Author: english-learner

How is China's wealth distributed?   [Copy link] 中文

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Post time 2014-8-17 10:50:22 |Display all floors
This post was edited by sfphoto at 2014-8-17 11:04

Those statistics are misleading for the following reasons:

1. Half of China's GDP is accounted for by the State sector while the other half is the private sector. Not all of the wealth held by the private sector is related to the State sector so the insinuation that all private wealth held by Chinese must be the product of "guanxi" or graft is a libelous statement.

2. China's GDP quadrupled since 2001 when China officially joined the WTO. For example, Chinese factory-owners exporting all kinds of products to the world reaped huge gains from the rise of China as the manufacturing powerhouse of the world. Thus, most of the private wealth held by these Chinese entrepreneurs in the PRC are a byproduct of the integration of China into the global economy. The wealth of these citizens had nothing to with "guanxi" or connections with the government.

3. China's property values in the first-tier cities increased by TEN(10) times since the first private housing was allowed in China in 1998. So the wealth of property owners in the first-tier cities has increased dramatically as well. The widespread reports of graft and corruption related to the real-estate industry has to do with land-sales whereby property developers exploit their "guanxi" with local government officials to obtain favorable prices or preferential treatment. However, the Chinese citizens who profited by investing in real-estate had nothing to do with "guanxi". They benefitted from the real-estate boom in the last fifteen years, greatly increasing household wealth for the Chinese middle-class in the first-tier cities.

The notion that ALL private wealth in China is tainted by graft and corruption and obtained from exploiting "guanxi" is thus false and misleading, and is mostly a concoction of the Western media. The dispartiy in private wealth has nothing to do with the alleged ill-gotten wealth of Chinese businesspeople in China but everything to do with the integration of China into the global economy, the success of Chinese entrepreneurs in competing against the world and the rise of property values in Chinese cities.

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Post time 2014-8-17 11:00:24 |Display all floors
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Post time 2014-8-17 11:15:26 |Display all floors
This post was edited by sfphoto at 2014-8-17 11:17
coralbay Post time: 2014-8-17 11:00
"For example, Chinese factory-owners exporting all kinds of products to the world reaped huge gain ...

I deal with Chinese entrepreneurs in Quanzhou, Fujian and their wealth had nothing to do with the State sector because their products are exported to countries all over the world. Sure, they have to pay off their tax collectors and the petty bureaucrats here and there but to insinuate as the posters on this thread did that these Chinese entrepreneurs obtained their wealth illegally by exploiting their "guanxi" is libelous. Let me give you an example: I know a Chinese entrepreneur in Quanzhou, Fujian who started an electronics factory making satellite receivers more than ten years ago while still in his 30s. He's now in his early 40s; his factory employs 2,000 workers; his company grosses more than US$ 100 million a year, exporting his products to Southeast Asia and the Middle East. He complains to me that he has to pay off a dozen or so government officials every year. But his company prospered INSPITE of not BECAUSE of corruption, get it?

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Post time 2014-8-17 11:57:54 |Display all floors
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Post time 2014-8-17 23:43:28 |Display all floors
This post was edited by sfphoto at 2014-8-17 23:49
coralbay Post time: 2014-8-17 11:57
Oh I agree. But I still think it is disingenuous to deny the role that guanxi or connections with  ...

You're talking apples; I'm talking oranges.

There's widespread notion in the Western World that any kind of private wealth created in China must be tainted by graft and corruption; that the richest Chinese became wealthy and successful by cultivating "guanxi" with government officials. Let me cite the case of Internet companies to disprove this notion:

Jack Ma (Alibaba), Pony Ma (Tencent), Vincent Mo (Soufun), Robin Li (Baidu), etc. are some of the richest Chinese who started their Internet companies in the last 15 years. If your assertion is true, then these Chinese entrepreneurs must have made their fortunes by cultivating "guanxi" with government officials, not by succeeding in the Internet/E-commerce industry. And these Chinese are not your small-time entrepreneur; their companies are worth hundreds of billions in market cap. The thing is: as China's economy develops more of its knowledge-based High-Tech Industries, "guanxi" becomes irrelevant. As an example, in Tier-2 cities like Chengdu, Sichuan, the Tianfu Software Park is home to hundreds of companies employing tens of thousands of software engineers, IT managers, customer service reps, etc. None of these companies need to cultivate "guanxi" with government officials because all the licenses/permits/taxes are handled by the Chengdu Hi-Tech Zone not by the local government. These type of Hi-Tech Industries in Tier-2 cities like Chengdu are the future engine of the Chinese economy going forward not the low-cost manufacturing factory in a Tier-3 city like Quanzhou that I mentioned earlier. Every kind of Hi-Tech Industries such as biotech R&D, mobile Internet, e-commerce, BPO outsourcing, IC design, online gaming, animation, IoT, advanced materials, health care, etc. are being targeted by hundreds of these Hi-Tech Zones all over China. State-owned venture capital firms are being funded to the tune of billions of dollars to seed Hi-Tech Startups all over China. Even in manufacturing, China will most likely surpass Japan in the deployment of robots to automate the assembly process before the end of this decade.

The biggest change that's going happen in the Chinese economy is QUALITATIVE: China won't grow as fast as before but the QUALITY of its industries will change from the "sweatshop" factory to the Hi-Tech Startup. To use my earlier example, in Quanzhou, Fujian which is a Tier-3 city, they still have the garments/textile/shoe industries but in Chengdu, Sichuan which is a Tier-2 city, they don't want any of those stuff. And because the cost of labor has gone up in the coastal cities, the factory-owners who used to export their low-cost garments/textile/shoes are now moving into e-commerce selling their stuff under their own brand names to the domestic market. China is even forcing SOEs to behave like private companies by forcing them to compete in the market economy. So no more "guanxi" to help shield them from economic competition.

The changes taking place after Xi took over is massive. No doubt the Western financial crisis was a wakeup call for Chinese entrepreneurs. But the policy moves of the Xi/Li duo has accelerated this transition from export-oriented low-cost manufacturing to knowledge-based High-Tech Industries. My prediction is that it will take five more years to complete this transformation of the Chinese economy. By that time, China would have eclipsed the U.S. economy based on PPP terms.

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Post time 2014-8-20 11:44:34 |Display all floors
Having a strong middle class gives stability to a country.
When wealth in-equality becomes to great, it can have a very adverse affect on society.
America is experiencing this now. Its the un-informed voters who vote poor economics is.
The Chinese system is better. They have very good economists at the top managing it. Far better results.

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Post time 2014-8-20 11:55:00 |Display all floors
^ you so funny
I'm just here for the money

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