Chinese Economics Thread

[abenomics12345]

- building/operating the electric grid, esp. UHV lines, and relevant R&D
- oil and gas pipelines
- building/operating rail lines, esp. HSR, and relevant R&D
- building/operating telecommunications networks, and relevant R&D
- building/operating the national water network
-Commercial utilities for the above

I largely agree with this list.

key equipment

The best electronic equipment makers in China are not SOEs.

grid scale energy storage projects, esp. pumped hydro

Don't see why private operators cannot do this as well as SOEs.

- coal mining
- metals mining
- metals refinement

World's biggest mining companies are not SOEs. Whatever refrains about the safety track record of POEs in China can largely be traced to the problematic regulatory/enforcement mechanism of local governments, not necessarily a conclusion that "mining is better left in the hand of the state", but rather the state had poor regulatory enforcement capacity.

-commodity chemicals

Again, nothing to suggest the state should do better here.

-rare earths

Strategically, yes.

- airlines

This is yet again a sector where it's not clear. SOEs and POEs can do very well (Xiamen is an SOE, Hainan POE).

- bulk shipping

Again, not clear why SOEs should do better here

- building a complete indigenous defense-industrial base nearly from scratch

This for sure.

- civilian shipbuilding

Eh, yes and no. I would frame this as the State need to maintain capacity but not necessarily look to dominate the sector.

- civilian passenger jets

Considering the conjoined nature of civil/mil in aviation this is really not separate from defence-industrial sector.

-a whole lot of obscure but very important industrial/agricultural machinery that would otherwise not be developed domestically or only developed to the point where they could be monopolized and then no further

Not sure why you'd write off Sany or Zoomlion as uncredible at ag machinery. You can support these sectors with basic research funding and allow the researchers to spin off of the labs/universities to form their own businesses.

Overall, it is extremely important to not conflate the necessity for "state support" with the necessity of "state ownership".

 

[supercat]

Why China is such a manufacturing powerhouse:

1. China’s Manufacturing Advantage Is a Deliberately Designed System
2. Within the System, Speed Becomes a Compounding Advantage
3. Profitability Is Rarely The Core Objective
4. The Energy Transition as Organizing Belief

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The author's X account:

https://twitter.com/i/web/status/2016043927489614326

 

[fishrubber99]

Advocating for more privatization of SOEs just sounds like advocating for falling into the same neoliberal trap that a lot of Western economies have fallen into already. Private companies are not guaranteed to be more efficient than state owned ones in the long run (I would argue it's industry dependent) since all firms eventually want to form monopolies and engage in rent seeking.

A large chunk of the economy generating revenue for the state at a higher effective rate than the private sector is not bad thing, otherwise a large chunk of that wealth will simply be privatized and the cost of regulating private companies will be socialize . SOEs can also be used counter-cyclically against a surplus labor market to hire more people and stabilize employment expectations:

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And in terms of whether China is meaningfully Marxist or not, it seems to me like the top leadership of the CPC still have a good understanding of dialectical materialism. You can say that "the role of the government is to act as the referee" but how can a government act like an impartial referee when the lion's share of wealth and economic power is concentrated into the hands of the capital owning class, especially when the state has divested from the economy? The capital owning class will use their economic clout to influence politics and degrade the regulatory state, like what has happened in basically every Western country (and what happened in China under Jiang and Hu). It seems like China's current leadership understands this and doesn't want the state to simply be used as a tool for capital, which is a good thing.

 

[Hitomi]

We've seen cases of SOE bankruptcies in China. Throwing good money after bad is generally not a great value proposition. You have to recognize that the role of government as a *shareholder* is different from the role of government itself. Two separate set of goals/objectives and ideally run by different branches of government.

I see where you are coming from for the other points and @hereforsemithread has explained the SOE retention point far better than me. However for this point, especially the second half, I would argue that the role of the government as a shareholder in an SOE is the means to the objective (whatever is defined by the government such as stable supply, controlled prices, services of low upfront value etc.) of service provision to the people that trumps profit and long term financial viability, and there is no conflict, as the shareholder dictates the overall company strategy, purpose, revenue levels and sustainability.

 

[hereforsemithread]

I see where you are coming from for the other points and @hereforsemithread has explained the SOE retention point far better than me. However for this point, especially the second half, I would argue that the role of the government as a shareholder in an SOE is the means to the objective (whatever is defined by the government such as stable supply, controlled prices, services of low upfront value etc.) of service provision to the people that trumps profit and long term financial viability, and there is no conflict, as the shareholder dictates the overall company strategy, purpose, revenue levels and sustainability.

To add to this, if the government were to take an entirely hands off approach to management and just tell the appointed officials to maximize profits, then they're basically operating like a private firm at that point anyway and there's little reason to keep them under state ownership beyond serving as a revenue source.

The primary purpose of SOEs is specifically to do things that are non-optimal for margins but benefit the broader economy, because private firms never would. Yes this makes appraising the performance of their managers a challenge, but that doesn't invalidate the function, and they have proven to be a huge structural advantage for China's development.

However it is definitely correct that commercial performance can and should play a significant role in officials' evaluations, even if its not the end all be all like for private firms. To this end the Xi admin has implemented a series of reforms over the past 2 five year plans that has shifted SASACs role from one of directly participating in the management of CSOEs to mostly just a monitoring body that evaluates the latter's commercial performance and oversees the implementation of policy directives by the largest parent companies.

The task of comparatively more granular implementation has been delegated to revitalized party organs within the SOEs that have seats on the board, hold veto power over strategic decisions, and control the appointment of middle managers. Then the state-appointed managers pursue commercial performance within the boundaries set by the party committee, which are in turn set by higher policy. The organization department is in charge of appointing officials and evaluating their performance for the most important 50 or so CSOEs.

This allows for a kind of happy medium where the party still controls big investment decisions and the industrial layout while the pressure of commercial performance also has room to discipline management.

 

[StraightEdge]

https://twitter.com/i/web/status/2016378201040203968