Finance executives say the risk of a default is already damaging the economy.
For many Chinese businesses, the guidelines were once clear: Pay lip service to the government, make money and go global if possible, with foreign listings and acquisitions.
While China’s billionaires always felt vulnerable — the country’s list of richest individuals is often joked about as a catalog of targets — they also had a cozy relationship with officials that allowed for flouting the rules and influencing policy.
Success is no longer a guarantee of safety. As China’s leader, Xi Jinping, reshapes how business works and limits executives’ power, the big-name casualties are piling up, and there is little sign that Mr. Xi and the regulators he has empowered are daunted by the carnage. Since February, investors have erased more than $1 trillion from the market value of China’s largest listed tech firms.
Long in coming, but rapid in execution, the policies are driven by a desire for state control and self-reliance as well as concerns about debt, inequality and influence by foreign countries, including the United States.
The goal is to fix structural problems, like excess debt and inequality, and generate more balanced growth. Taken together, the measures mark the end of a Gilded Age for private business that made China into a manufacturing powerhouse and a nexus of innovation.
“The very definition of what development means in China is changing,” said Yuen Yuen Ang, a political science professor at the University of Michigan. “In the past decades, the model was straightforward: It was one that prioritized the speed of growth over all other matters.”
“It is clear by now that Mr. Xi wants to end the Gilded Age and move toward a Chinese version of the Progressive Era, with growth that is more equitable and less corrupt,” she added.
Economists warn that authoritarian governments have a shaky record with this type of transformation, though they acknowledge that few have brought such resources and planning to the effort. READ THE ARTICLE →
Article source: https://www.nytimes.com/live/2021/10/06/business/news-business-stock-market