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Post: Communism and billions. What’s going on with big business in China?

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MOSCOW, May 15 – RIA Novosti, Dmitry Ermakov. In terms of the number of super-rich people, China ranks first in the world. However, the leadership is rather shaky: authorities thwart uncontrolled private capital accumulation and encourage billionaires to share with the people. Western sanctions against Russia may also fall into their pockets. RIA Novosti investigated whether the Chinese economy will continue to grow in the new conditions due to monopolies.

Jinping vs Xiaoping

There are 1100 dollar billionaires in China. Thus, China became the first country in the world to exceed a thousand. This is reported by research agency Hurun Report’s rating released in April. According to him, in 2021 alone, China added 75 billionaires despite the global economic recession due to the pandemic.

The USA is in the second place with 716 billionaires and India is in the third place with 215. There are seventy-two in Russia, and there are about 3,400 in total in the world, according to Hurun. It turns out that a third of the list are citizens of the PRC.

Zhong Shanshan, Chinese entrepreneur, founder and chairman of the board of Nongfu Spring beverage company - RIA Novosti, 1920, 13/05/2022
Zhong Shanshan, Chinese entrepreneur, founder and chairman of Nongfu Spring beverage company

According to Hurun agency, China’s richest man is Zhong Shanshan, who earned $72 billion from Nongfu Spring mineral water. In last year’s Forbes magazine rating, the slightly more modest figures for its revenue were 67.3 billion.

In second place is Zhang Yiming, the founder of ByteDance, the owner of the popular social network TikTok. Its capital is estimated at 54 billion. A billion less – and third place – is occupied by Zen Yukun, executive director of a company that makes CATL batteries.

Compared to the previous rating, the list has changed a lot: 160 billionaires left, 235 new ones took their place. Among the money-losers are Jack Ma, the former leader of the rating, owner of Alibaba Group, and Pony Ma, founder of investment firm Tencent Holdings.

At the same time, the Chinese Communist Party is not satisfied with the growing number of billionaires. Guo Shengkun, a member of the CCP Politburo, said that income inequality undermines the party’s prestige. The official cited President Xi Jinping’s speeches – arguing that achieving “common prosperity” was necessary. So billionaires should share with people. Such a policy is another sign of modern China’s departure from Deng Xiaoping’s market reforms.

Deal with monopolies

The Chinese authorities are really starting to tighten the screws of the big commercial conglomerates. Therefore, in 2020, Jack Ma planned to hold the IPO of Alibaba’s subsidiary AntGroup. But a few days before that, he publicly criticized the country’s financial elite. As a result, the public offering did not take place. Regulators were dissatisfied with AntGroup’s ability to receive a higher market value from government lenders, a banking industry source told the Financial Times. After such news, Jack Ma disappeared from the media for a long time. Several publications suggested that the businessman was under house arrest. However, the information was later denied by tracking the movements of Alibaba’s president on a private plane.

Alibaba founder Jack Ma at IV Eastern Economic Forum - RIA Novosti, 1920, 13/05/2022
Alibaba founder Jack Ma at the IV Eastern Economic Forum

Following this story, Xi Jinping urged relevant departments to strengthen supervision of Internet companies, including to crack down on monopolies and prevent an uncontrolled increase in finance. The capitalization of some IT assets collapsed immediately. According to Forbes, Tencent lost more than $65 billion in two days. Hence the decline in the position of the owner of the investment group in the rating of the super-rich.

Tighter government regulations in the tech industry are worrying Chinese analysts. Especially against the quarantine due to COVID-19 and the disruptions it causes in supply chains. For example, in Shenzhen, where Tencent is headquartered, the company’s shares have lost more than half of their value since February 2021 after the government announced stricter censorship rules for the release of video games. Sources in the Shenzhen high-tech industry agree that industry workers are poised to change employers. “People are afraid of being fired. Their morale is low,” says one of the engineers.

“The market has become a frightened bird. Entrepreneurs are full of fear,” adds Zhou Jiangong, former CEO of Chinese business publication Yicai.

However, new restrictive laws were not passed. Perhaps the change in the geopolitical situation affected. It is now unprofitable for China to pursue a harsh policy against its companies: the Russia-Ukraine conflict and Western sanctions could negatively affect the economy. Despite growing disagreement over Taiwan’s status, Beijing is not yet ready to engage in direct conflict with Washington.

