China targets monopolies in warning to keep big capital in check in 2021

The Politburo says the country needs to prevent ‘disordered expansion of capital’ as the Communist Party counts down to its centenary
‘Demand-side’ reforms also needed to unleash domestic demand and create a sustainable home market

China economy

Zhou Xin

Published: 11:23pm, 11 Dec 2020

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In a veiled jab at China’s sprawling big capital firms, China’s Politburo said on Friday that the country should do more to tackle monopolies and prevent “disordered expansion of capital”, according to a report by state news agency Xinhua.

Along with efforts to improve oversight and regulation, the country will implement a broad strategy of keeping economic growth “within a reasonable range” for 2021 – the year the ruling Communist Party celebrates its centenary – while expanding domestic demand and strengthening China’s strategic technology.

The meeting of the supreme policy-making body chaired by President Xi Jinping also decided that China must prevent any “scaled rebound or imports” of the coronavirus in this winter, signalling that China will continue to be strict in its border controls.

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This is the first time that the Politburo has specifically targeted the “expansion of capital”, reflecting Beijing’s growing unease about the potential social consequences of big tech and capital.

The risks of the combination were apparent in the closure of thousands of peer-to-peer lending platforms as well as the recent downfall of Danke, an online property rental platform that left in its wake tens of thousands of angry young tenants in big Chinese cities.

Tang Jianwei, an economist at Bank of Communications, the fifth-biggest lender in China, wrote in a note that Beijing was trying to push big tech firms to focus on “basic scientific research” that would strengthen the country instead of generating profits through monopolised services.

“Big tech firms with massive data and advanced algorithms must shoulder more responsibilities and spend more on original and fundamental technology innovation,” Tang said.

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Also at the meeting, the Politburo decided that China had to implement “demand-side” reforms to unleash domestic demand to serve Beijing’s strategy of creating a sustainable home market.

While “supply-side structural reform” has been the hallmark of Xiconomics in the past, the Chinese leadership concluded on Friday that it was time to pay attention to “demand-side reforms” along with supply-side changes.

“A higher level dynamic balance, in which demand can lead supply while supply can create demand, must be formed to improve the overall effectiveness of the national economic system,” the Xinhua report quoted the leadership as saying.

In addition, China will try to address “various existing risks” next year.

China was the first country to report an outbreak of the coronavirus but was also the first major economy to bring it under control. As a result, the country’s economic growth rebounded sharply, with the headline GDP growth rate accelerating to 4.9 per cent from a contraction of 6.8 per cent in the first quarter.

“This year is an extraordinary year in the history of the People’s Republic,” according to the meeting. “But we’ve achieved a result that the people are happy with and the world is marvelling at.”

This article appeared in the South China Morning Post print edition as: Beijing targets big capital firms

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