China's 'unprecedented' crackdown stunned private enterprise
Beijing's decision to yank the $37 billion IPO was just the start of a sweeping crackdown that has become one of the most consequential realignments of private enterprise in China's history.To get more
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In the year that followed, the Chinese government's regulatory might has changed industries ranging from tech and finance to gaming, entertainment and private education.
China's regulators aren't alone in moving to restrict what they see as overly powerful companies, especially in Big Tech. Authorities in the United States and Europe have also moved over the last year to rein in unruly players by proposing new antitrust laws or trying to regulate data and online content.
But the speed and ferocity with which Chinese authorities have acted against the country's corporate titans have startled even the closest China watchers.The latest regulatory tightening cycle is unprecedented in terms of duration, intensity, scope, and velocity," analysts from Goldman Sachs wrote in a recent research report.
The campaign has wiped out more than $1 trillion worldwide from the market value of Chinese companies. It has sent chills through the wider economy and stoked fears about the prospects of future innovation and growth in China.Some of China's most successful entrepreneurs have quit high profile jobs in the past several months — decisions they've claimed are unrelated to the turmoil, but which analysts find hard to separate completely. Several tech firms have pledged to hand billions of dollars worth of their own profits to government-backed social causes. And some big proponents of Chinese investment have reconsidered plans to pour more money into the market until the outcome of the political interference is clear.
While China's decisions have rocked the corporate world and rattled foreign investors, Xi appears undeterred. To him, reining in private enterprise is the solution to fixing longstanding concerns about consumer rights, data privacy, excess debt and economic inequality.
In other words, for the Chinese Communist Party it's not about killing the private sector: It's about taming the excesses of capitalism and embracing the country's history of socialism.
"Common prosperity is the prosperity of all the people, the material and spiritual life of the people being rich," Xi wrote in an article published last month by a Communist Party journal, invoking a historically significant phrase that dates back to the time of Chairman Mao Zedong. "It is not the prosperity of a few people."
China is one of the world's most unequal major economies, according to the World Bank. Its Gini coefficient — a popular measure of inequality — has increased significantly over the past four decades, coinciding with the country's staggering rate of economic growth.
That meteoric rise accelerated under the leadership of Deng Xiaoping, who took power in the late 1970s after the death of Mao.
Under Deng, the country embraced the free market and opened up to global trade. He famously said in 1985 that "some people can get rich first" to help poorer people in the long run, so that the society can gradually achieve "common prosperity" — a use of the phrase that differed significantly from its invocation by Mao, who advocated for wealth redistribution nearly 70 years ago as he worked to cement the party's control.Worsening inequality now appears to be vexing Xi, the country's most powerful leader in decades. Just last year, his government concluded a five-year long fight against absolute poverty. Now he's widely expected to seek a third presidential term next year, and has focused his time on reducing the wealth gap.