Indirect Failure

But Chinese billionaires are already losing money. The most revealing case is the story of Huawei Technologies, the world’s largest supplier of telecommunications equipment. The White House imposed sanctions on the company in 2018 for cooperating with Iran. CFO Meng Wanzhou had been under house arrest in Vancouver for nearly three years. Meanwhile, Huawei President Ren Zhengfei is a member of the CCP and a former military man whom Western intelligence agencies dislike.

Although his stake in the company is only 1.42%, Zhengfei’s net worth is one billion dollars and is listed on Forbes. Minimum income loss – and he ceases to be a billionaire. There is such a possibility: Huawei reported that its revenue in the first quarter fell 14% compared to the same period last year.

Huawei logo in Beijing - RIA Novosti, 1920, 13/05/2022
Huawei logo in Beijing

Still, Huawei continues to export products to Russia without any restrictions. But Bloomberg cites a study by Capital Economics that says other Chinese business firms don’t want to work with their Russian counterparts because of the risk of secondary sanctions. Analysts believe that access to the US financial system is more important for Chinese businessmen than for Russian businessmen. The names of the companies were not disclosed. In response, the Wall Street Journal writes that Lenovo and Xiaomi “almost completely stopped the delivery of equipment to Russia.” True, the reason may not only be the US sanctions, but also the curfew in Shanghai due to covid.

According to some sources, the UnionPay payment system created in China also hesitates to cooperate with Russian banks that are subject to sanctions. At the same time, there was no direct statement from UnionPay itself regarding this matter.

Also, not a single major Chinese company, including state-owned companies, has directly disclosed its refusal to trade with Moscow. A few companies are buying Russian energy resources for yuan, overcoming potential financial obstacles from the West. It is also alleged that they are considering buying or increasing shares in Russian energy and raw materials companies in China. Among other things, we are talking about Gazprom and Rusal. However, negotiations are currently at an early stage and it is not a fact that they will result in an agreement.

Despite the new and new sanctions packages of the USA and EU against Moscow, China continues to import crude oil from Russia. But China’s strategic support for the Russian economy is still only a matter of debate. Thus, the country’s largest oil and gas operator Sinopec suspended investment talks in Russia.

“We are on the right track”

However, Washington continues to criticize any trade relationship between Beijing and Moscow. In late April, US Treasury Secretary Janet Yellen denounced China for actions that “wrongly harm” other states’ national security interests. Beijing was quick to respond. “China strongly opposes unilateral sanctions that are not supported by the UN Security Council and are not based on international law. We are against any ban and restriction on China’s normal trade,” said Shu Jiueting, spokesperson for China’s Ministry of Commerce. other countries.”

Chinese Foreign Ministry spokesman Zhao Lijian added, “We are against unfounded accusations against China. We will not bow to any pressure or coercion. Time will tell, we are on the right historical track.”

Zhang Yiming, founder of ByteDance, owner of the popular social network TikTok - RIA Novosti, 1920, 13/05/2022
Zhang Yiming, founder of ByteDance, owner of popular social network TikTok

Over the past few years, China has developed a toolkit against foreign interference in domestic economic matters. In June 2021, the anti-sanctions law was passed. It also provides legal support and compensation to organizations affected by the introduction of foreign restrictions. Also, at the end of February, the PRC began stress tests of the financial system in case of economic measures by the West. The program includes banking regulators and the public sector of international trade.

Economic analyst Leonid Khazanov believes that Chinese market players are busy developing cooperation plans with Russia without risking US and EU sanctions. It also acknowledges that some firms from China will lose money. For example, shipyard contractors building modules for Novatek’s Arctic LNG 2 project: they are expected to stop doing more work.

“On the contrary, others will increase their profits – especially automobile concerns, where the field has been cleared after the withdrawal of Western brands from the Russian market,” says Khazanov. However, according to him, the income of Chinese trade from the expansion of contracts in Russia will be noticeable only in the long run.

Meanwhile, the Chinese economy continues to grow. According to the South China Morning Post, it rose 4.8% in the first three months of 2022. The country’s 2021 GDP increased by 8.1%. China’s foreign investment increased by 3.2% last year to $113.6 billion, according to government data.

But in new realities, growth may be short-lived. Investors are in doubt due to the sanctions and hypothetical union of China and Russia on the backdrop of the Ukraine conflict. In March, shares of major Chinese companies on the US and Hong Kong stock markets fell by six to seven percent. If this trend continues, there will be a noticeable decrease in the number of billionaires in the country next year.

Source: Ria

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