Trouble in China?

Starting about a year back, the Chinese government has started shaking things up. Within China. Sharply and suddenly, writes Peter Hoskins:

“Everything from insurance agents, private tutoring firms, real estate developers and even companies planning to sell shares in the US have come under intense scrutiny.”

What’s going on? One can’t be sure, since China's leaders do not give interviews. So one can only guess the reasons.

 

A couple of problems have been looming for some time. China’s population is beginning to age, and they need more young people to keep the economy growing. Hence the decision to allow upto 3 children per family. Another issue is the lack of “common prosperity”. There is an ever-increasing number of super-rich folks, a huge middle class and yet… there’s still a big chunk of the population that is not well off at all. Some of the recent moves would certainly seem to be based on these troubles-on-the-horizon.

 

The tech industry bore the brunt of the government’s actions initially. Everything from ecommerce platforms including Ali Baba to online financial services to social media companies like Tencent to even Uber-equivalent apps. But since then it has spread into more and more sectors of the economy. And the government recently announced a 10-points program that covers topics like increased regulations, wealth inequality, and monopolies.

 

But other areas where the government is encroaching are barely, if at all, connected to politics or power or the “good of China”. Like the rule that kids shouldn’t play more than 3 hours of video games per week (If you’re wondering how anyone could enforce this, it’s possible because most kids play on the phone and phone apps could use face recognition to track the time). Or the banning of “sissy looking boys” from popular programs. Private tutors for school kids, a growing sector in China, have been banned in the Beijing area.

 

One measure feels almost “moral”. Like the decision to “review” the casino industry in Macau. This isn’t a small industry, as Venkateswara Rao pointed out:

“Tables at Macau’s 41 casinos generated six times the revenue of the 144 casinos in Las Vegas, racking up $360 billion in earnings in 2019.”

 

Evergrande is China’s 2nd largest real estate company. It is struggling to make loan repayments of more than $300 billion. As the real estate market has started to slow, China wants to bring in more regulations on the amounts these companies can borrow. Is that too little, too late? Or are they trying to pre-empt a much bigger problem that is building up?

 

Looks like a lot is brewing in China. Reminds of that ancient Chinese saying, “May you live in interesting times”…

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