It’s
typical for commentators to talk about how China is no longer really communist.
Of
course, only the most ardent China apologist would question that it’s still a
one-party authoritarian state. It’s just that the economic policy pursued since
the early 1980s is hard to square with Marxism-Leninism.
I
say, “Not so fast.”
The
Sixth Plenary Session of the Central Committee of the Chinese Communist Party
contained a new historical resolution.
This
is only the third since the founding of the Chinese Communist Party.
The
first was by Mao Zedong in 1945 and the second by Deng Xiaoping in 1981.
Revising
the historical narrative has been used in the past to set the stage for a new
era.
Most
China watchers see this as a consolidation of power by the General Secretary of
the Chinese Communist Party, Xi Jinping. But to what end?
His
rhetoric sounds more like Mao than the Chinese leaders since Deng Xiaoping.
General
Secretary Xi’s historical resolution reads as a break from China’s economic
policy since the 1980s.
But
it’s too late to turn back now, right? Don’t be so sure.
The
Soviet Union pursued its “New Economic Policy” as a short-term effort to
strengthen the state before returning to more pure Marxism.
In
a similar vein, General Secretary Xi has been cracking down on non-state-owned
businesses, giving seemingly no care to the costs to the Chinese economy.
General
Secretary Xi’s recent policies reportedly wiped out up to $1 trillion in stock
value.
He’s
doing this under the banner of so-called “common prosperity,” giving a
socialist ideological backbone to what seems to be a power play.
American
businesses need to pay attention to this, even if they don’t care about the
slave labor camps full of Uyghurs, the suppression of democracy in Hong Kong
and China’s increasingly aggressive military posture – even willing to look the
other way to China’s stealing intellectual property and trade secrets.
I
urge extreme caution to any business that still sees the Chinese market as a
cash cow.
Many
people thought China would become democratic once it was sufficiently
capitalist.
Maybe
General Secretary Xi is worried about just that.
If
anyone thinks that General Secretary Xi would not dare sacrifice economic
growth in pursuit of power, think again.
Emerging
market funds with a lot of exposure to China ought to think about rebalancing.
Pension
funds that are overexposed to the Chinese market are risking wiping out the
retirement savings of American workers.
My
advice to American business is that China is not the safe bet many had thought
it was.
Anyone
investing in China had better go in with open eyes and big tolerance for risk.
