Joe Zhang, author of ‘Party Man, Company Man: Is China’s State Capitalism Doomed?’ shared his insights on the private-sector corruption in China:
What is wrong with China’s private sector? Most privately held businesses are still too small, too inexperienced and too fragile to succeed. Many are opportunistic concerns that trade for a few months or years and then shut down. They must contend with public hostility and a legal system that offers scant assurance that they will be able to enforce their rights. Driven by greed as well as discrimination, many private business people are forced to find illegal shortcuts, even if this jeopardises the future of their business – or their lives.
There is still systematic discrimination against the private sector by the government and the public. City officials fear, for example, that awarding a public contract to a private concern over a state-owned competitor might damage their careers.
What limited evidence there is suggests the financial performance of companies in the private sector is inferior even to those in the inefficient state sector. The picture is still worse when you take into account the thousands of private-sector companies that go bankrupt or close voluntarily each year.
This hostility towards private enterprise has insidious effects. Many investors perceive state-controlled companies as less risky propositions. That is understandable: during the past two decades, instances of fraud and operational risk have hurt private-sector businesses badly.
The inevitable consequence will be a bigger state sector. That may be what the Chinese public wants. But, if China is to stamp out corruption in business, it is not the place to start.
Read the entire article here…
Joe Zhang is the Chairman of Slow Bull Capital based in Hong Kong, and also author of “Inside China’s Shadow Banking: The Next Subprime Crisis” and 避開股市的地雷。Zhang was Chairman of Wansui Micro Credit Company in Guangzhou, China, from 2011 to 2012, . He was named “Microcredit Person of the Year” in January 2012 by the Microcredit Association of China.
He started Slow Bull Capital in 2012. Before starting his own business, Zhang worked at investment banks. He was Deputy Head of China Investment Banking at UBS between 2008-11. From 1999 to 2006, Joe was co-head and head of China Research at UBS Securities Asia Limited. Prior to this, Mr. Zhang worked at the People’s Bank of China between 1986 and 1989. Zhang was chief operating officer of Shenzhen Investment (604 HK), a company listed on the Hong Kong Stock Exchange, between 2006-08.