An unworthy Chinese example that India ought not to emulate

Relevance: Economic policies of India

Synopsis: India shouldn’t become too much restrictive to business by trying to copy recent policy actions of Chinese government.

Background

China’s crackdown on businesses has been going on steadily and continually. Initially, it was felt that the target was Jack Ma because he dared to challenge the system in a speech last October. But soon, it became clear that it was not just about Jack Ma or non-bank companies and the systemic risk they posed to China’s financial stability. The ruling Communist Party was worried about some businessmen becoming too successful, and hence too powerful, and that they might one day challenge the party’s authority.

China’s recent crackdown on large businesses

The communist party ordered Jack Ma to step down from the helm of the affairs of a futuristic business-cum-leadership school that he had set up.

Then came China’s crackdown on ride-hailing app DiDi right after it listed its shares in the US. It was said that Beijing was concerned about the privacy and sovereignty of Chinese data. Overnight, these for-profit businesses were asked to turn themselves into non-profit entities.

The country’s online recreation and entertainment industry was the next target. They were branded ‘moral opium.’

What are the reasons for such actions?

• Threats from big capital: According to some journalists and experts, China is now against the big capital, especially if it flows into areas that the government does not consider priorities. Also, more importantly, big capital was creating power centres that could threaten the government.
• Standardizing unreasonable income: Recently, China’s President presided over the 10th meeting of the Central Finance and Economics Committee and emphasized the promotion of common prosperity. The meeting concluded that it was necessary to strengthen the regulation and adjustment of high incomes
  and to clean up and standardize what it called unreasonable income.

Why India shouldn’t copy China’s present actions?

India faces elections in 16 states before 2024 and national elections in 2024. Political parties might be tempted to play the populist-socialist card to retain power or win elections. In India, the tendency to play the populist card either through policies or through fiscal support is no longer sustainable

While America and China, that have created far more economic wealth than India, can turn their attention towards sharing it. India still has to expand its wealth to engage in a meaningful redistribution.

Way forward

Indeed, some of our growth-friendly measures would automatically help raise incomes at the bottom of the pyramid, if the licence, inspection and compliance raj is systematically dismantled at all levels. This is the ‘populism’ that India needs, not failed social and economic engineering that destroys capital.