HomeCorruptionChina's Socialism vs. Free Enterprise Dilemma - Pending Failure?

China’s Socialism vs. Free Enterprise Dilemma – Pending Failure?

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I’ve been watch for decades China’s struggle, torn between two contrasting ways of doing business: socialism, rooted in a strict communist ideology that has always failed as an economic system (EVERY time), and free enterprise, a capitalist approach that embraces competition and profit and has been overwhelmingly successful in creating wealth around the world. Historically, this massive nation has witnessed these two systems in a continuous push and pull, and the results are evident in their economic landscape.

Imagine a game of tug-of-war. On one end, you have the socialist principles, aiming for control, uniformity and dominance. On the other end, there’s the free enterprise side, striving to make significant profits and creating wealth. For years, capitalist ventures in China have made vast amounts of money, only for the communist party to redirect these earnings towards colossal and often ill-conceived projects. With the free enterprise now facing challenges, the socialist side remains adamant about its share. Socialists do not understand free enterprise (even though China had been a free enterprise society before the communists rose, and as individuals the Chinese still work as free enterprises), and their treatment of successful capitalists has been appalling.

The recent struggles in China’s economy are undeniable. When the country relaxed its strict COVID-19 policy, hopes were high for a surge in economic growth. Yet, the reality proved otherwise. The country’s growth rate dipped, households started saving more, and exports saw a dramatic drop. July saw exports decline by a startling 14.5%, the most significant decline since the pandemic began. This economic downturn is also mirrored in the stock market; China lags behind other Asian markets and the U.S., underperforming by approximately 20%.

Eswar Prasad, a scholar from Cornell, aptly remarks, “While the underpinnings of China’s growth seem fragile, a more benign future is possible.” This echoes the sentiment that China might be experiencing a slowdown, but it still holds potential for growth that balances economic, social, and environmental needs – if only the socialists would get out of the way.

The turning point for China’s economic model began with reforms led by Deng Xiaoping, favoring market-oriented strategies. China transitioned from a primarily agricultural economy to an industrial powerhouse by the close of the 20th century. However, since 2014, under Xi Jinping’s leadership, there’s been a noticeable shift, favoring state-owned enterprises over private ones. This shift has caused China’s economic efficiency to waver, impacting its stock market performance.

Adding to the complexities, China’s housing market, accounting for a significant portion of its economy, is seeing falling property prices. Evergrande, a prominent property developer, reported a loss of $81 billion over two years. The government’s push to build apartments and city segments (many of which have become ghost towns) dramatically interferes with capitalists expecting an efficient market.

The power-seeking, dominance-seeking communist side of the government has causes China to face new challenges internationally. After tariffs were imposed on U.S. imports from China in 2018, multinational corporations began diversifying their operations away from China. The recent initiatives to regulate technologies further complicate this relationship.

A decade ago there was reason to be optimistic that the capitalist/free enterprise part of China would continue to grow and that eventually China would become an integrated and reliable business partner to the Western economies.

Xi Jinping has pushed the balance the other way, interfering with his own markets, challenging and attempting to dominate the markets of others, engaging in political intrigue that has cause sanction on China, and acting as if socialism is a reasonable economic model. But he may very well be flushing China down the economic toilet, which would not bode well for the Chinese people.

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