusade'

‘But Chinese regulators are unlikely to stop at Alibaba; China’s entire private sector has a target on its back.’

‘The Chinese government’s newly launched antitrust probe into Alibaba is probably warranted.’

  • ‘The e-commerce giant undoubtedly has a dominant market share and engages in monopolistic practices, such as forcing merchantsto make the company their exclusive online distributor or be delisted from its platforms.’

‘But other Chinese e-commerce companies have the same rule, and there are worse monopolists in China than Alibaba.’

  • ‘So, why is Alibaba being targeted?’

‘One of Alibaba’s apparent offenses is the expansion of financial services offered by its affiliate, financial-technology giant Ant Group, which owns Alipay.’

  • ‘Beyond being the world’s most popular payment app, with 730 million monthly users, Alipay allows consumers to invest, purchase insurance, and secure loans on its platform.’

‘Last October, Ant Group was poised to launch a record-setting $34 billion initial public offering.’

  • ‘But the Chinese authorities abruptly halted it, in what was portrayed as a prudent attempt to limit the company’s exorbitant market power.’
  • ‘The decision to block the IPO reportedly came directly from President Xi Jinping.’

‘Now it appears that Xi’s government wants Ant Group to abandon financial services altogether and to confine itself to payment processing.’

  • ‘Chinese regulators have provided a litany of justifications for this decision.’

‘But the real reason didn’t make the list.’

  • ‘Payment processing is a low-margin business; no state-owned bank bothers with it.’
  • ‘Financial services, by contrast, are highly lucrative – and the territory of state-owned incumbents.’

‘If the Communist Party of China (CPC) were genuinely committed to breaking up monopolies and oligopolies that are stifling market competition, it would put those incumbents in its sights.’

  • ‘After all, state-owned enterprises like China Mobile, China National Petroleum Corporation, the State Grid Corporation of China, and the Industrial and Commercial Bank of China (the world’s largest bank by assets) dominate China’s economic landscape to a far greater extent than Alibaba does.’
  • ‘Yet, far from launching anti-monopoly investigations into state-owned enterprises, China’s government has recently been pursuing SOE “mega-mergers,” thereby boosting their market power even further.’

‘The reason is simple: when SOEs succeed, the CPC benefits, both economically and politically.’

  • ‘As Xi made clear last April, the SOEs are “important material and political foundations” for so-called socialism with Chinese characteristics, and he plans to make them “strong, better, and bigger.”’

‘Allowing private firmsto erode SOEs’ market share would undermine this objective, not only by naturally weakening the regime’s control over critical economic sectors, but also by opening the way for successful private companies to challenge the CPC.’

  • ‘And Alibaba – co-founded by Jack Ma, one of China’s wealthiest people – is one of the most successful (and innovative) of all.’
  • ‘In Xi’s eyes, it thus represents a threat to the CPC’s political monopoly and the regime that represents it.’

‘Ma’s critics might regard the unfolding investigation as comeuppance for his past statements or business practices.’

  • ‘But Chinese regulators are unlikely to stop at Alibaba; China’s entire private sector has a target on its back.’

‘This has serious implications for China’s future economic prosperity – and for the CPC itself.’

‘For all their flaws, private firms are the most dynamic players in the Chinese economy.’

  • ‘If the CPC cracks down on them, while leaving SOEs alone, private-sector confidence will dwindle, and the economy will become less productive, innovative, and efficient.’
  • ‘GDP growth will falter.’
  • ‘And the legitimacy of the one-party regime – which has long rested on the promise of prosperity – will deteriorate.’

‘Xi and his colleagues are probably right that, by strengthening the regime’s grip on the economy, reining in the private sector will bolster the CPC’s political security in the short term.’

  • ‘But, in the longer term, the biggest casualty of China’s “antitrust” crackdown may well be the one monopoly it is meant to protect: the CPC’s lock on political power.’

