Chinese economic strategy involves significant and planned government intervention, particularly as relates to SOEs and mercantilism rather than competitive markets and free trade.
- 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.
- 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:
- Protection of domestic market
- Financial subsidies of domestic companies
- Export promotion
- Stealing technology
- Enforcement of antitrust measures
- System of securities regulation
- 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:
- SOEs have helped China's strategy of mercantalism and undercutting Western competition.
- SOEs provide a role and justification for the political dominance of the Chinese Communist Party
- Major industries, important for China's economic and national security, need to be government controlled.
- SOEs encourage indigenous innovation reducing the reliance on foreign technologies.
- Avoid post-Soviet mistake of selling state industries for pennies on the dollar.
- SOEs selling abroad can disrupt foreign telecommunications, manufacturing, logistics etc.
Policy of 'going out' (走出去):
- Internationalization of RMB to replace US dollar as global reserve currency
- Bottom-fishing - buying foreign companies at low prices (funded by State banks with little need for ROI).