The View | Behind the brouhaha, China’s struggles to regulate its big businesses are by no means unique
- Regulating new technologies and industries is a challenge facing many countries, including the US
- Far from snuffling enterprise, China is responding to the common need to mitigate or prevent the negative consequences of big businesses
Plummeting stock prices and sensational headlines have led to much excited commentary about the risks of investing in Chinese companies.
The underlying and frequently heard presumption is that these recent examples highlight the difficulties China has with reconciling its authoritarian and technocratic style of governance with the more unstructured, unpredictable and dynamic nature of market forces.
The logical extension of this view is that a vibrant private sector – so necessary for sustained long-term economic development – is fundamentally incompatible with China’s style of governance. If this is true, not only will it become a major constraint for the country’s growth outlook, it would also create significant and potentially unprecedented risks for equity investors.
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Tencent narrows kids’ playing time on video games labelled ‘spiritual opium’ by Chinese state media
But, as ever when it comes to the financial markets, it is important to step back and take a broader perspective. For while it is easy to frame the recent stories as examples of the Chinese government’s need for control – a desire which runs diametrically opposite to entrepreneurial individualism – this is just too simple an explanation.