More

CHINAMacroReporter

February 23, 2021
HSBC offers lesson in corporate realpolitik
‘HSBC’s Asia pivot is a lesson in corporate realpolitik. It is just as much a recognition of the new political reality facing every western company that is dependent on doing business with China. Businesses will have to choose between western markets and access to China, and between liberal and authoritarian value systems.’
keep reading
February 23, 2021
Germany Is a Flashpoint in the U.S.-China Cold War
'As goes Germany, so goes Europe — and that’s a real challenge for the U.S. Berlin leads a European bloc that could cast a geopolitical swing vote in the U.S.-China rivalry.’
keep reading
February 22, 2021
Remaking “Made in China”: Beijing’s Industrial Internet Ambitions
‘The Chinese government is placing large bureaucratic and financial bets on upgrading and digitizing its already dominant manufacturing base. Such efforts have coalesced around one key term: the “industrial internet” (工业互联网). The successful application of it across Chinese industry would prolong and elevate the “Made in China” era.’
keep reading
March 9, 2017
So many twists and turns to the China Housing markets story
[CHINADebate Presentation] One of the highlights in our recent 'In Pursuit of Patterns' series of client notes, showed that the land sales growth had tended to lead the price growth and a significant increase in land sales would lead, with a lag, to the subsequent correction in prices.—Almost everyone on the outside seems to have missed the biggest bull market in China housing in 2016, culminating in policy tightening cycle kicking in at the end of the year. But what's next?
keep reading
February 27, 2017
Is The U.S. Ceding Global Leadership To China?
'China isn't positioned to replace the U.S. as a global leader anytime soon.'—Hard on President Trump's 'American First' inaugural address, Xi Jinping gave a rousing paean to globalism at the World Economic Forum. And, immediately the hot question became: 'Is the U.S. ceding global leadership to China?' Yes and no, says Bill Overholt of the Harvard Asia Center. Yes, the U.S. is ceding global leadership. No, China won’t replace the U.S. What will replace the U.S. is ‘G-Zero’, a world with no single global leader. Not China, not the U.S. So, can his critics lay this outcome at President Trump’s feet?
keep reading
February 15, 2017
C-to-C Internet Commerce- From Taobao Shops to Taobao Villages
One is some of the local government-owned SOEs are the sources for overcapacity. The reason is because the local government also wants to ensure there's some degree of employment locally, and perhaps some source of taxation. The Chinese government is now going to need to start the so-called supply-side economics to try to consolidate overcapacity in a number of sectors. It's going to impinge on the interests of many of these local SOEs as well as the local governments who own them.
keep reading
February 15, 2017
How SOEs & Local Governments Create Overcapacity
One is some of the local government-owned SOEs are the sources for overcapacity. The reason is because the local government also wants to ensure there's some degree of employment locally, and perhaps some source of taxation. The Chinese government is now going to need to start the so-called supply-side economics to try to consolidate overcapacity in a number of sectors. It's going to impinge on the interests of many of these local SOEs as well as the local governments who own them.
keep reading
February 15, 2017
Why SOE Reform is So Tough
'...SOEs need to reform, because on one hand, many of them have achieved a lot for China. On the other hand, they've actually created quite a lot of harm, in particular in the areas of overcapacity but also in the areas of corruption we've talked about.'
keep reading
February 2, 2017
AmCham China Chairmen's View From China in D.C. 2017
[AmCham China & CHINADebate U.S.—China Trade/Business Series 2017] Terrific insights from leaders on the ground in China. While in D.C. the Chairmen joined us in a panel discussion and individual interviews about U.S. business in China, U.S.-China relations, trade, and much more. We present their views in a 13 part series. Sheryl WuDunn, business executive, lecturer, best-selling author, and winner of the Pulitzer Prize moderated.
keep reading
February 1, 2017
'Chinese Politics In The Xi Jinping Era'
[Malcolm Riddell Interviewed Cheng Li] 'If you ask any taxi driver in Beijing, Shanghai, or Guangzhou, he or she will tell you – with accuracy – which leader belongs to which faction. : 'China is a one–party state, but that does not necessarily mean Chinese leadership is a monolithic group with leaders who have the same ideas, same background, same world views, same politics. No, they're divided.'
keep reading
December 7, 2016
First 100 Days: Do Not Provoke China
The First 100 Days interview series features Pacific Council experts addressing the top foreign policy issues facing the incoming Trump administration.: Warns of the potential for new conflicts if Donald Trump follows through with his campaign promises regarding China.
keep reading
October 18, 2016
How Alibaba, Xiaomi, & Tencent are Changing the Rules of Business
[An Interview of Ed Tse, the author of 'China's Disruptors: Alibaba, Xiaomi, & Tencent... how innovative 'Disruptor' companies are restructuring China's economy.' ] The real force in Chinese economy is increasingly private companies, not SOEs. / Leading private Chinese companies are innovative and ambitious
keep reading
July 14, 2016
How 'Brexit' Will Impact China's Economy
David Dollar gives you fresh insights to better incorporate Brexit's impact into your analyses of China and global economies & markets, including: 1. Why, after the Brexit vote, did the Shanghai Stock Market fall only 1%? 2. How will Brexit affect the value of the RMB and China's currency policy? 3. How will Brexit impact trade with the EU, China’s largest trading partner? 4. Why, in the larger geopolitical perspective, could China be the big winner from Brexit?
keep reading
July 2, 2016
China housing: boom, bust, or bubble-or...?
100s of Cities Bubble Up & Down As Policy Makers Press the Levers China hasn’t collapsed. And, the bubble hasn’t burst because there may not be just one big real estate bubble. Instead, there are 100s of sizable cities, each moving in its own cycle, each responding to how its local policymakers stimulate & tighten-stimulate & tighten, and each having performance divergent from that of other cities. Watch here to see how city-level markets bubble up and bubble down...
keep reading

Heading

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Suspendisse varius enim in eros elementum tristique. Duis cursus, mi quis viverra ornare, eros dolor interdum nulla, ut commodo diam libero vitae erat. Aenean faucibus nibh et justo cursus id rutrum lorem imperdiet. Nunc ut sem vitae risus tristique posuere.