Joe Zhang: Reform is a Tall Order in China

Joe Zhang published in South China Morning Post on 19 December 2013 an article about the private sector versus the state sector in China.


Despite suggestions the private sector is gaining ground on the mainland, state-owned firms are more dominant than ever, with the past decade seeing a reversal of earlier liberalisation gains.


It is wrong for liberal economists to say that the dominance of the state sector goes against the public’s wishes.

In China, the public wants more, not less, involvement by the state sector. The public wants a bigger state sector to tackle the many challenges China faces, even if many of these challenges are by-products of the state sector (inequality, overpopulation and pollution).

Even the recent third plenum does not mention the private sector, a point Lardy acknowledges.

The official data shows that the government tax revenue as a percentage of gross domestic product almost doubled from 12 per cent a decade ago to 22.3 per cent last year. This is almost a wholesale reversal of the economic liberalisation of the previous two decades.

But Western economists do not mention this uncomfortable fact.
The state dominates strategically important sectors – essential infrastructure and sectors with pricing power – while the private sector is left to fight it out in fiercely competitive sectors such as low-end manufacturing, retail, service industries and (some) real estate.

The writing is on the wall: the score of the past decade’s match of the private sector versus the state sector in China is “private sector – zero” and “state sector – one”.

Read the article here…

Joe Zhang

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.

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