World News

@min_fapper@iusearchlinux.fyi @DdCnol@beehaw.org

The level of control by the Chinese Communist Party (CCP) wielded over the enterprises in China is extremley high, and this is true for state-owned enterprises (e.g., China National Petroleum, State Grid, Sinopec) as well as 'private' companies.

The combined assets of state-owned enterprises in China amount to +60 trillion USD, the equivalent of ~80% of the world' GDP (according to Freeman Chair analyses). This is so as they are strictly shielded from any domestic or foreign competition as well as from any anti-trust regulations. Under Xi Jinping, the level of control has even grown. In 2017, the CCP even amended its constitution to assert that the Party “plays a leadership role” in firms' decision making processes. All of these state-owned companies operate in strategic industries like banking, telecommunications, utilities, etc.

The increasing level of control and political influence by the CCP is also an issue for formally private companies, however. Private firms benefit from a similar economic system of high state subsidies that often focuse on scale rather than financial health, and -again- a shield from any competition in order to become major domestic and international players (the EV car industry is currently a prominent example, as well as its donestic property market).

When Western firms compete with Chinese firms, therefore, they essentially compete with the CCP rather than an individual rival. The CCP will do whatever it takes (regulation regarding competition, state subsidies) to ensure that foreign firms are outpaced.

As successful this may be for now, it backfires in the long-term. Some weaknesses are evident in the meantime, while others are likely to emerge in the not so distant future. The all-encompassing, centrally-planning state decision maker leads to shrinking company profitaibilty already and may lead to a decline in the rate of innovation in the future. China is already facing scrutiny in Europe and the U.S. over its structural overcapacity in many industries, its hegemonial intentions, and is increasingly struggling with its demographic development of an aging and shrinking population.

As researchers like Nicholas Lardy point out, if China wants to continue its economic success in the next decades, the country needs to open up, and become a more market-led economy. For now it seems it's heading in the opposite direction.

[Edit typo.]

Only 24% of US debt is held by foreigners and many more countries than the US are having debt in USD and have their currencies tied to it. That's what "the world's reserve currency" means. It's absolutely massive, far too big to suddenly collapse. How and with what aim would international debtors suddenly demand payment? What kind of mechanism are you envisioning and why would these debtors do this in the first place? US debt is the most reliable in the world - everyone knows exactly what they are getting into.

The only realistic possibility is that the USD slowly loses relevance, similar to the British Pound - but this coincided with the decline of the British Empire and the dwindling importance of Britain in the world in general and in regards to trade in particular. America is still the only superpower for the foreseeable future (50+ years at the very least) and there is nobody else that might take the scepter, in regards to both soft and hard power. By that point, China (which is currently busy self-destroying its soft power with Xi's moronic "wolf warrior diplomacy", by the way) will have long imploded under the weight of its many unsolvable issues, chiefly among which the gigantic self-inflicted wound that is their demographic decline. The EU might be much stronger and more united at that point than it is now or it might not be, the Euro could be more important than it is now then or perhaps not. This largely depends on what's going to happen to Eastern Europe.