(Neo)Authoritarianism in China: The Past, Present and Future of Authoritarian Rule


Much can be said about China’s economic system, about socialism with Chinese characteristics and its many common denominators when comparing it to both capitalism and socialism. Some economists praise China for being more market-oriented than let’s say many European nations in some respects, others claim the exact opposite. Let’s just say that few things are set in stone when trying to make sense of China from an economic perspective.

Politically speaking, however, there aren’t nearly as many question marks.

As unpleasant as it may be for some economic actors to admit this, yes, (neo)authoritarianism is the status quo in China and while we are not dealing with a level of authoritarian terror that matches let’s say that experienced during the 1966 Cultural Revolution days (arguably the height of Mao Zedong’s authoritarianism and for more information about Mao’s activity, please read our dedicated article which can be accessed by clicking HERE), there is no denying that China is under a clear authoritarian rule.

The ChinaFund.com team believes in being upfront about the pleasant as well as unpleasant realities associated with China, for reasons which range from ethics to pragmatism. Referring strictly to the latter, it is important to understand the proverbial rules of the game you are about to play as someone who is interested in gaining exposure to Chinese assets. Here are just a few examples which should make it clear why:

  1. Entire industries can literally evaporate on a whim but the same way, the Chinese authorities frequently change their minds on a whim as well. Perhaps a textbook example to this effect is represented by the cryptocurrency industry. China has been notorious for banning and then unbanning various sectors of the cryptocurrency space. From banning exchanges to regulating them. From including cryptocurrency mining in a list of activities that are to be discouraged from eliminating it from said list. From warning market participants against blockchain technology to embracing/encouraging certain applications of blockchain technology… despite this literal craziness, some of the most important actors in the cryptocurrency space (when it comes to anything from top holders to miners) have been and continue to be located in China
  2. The political element associated with various sectors tends to be emphasized more so than in other jurisdictions, with “regime-friendly” industries or businesses being encouraged and at the same time, industries/businesses which are perceived as even mildly anti status quo being put under the microscope
  3. The Chinese authorities being more willing to step in and take various forms of action (even if it infringes on the independence of a certain business) than the authorities of most Western nations, with the obvious implications thereof

… in other words, the Chinese authorities and their various actions will represent a far greater variable in your business/investment equation over in China than in other jurisdictions.

Is this good or bad?

Opinions about this matter abound.

Some economic actors believe this level of interference cannot be anything other than bad, with many refusing to do business in China precisely because it lacks the sort of transparent and predictable playing field many have come to expect in the West. Others, however, embrace the exact opposite view point and try to turn this situation into something that gives them an edge (for example, by meaningfully understanding how things work in China and doing their best to anticipate the actions of the authorities so as to position themselves accordingly). Finally, there are of course players who consider the situation for the most part benign, neither inherently good nor inherently bad.

The ChinaFund.com experts have been around the proverbial block over in China enough (for over 13 years) to state that as strange as it may seem, what some consider volatility to the point of insanity from a legislative perspective can most definitely be turned into an edge by savvy market participants. Needless to say, a superficial understanding of “all things China” is most definitely not enough and there is a reason why we tend to be so thorough on this website. Why we publish posts about anything from specific economic indicators to Confucianism.

We don’t do it so as to show off our knowledge and/or try to impress potential clients, we do it because there is literally no other way. Time and time again, ambitious players approach this jurisdiction with very aggressive dreams but unfortunately for them, they prove to be delusional when it comes to assessing the amount of work involved to actually have staying power in China. They read a few articles, believe they have it all figured out, perhaps even get lucky once or twice. In the long run, the market is anything but generous with the unprepared, however, and the same players for the most part end up leaving with various conspiracy theories in their mind as to why they failed.

Hint: don’t be quick to blame potential conspiracies when incompetence represents a possible explanation. And to come even remotely close to considering yourself competent as an investor in this jurisdiction, it is paramount to roll up your sleeves and put in the work. Unless, of course, you choose to outsource this process to a third party such as ChinaFund.com. However, be warned: the market is full of unethical consultants who talk the talk but fail to deliver, so always proceed with caution and take things one step at a time.

We do not shy away from advising potential clients against jumping into a large-scale relationship with us because that is simply not prudent. Instead, we only ask for the opportunity to prove ourselves and gradually establish trust. Other entities do the exact opposite and try to lure Western investor in with tempting promises but as always, keep one of the top axioms of the investment world in mind: if it sounds too good to be true, run like the wind.

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