Chinese Mercantalism


Chinese economic strategy involves significant and planned government intervention, particularly as relates to SOEs and mercantilism rather than competitive markets and free trade.


  1. Peak Oil Theory that there will be a massive fight for resources as price increases.
    • Mercantalism = The theory and system of political economy prevailing in Europe after the decline of feudalism, based on nationalpolicies of accumulating bullion, establishing colonies and a merchant marine, and developing industry and mining to attain a favorable balance of trade.
  2. China has a grand strategy of economic growth rather than just 'muddling through'.


Despite the narrative to the contrary, China has copied, what it deems was America's path to development:

  1. Protection of domestic market
  2. Financial subsidies of domestic companies
  3. Export promotion
  4. Stealing technology
  5. Enforcement of antitrust measures
  6. System of securities regulation
  7. Government led mergers.

And used the advice of the World Bank to focus on SOEs where 50 of the Global Fortune 500 and developing 'national champions' because:

  1. SOEs have helped China's strategy of mercantalism and undercutting Western competition.
  2. SOEs provide a role and justification for the political dominance of the Chinese Communist Party
  3. Major industries, important for China's economic and national security, need to be government controlled.
  4. SOEs encourage indigenous innovation reducing the reliance on foreign technologies.
  5. Avoid post-Soviet mistake of selling state industries for pennies on the dollar.
  6. SOEs selling abroad can disrupt foreign telecommunications, manufacturing, logistics etc.

Policy of 'going out' (走出去):

  1. Internationalization of RMB to replace US dollar as global reserve currency
  2. Bottom-fishing - buying foreign companies at low prices (funded by State banks with little need for ROI).