Xi Jinping Aims to Rein In Chinese Capitalism, Hew to Mao’s Socialist Vision

Old_Joe

A lengthy but fascinating article in the Wall Street Journal analyzes what may really be going on in China, and looks at possible financial ramifications for the West. This article is free with the link below:

➤ Xi Jinping Aims to Rein In Chinese Capitalism


Here's another free article from the WSJ on this topic:

China’s Regulatory Storm Risks Triggering Wider Economic Damage
As Beijing tightens rules on real estate, technology and other sectors, worries grow that it could trip up growth

➤ Link to WSJ Article

LewisBraham

+1

Mark

Thanks OJ. Quite informative. Reinforces my decision to stay away from Chinese stocks for now.

BaluBalu

From Ray Dalio - some consider him as well informed about China but as conflicted /not objective

davfor

FWIW....The current significant shift underway will take some time to settle out. But, the transition to socialist utopia in China may take decades (or more) to reach it's final conclusion. If so, the private sector capitalist beast may well continue to be tolerated and used by the CCP during much of that lengthy transition period. If so, investment there may continue to make sense for an extended period of time.

For those so inclined, the article suggests one area where the author of the article thinks looking for profitable firms has a higher than average probability of continuing to make sense:

Mr. Xi and his underlings still talk about the need to develop the private sector, which accounts for 80% of China’s urban jobs. But officials say the focus now is on fostering small and midsize companies, in areas ranging from power equipment to sensors and semiconductors, that aren’t likely to become alternative power bases.

I suspect that giants such as TCEHY and other large cap firms that openly acknowledge and bend to the requirements and priorities of the power structure will also likely continue to be accepted.

LewisBraham

To me, it's hard to tell in this case what's real and what's just rhetoric--from WSJ, which has its own very capitalist slant, and from China, which has a socialist image to maintain. But assuming Xi's rhetoric has teeth, the real play here is not to sell out of China completely, but to switch to small- and mid-cap China stocks. From the article:

Mr. Xi and his underlings still talk about the need to develop the private sector, which accounts for 80% of China’s urban jobs. But officials say the focus now is on fostering small and midsize companies, in areas ranging from power equipment to sensors and semiconductors, that aren’t likely to become alternative power bases. These firms are expected to emphasize innovation that elevates China’s manufacturing capabilities over profits.

AndyJ

LewisBraham said:

But assuming Xi's rhetoric has teeth, the real play here is not to sell out of China completely, but to switch to small- and mid-cap China stocks.

The Matthews China "small companies" fund MCSMX (86% small & mid-cap) has stayed well ahead of the China Fund (19% small & mid cap) since January 2020. (They're both growth funds.) From that limited comparison, looks like that advice has been good for a while now.

davfor

Just an example of how the Chinese giants are bending to the will of the CCP (perhaps part of the problem for BABA is that Jack Ma let himself become too much of an international public figure?)...

Alibaba Seeks to Exit Media Firm After Beijing’s Scrutiny

Old_Joe

@davfor- yes, I think that you are exactly right with respect to Jack Ma, and that he inadvertently triggered a major reaction from Xi that was percolating close to the surface in any case.

davfor

Signs of progress with the rehabilitation of Jack Ma.

Jack Ma resurfaces in Hong Kong