Chinese President, Xi Jinping, just two years ago sought to deleverage state owned enterprise in favor of private industry. However, in recent memory, the Chinese monetary policy has shifted in response to the potential trade war with the United States, international volatility, and slowing economic expansion. In response, the policy has shifted toward shifting private sector assets to the public sector. The Chinese government is doing so by increasing state owned enterprise (SOE) debt and directly competing with private sector counterparts. The result: a short-term boost in the economy at the cost of long term loss. Since the start of 2018, private sector growth has dropped 40% and the public sector has risen over 20%. Exacerbating the issue is a crackdown on private “shadow” lending. Economist, Ben Steil, believes that this will lead to increased debt levels and an overall negative effect on the Chinese economic ecosystem.
The interesting thing about this shift is that it coincides with other policies that promote non-marxist economic policies. For example, the One-belt road initiative could be analyzed as a mercantilist power play within the region. Similarly, the Chinese policy before the shift has largely favored public enterprise (in stark contrast to traditional Marxist views). This shift toward a more socialized economy, or what Steil calls Xi’s ‘socialism or bust’ model, is a regression toward a more socialized economy at the expense of long term domestic growth. The long term solvency of the change could flip just as quickly as it started, but as for now, the end goal and results of the change are to be seen. I find it unlikely that it will truly lead to the Marxist ideal of a worker controlled labor market.