Misconceptions and misrepresentations abound to such a degree when it comes to China that the average Western observer is oftentimes left scratching his head. For example, he might read one article about “communist China” today and tomorrow, another one which praises China for actually being more capitalism-oriented than let’s say many European nations in certain respects.
Who is right?
Both authors, because yes, a country ran by the Communist Party of China can indeed be market-oriented in many instances as well (for more information about socialism with Chinese characteristics, click HERE).
This is just one example (perhaps the most straightforward one) and the bottom line is this: in China, the answer to many questions can be “yes” and “no” at the same time.
The same principle is valid when it comes to the question which constitutes the title of today’s post.
Is China tolerant?
In some cases yes, in others no.
How tolerant is China?
In some cases very, in others not at all.
As confusing as it may seem, things start making sense once we throw some more examples into the mix and we will start with examples of instances in which China can be considered intolerant:
- Freedom of speech, especially when it comes to opinions which go against the political status quo, with consequences being dire in such instances
- Freedom of information, with there being a ChinaFund.com article dedicated to the textbook example to that effect, the Great Firewall of China (an article which can be accessed by clicking HERE)
- Freedom religion in many instances, with minorities oftentimes being persecuted in manners which draw international attention in the most concerning possible manner
- Freedom of political choice, with China being a multi-party nation technically speaking but in reality, it’s nothing more than a formal status quo, one we have addressed in an article you can read HERE
… the list could go on and on. As can be seen, examples which describe China’s intolerance for the most part revolve around the political status quo and anything that risks threatening it.
On the other end of the spectrum, there are examples of situations in which China can be considered tolerant:
- Business-related standards and especially their enforcement, anything from worker protection to quality control. Let’s just say the equation based on which businesses decided whether or not to relocate to this jurisdiction pretty much always involved considerably more than simply wage arbitrage
- Unethical or even downright fraudulent practices, especially practices which revolve around defrauding Western entities. While let’s call it endogenous fraud tends to be more thoroughly enforced, things tend to be multiple orders of magnitude trickier when international fraud is involved
- Externality-related situations, for example instances pertaining to pollution, situations in which Chinese businesses tend to have a fair bit more wiggle room than their Western counterparts… to put it mildly
- Barriers to entry for domestic individuals/businesses (most definitely not for foreign entities, however). In fact, many expressions along the lines of “there is more capitalism in China than some European nations” revolve around just that, barriers to entry or the ease of doing business, generally speaking
Once again, the straightforward observation which arises is that as long as we are referring to activities which do not question the political status quo, China oftentimes finds itself on the tolerant end of the spectrum… ironically, more so than even certain Western nations. There is a reason why industries such as bitcoin or cryptocurrency mining have been thriving in China despite the love-hate relationship authorities have with them, with “tolerance” being the operative word.
Simply put, the authorities have been willing to tolerate the sometimes questionable energy contracts mining operations have obtained, the pollution dimension of mining data centers, the lax (by Western standards) security and worker protection protocols and the list could go on and on. The end result is that bitcoin and cryptocurrency mining ended up being dominated by Chinese market participants to such a degree that otherwise decentralized cryptocurrency assets (with decentralization being a key crypto selling point, arguably the number one selling point) can be and are considered dangerously centralized from a mining perspective.
Let’s just say that if you or your organization have business interests in China, wrapping your head around nuances most definitely conducive to long-term survival. Do not make the mistake of expecting a Western-style framework of predictability, as you will be bitterly disappointed. Instead, understand that China is the country where cryptocurrency mining can be hated (it was even included on the list of activities that should be prohibited) yet still thrive. Just as fortunes have been made by cryptocurrency miners, generation-defining wealth can be generated in a wide range of other industries as long as your business model and overall approach are tailored to the particularities of China.
As an entity with an actual brick and mortar business presence in China for over 13 years, the ChinaFund.com team is in a unique position to help with just that. From the economic/investing experience of our managing partner Andrei Polgar to the brick and mortar expertise of Graham Haynes and the multi-jurisdictional accounting know-how of James Macrae, we pride ourselves in having all bases covered. For more information about our team, visit the About Us section of ChinaFund.com, visit our Consulting section to find out what we can do for you or your organization and, finally, simply access the Contact page of our website to send us a message if you have a specific request in mind.