Is China Communist?

If I were to name one single blindspot of almost all Western pundits and economists talking about China, I would name the existence of vast, and ultra-efficient private sector, in a Communist country. I did not use the word “Communist” accidentally. In fact, I incline to think that it is the Communist element, that makes so manny Western analysts to totally misinterpret the nature of Chinese economy.

You see, most people are naive platonists. They believe in some form of eidos, be it communism, capitalism, socialism that just … exists? in some parallel transcendental reality, and at times gets emanated on earth in some - usually deficient and impure form.

So, basically, if we have a capitalist society in the United States, that is because it works as an emanation of this transcendental eidos from another space. And vice versa, a communist society in China must be working as an emanation of its own eidos, and be governed by it.

In the light of this naive platonism, which - as I will argue - does define the public discourse, the total and stubborn refusal to see the private economy of China does indeed make a total sense. China is Communist, isn’t it? It must be, it is here, in it’s name, you can read it. And if it is communist, then it must be defined by the influence of Communist eidos from some outer space.

Following this logic, all the perceived aberrations from the eidos, must be just ignored, as irrelevant as unimportant. China is Communist, Communist, Communist, Communist, Communist, Communist, and Communist once again, how do you not understand. And if it is Communist, then it is the Communist part that we should focus upon and study through, for it is the only thing that matters.

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I will argue that this quasi-platonic approach is totally and fundamentally wrong.

I will argue that the dynamics of Chinese economy cannot be understood through the lenses of “state planning”, “directives” or even policies. That is all just naive platonism

I will also argue that a great degree of Chinese comparative advantage is based upon the fact that they have a huuuuuuuuuge deal of the free market, to the extent unimaginable, and unaffordable for the economies of the West.

Let me give you an example:

That is just one, but you can find many

I think this well-describes a very real phenomenon. Yes, that is exactly what happens, happens on many markets simultaneously, and Western observers cannot see it otherwise than the madness or insanity. Chinese companies enter the market, and start selling their product like just a little above the cost of production. At very little profit margin at all, totally obliterating all the competition. And that is despite of the fact, that they could have set prices just a little bit lower than their Western counterparts, and earn millions trillions bazillions just for themselves.

Insanity is indeed one possible explanation of what we see. May be they are right. May be Chinese producers are dumb, or mentally ill, and just do not understand their own interests, and somehow act against it for some incomprehensible reason. May be it all is just the mysterious Chinese soul, and the Chinese just don’t like money as much as the Westerners do.

And yet, let’s make a mental experiment. Let’s imagine a model of economy where this exact kind of behavior makes sense. More than that, let’s imagine a model of society, where it makes sense and is the only rational course of action for every individual player. What would that model be? What set of conditions might induce you to crash prices to the ground, rather than holding them high enough?

The most obvious, the most on-the-surface, and the most logical explanation that almost all of the Western analysts just refuse to consider, is

The (nearly) perfect competition

If the market is free, and the competition is near to perfect, than holding the prices high is impossible, because 5 min later swarms of competitors with crash them anyway.

So, basically, a German producer may think, like why can’t we be living in peace? Why cannot we be dividing the market in peace? Why cannot he offer the prices like 20% lower than mine, and enjoy a fair fat lump of the profits?

And the answer would be:

In China, you cannot gatekeep

The whole let’s divide the market logic, is based upon a premise that you can somehow hold the gates of the market against the new entrees. There is only you, and a German guy, and that’s it. Then you can hold the prices.

Now the thing is:

You can gatekeep in Europe

You can gatekeep in the United States

You can gatekeep in every single economy of the West

But you absolutely cannot gatekeep in China, for there are no tools at all, that would allow you to do that

Like what would you even do to restrict the new entrees?

Intellectual property? lmao

Some other lawfare? Again, just like the enforcement of intellectual property rights, that would ultimately rely upon the cooperation of state, and the state in China - unlike in the West - just would not cooperate.

High profit margins in the West are ultimately based upon the artificial restraints upon the new entrees, and upon the state-sponsored gatekeeping. You keep your prices high, because any new entree on the market will be scared away by the force of the state machine. And in China, the state machine just wouldn’t do that. That is why Chinese competition is getting so close to perfect, and that is why prices (and profits margins) in China, can be getting so low.