China’s Marxist “Profound Revolution” Is Here, And Nobody In The West Is Ready, by Michael Every

It’s important not to forget that Chinese communists are communists, especially if you’re putting money into Chinese investments. From Michael Every at Rabobank via zerohedge.com:

Pro-Fund or Profound Revolution?

Summary

  • Developments in China continue to confound market optimists, with new talk of a “profound revolution” towards a new target of “Common Prosperity”
  • Rather than simply react to these events, we analyze the history of Marxist-Leninist-Maoist Thought to try to put current moves under Xi Jinping Thought in a larger context
  • This also provides a framework of a hypothetical Marxist policy path forwards
  • We briefly discuss the meaning of Common Prosperity over time, and how it is a bellwether
  • We conclude with likely market reactions to an economy not saying “because markets”

“Profound Revolution”?

Political developments in China have been front page news in the financial press over the past few months. Beijing’s crackdown on Ant Financial, largely dismissed by Wall Street, then spread to Didi and on to the broader sectors these championed, fin- and transport-tech; then it grew to encompass swathes of the economy, from tech to health to education to property to private equity to gaming.

In terms of tech, there are now sharp limits on IPOs in the US (mirrored from the US side) and new algo/pricing and data regulations that require Beijing to hold on to it; the private tuition field was made non-profit; there has been a sharp reduction in credit to property developers along with the official message that “houses are for living in, not speculation”, and rental increase caps of 5% annually; under-18s have been limited to just 3 hours of computer gaming a week, in allotted slots; and private equity has been cut off from residential investment.

Beijing has also called for curbs on “excessive” income, and for the wealthy and profitable firms “to give back more to society.” (Tencent already pledged $15bn.) This is also matched by: a social campaign against excessive business drinking, “unpatriotic” karaoke songs, and celebrity culture; ‘Xi Jinping Thought’ made obligatory at all schools and universities; and, as Bloomberg puts it, controls on social media financial commentary – “China to Cleanse Online Content that ‘Bad Mouths’ its Economy”.

This has all taken place under the slogan of “Common Prosperity”. (And for those who need the market-facing implications of this first, please see What is to be done?)

Going further, commentary reposted by Chinese state media on 30 August stressed these changes are a “profound revolution” sweeping the country, warning anyone who resisted would face punishment. It added: “This is a return from the capital group to the masses of the people, and this is a transformation from capital-centred to people-centred,” marking a return to the original intention of the Communist Party, and “Therefore, this is a political change, and the people are becoming the main body of this change again, and all those who block this people-centred change will be discarded.”

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One response to “China’s Marxist “Profound Revolution” Is Here, And Nobody In The West Is Ready, by Michael Every

  1. It sure feels like TPTB intend for all of the West to fully experience it with them.

    Like

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