In the first few days of August, President Trump placed executive orders with US companies that do business with ByteDance, the owners of TikTok, the famous video-sharing application, and WeChat, the Chinese payment and messaging service. It was an ultimatum. You need to break the relationship and break up. It’s part of the trade / technology war with China. It’s true. There is a war. But that’s not new. China has been building its “Great Fire Wall” since 1997. WhatsApp, Gmail and Facebook Messenger, for example, are blocked by the “Great Fire Wall”. China has its own applications and they have long focused on technological autonomy. China today is not what we think it is. A new China is consolidating.
The image that we have of China in the west is not current. Usually when we think of China We think of the great factory in the world. Cheap labor, cheap land, excellent infrastructure, imitations, questionable quality and prices for the apartment. Of course the world is full of Chinese products. Chinese isn’t always the best, but it’s the cheapest. And with this formula they become the global export masters.
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On my first trip to China in 2005, I immediately realized that the Chinese were adept at imitating. Everything had its Chinese copy. The big business was finding a niche and then selling the Chinese copy. The Chinese copy was practically identical to the original, but at a fraction of the price. Counterfeit Rolexes for $ 1 could be found on the street. And if you wanted the identical copy, you could get it for $ 12. Factories and shops everywhere. Back then, new buildings were opened every day. There were cranes everywhere. The speed of growth was just amazing. They felt as if they were facing a miracle.
These were the times of economic opening. The focus was on trading. Of course, it was all chaos. The economy opened like a bang. On the political level, the Communist Party was in full control; on the economic level, it was savage capitalism. The plan was to grow explosively. “”All industrialization was good industrialization”. In addition, for yourself who can. It was just a tsunami of progress. There were few channels on TV and many sites on the internet were blocked. Wikipedia, for example. But in economic matters there was complete freedom. The land was built in two layers. Authoritarianism in Politics. Wild capitalism economically.
This China in my memories began to change with the arrival of Xi Jinping in power. Xi creates a new form of state capitalism by combining free market mechanisms with a stronger government (Communist Party) presence in the Chinese economy. The trend is towards the Party’s greater control over all aspects of life and Xi Jinping’s greater control over the Party. It used to be all about trading. The new economic agenda is different. The new approach is about efficiency and innovation. Work with closed borders. That is, not so dependent on export. Now everything revolves around order and resistance to threats. Xi aims to look more inward and block outside influences. And that means mostly Western Big Tech. And all of this happens under an Orwellian government for mass surveillance of its citizens.
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The era “All industrialization is good industrialization” is behind us. Now there are plans and priorities. And the higher the priority, the higher the state control. Three key sectors: technology, finance and energy. Facebook’s Libra in China? Good luck with it. With VPNs and other fallback mechanisms, everything will continue to run smoothly. The secret route will never end. There will always be a sector that operates outside the law. But Big Brother will see it and want to control everything. In other words, the ruling party will be in a permanent war with the black markets. Goodbye wild capitalism.
While the US economy will shrink 8% this year, the economy in China will grow 1%. China has not suffered as much from the tariffs as previously thought. And that’s because exports are no longer that important for gross domestic product. In the same way, Not as many raw materials are imported as before because the economy has developed and they are expanding in the service sector. Bad news for Latin America. Your star customer won’t buy that much anymore.
While this is true China’s growth is largely based on unsustainable debt, subsidies, and intellectual property theftIt would be a mistake to underestimate Xi Jiping’s new China. T.Technology, technology, technology. But with full state control.
We see what New China is like. WeChat, for example. WeChat is WhatsApp, Facebook, Amazon, Uber, Instagram, PayPal, Expedia and MercadoLibre in one. All of China is on WeChat. Nobody in China pays cash anymore. Everything, absolutely everything. From a cafe to a house. You pay with WeChat Pay or AliPay. You don’t have any adoption problems. Digital money is everywhere. Digitization is omnipresent. Many companies run out of cash boxes and almost no one accepts paper invoices. Fintech is king. And of course the owners of Tencent (WeChat’s parent company) Tango with the party.
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The new Chinese cryptocurrency won’t bring anything revolutionary. The average person will not notice the difference. It’s a change that will take place behind the scenes. The “digital yuan” is only integrated into the WeChat and AliPay wallets.
And bitcoin? What role does Bitcoin play in this new Orwellian state capitalism? Well, you don’t have to be a genius to know that Bitcoin is a threat and will live in the shadows. It is used to avoid controls and capital flight in a black market. Bitcoin, Tether and the other cryptos. I assume that given Xi Jiping’s new economy, Bitcoin is not on the friends list.
The big puzzle is mining. Mechanical engineering and farms. It is possible that the government will allow mining because it doesn’t directly harm their plans. In fact, they are generating income for the country. But how will they control the bitcoins mined? I do not know. On the one hand you can impose bans and at the same time turn a blind eye. Bitcoin may be an uncontrollable call for capital flight, but at the same time, Chinese mining is too powerful to ignore completely. I don’t know how the government will solve this dilemma. But the Bitmain ringleaders have certainly had more than one secret meeting with party officials. New China, gentlemen!