As Chinese state capitalists continue to receive praise for their ever-growing businesses, they are celebrating their incredible success. From well established telecommunications companies to online streaming services, the Chinese business sector has become one of the world’s most vibrant and innovative markets, and China’s state capitalists are currently reaping the benefits of their impressive stock market performance. Read on to learn more about how Chinese state capitalists have managed to achieve such tremendous growth.
1. State Capitalism: Big Winners in China
China’s State Capitalism has become a primary driver of the country’s economic success. As the Communist Party strengthened its control over the economy, large companies with links to the government increased their dominance. The state-owned-enterprises (SOEs) have become the biggest winners of China’s economic growth in the last two decades.
The Most-Favored-Enterprises (MFEs) formed by private and state-owned companies have been connected with low-interest loans from public banks, subsidies, trade policies, and preferential tax treatment. This has allowed them to benefit from more advantageous market conditions to expand their operations and build strong competitive advantages. This strong support has enabled them to capture a larger portion of local and international markets, resulting in higher profits.
Many MFEs are now some of the world’s largest and most innovative business players. From automobile groups like SAIC Motor and Didi Chuxing, to tech companies such as Tencent and Huawei, they have raised the bar for product innovation and quality, providing exceptional value to their customers.
In addition to the growth of MFEs, other aspects of State Capitalism have proven beneficial to the Chinese economy. For instance, the strengthening of intellectual property protection has allowed Chinese companies to produce and grow high-value goods. Moreover, SOEs have attracted substantial foreign direct investments (FDI) ,which has helped to increase the overall economic prosperity of China.
2. China’s Soaring Share Prices:A Tale of Two Billionaires
China’s stock exchange is a tale of two cities, or in this case, two billionaires. Jack Ma and Wu Yajun may not look much alike but their wealth stories are quite similar. In 2021, Ma retired from Alibaba, his tech empire, with a net worth of $58 billion, making him China’s richest man. Wu, chairman of Longfor, is not far behind with a net worth of $41 billion.
2020 was a remarkable year for Chinese companies in the stock market. In a few short months, Chinese companies listed on the Shanghai and Shenzhen exchanges saw their shares double in value. The lucky few, like Ma and Wu, made billions of dollars overnight. With such success, the Chinese exchanges are now some of the most traded in the world.
- In 2021, Ma retired from Alibaba with a net worth of $58 billion.
- Chinese companies listed on the Shanghai and Shenzhen exchanges saw their shares double in value in 2020.
- Ma and Wu are now among the wealthiest individuals in the world.
- The Shanghai and Shenzhen exchanges are now some of the most traded in the world.
3. Riding the Chinese State Capitalist Wave
In recent years, China has seen a huge resurgence of the state capitalist sector. With the right moves, individuals can capitalize on China’s powerful economy and experience incredible growth.
- One way to take advantage of this trend is to invest in state-owned enterprises (SOEs).
- Private companies could benefit immensely by partnering with or acquiring an SOE.
- China’s vast domestic market means there are plenty of opportunities for those willing to take the risk.
Beyond the obvious gains, there are other opportunities for those ready to grab them. For instance, the development of infrastructure projects like high-speed railways or deep-water ports could generate business opportunities for those willing to get involved. Moreover, foreign investors can benefit from high returns produced by investing in real estate, especially in popular tourist spots. Reaping the rewards of the escalating Chinese state capitalist wave may require a bit of strategy, but it can be an immensely lucrative experience.
4. Power Behind the Scenes: China’s Influence on Stocks
China has long been the prevailing force in the international markets, and it stands true for the stock markets as well. The Chinese Government’s efforts in bringing high-value investments into the Chinese stock market has witnessed a staggering growth in the Asian stocks. The direct involvement of the Government with the Chinese enterprises has ensured a competitive edge over the counterparts in other countries.
However, China’s influence is not limited to its domestic investors. From investments in the US stock assets, to the monitoring of regional markets, investment banks in China have been known to dominate the stocks all over the world. With the presence of big names in finance like China Merchant and Citic Pacific, it’s not difficult to appreciate the leverage these banks have in the global stock portfolios:
- These banks control over $4 trillion in assets.
- China has enabled a mutually beneficial relationship between the Asian and North-American markets.
- The Chinese decision to invest in US stocks has made them the biggest investors in some cos.
With China holding the reins in the stock markets, it’s clear that the Asian superpower has come a long way in securing its legacy in the international economic landscape. In the coming years, it’s likely that more nations will get onboard with Chinese investments, resulting in a safer, more secure stock market.
As China’s economy continues to grow in strength, the state capitalist model that has been so successful in generating wealth is expected to continue to thrive. While critics may find aspects of the approach objectionable, the spectacular stock market performance achieved by the major state-owned companies is unlikely to be diminished anytime soon.