Private economy symposium, Jack Ma, DeepSeek, Alibaba, marriage data, generic drug scandal
China Translated - Week in Review #41
After digressing to Jack Ma, Ne Zha 2, whether China is an expansionist power, AI’s new insights from neuroscience, and translating Mr. Shan Weijian’s great essay that deeply resonated with me, it has been a month since I last did a proper weekly review.
For those of you who are relatively new, the main format of this newsletter, apart from in-depth essays from time to time, will be this kind of weekly review, in which I will review events happening in China that I believe will have a lasting impact beyond news cycles. Think of the long essays as building a theoretical framework to help you have a basic grounding in understanding China, and think of the weekly reviews as a way to apply those theoretical frameworks to ongoing events. I hope the existence of this newsletter will help China to start making some sense to you.
For this week, the events I will review are:
How to interpret Xi’s symposium with the private sector
Alibaba’s quarter results that cement the “vibe shift” towards China tech sector
Marriage data
The drug bulk procurement scandal
#1 The private sector symposium
Probably the most consequential news in China of the last week is the much anticipated Symposium between China’s top-most political leadership and some of our most successful private businessmen, including Ren Zhengfei of Huawei, Wang Chuanfu of BYD, Pony Ma of Tencent, Lei Jun of Xiaomi.
But undoubtedly, the private sector attendees who are most watched are Jack Ma, who perhaps occupies at least 95% of the Western mind share when imagining “China’s private businesspeople”, and DeepSeek’s Liang Wenfeng, who I believe has just broken the record for any private businessman to have met China’s premier-or-above-level leader TWICE for the shortest period of time - in less than a month, amazingly.
For Xi’s part, he sounded all the right notes, notably by revealing his personal side. According to the state media story about the symposium, Xi said during the Symposium that:
I have always supported private enterprises and have worked in regions where the private economy is relatively developed.
Private enterprises have grown on the hopeful fields of China. At the beginning, it was a barren field, struggling to survive in the cracks. China has carved out a path for the development of private enterprises, and what a difficult journey it has been! This path was forged under the system of socialism with Chinese characteristics, through hard work and perseverance.
When I worked in Fujian and Zhejiang, I greatly appreciated how some private enterprises in these regions focused on their core industries, concentrated on their main business, and continuously grew bigger and stronger. These two regions have many clothing and footwear enterprises, some of which are now leading international trends. A very important reason for this is their decades-long dedication and unwavering focus on this line of work, evolving from processing materials for others to creating their own brands, and now growing into globally renowned companies.
In the new era and on the new journey, the prospects for the development of the private economy are broad and full of opportunities. It is the perfect time for private enterprises and entrepreneurs to showcase their talents and achieve great things."
How do we look at this symposium? Does that mean China will no longer crack down on the private sector?
For starters, this whole “crackdown on the private sector” narrative is a false one, tinged with deep ideological bias. In fact, despite having the word “communist” in the ruling party’s name, China will never go back to abolish or minimize the private sector. So why do many people feel that way?
First, poor policy implementation and bad communication skills can create bad images. The salient example is the “education crackdown.” The policy standpoint may be sensible, but the way it has been implemented was a true disaster, and was at the root of many people’s pessimism about China’s private sector.
In other cases, it’s just a willful neglect of facts in favor of a “China bad” narrative. Jack Ma is a case in point. I discussed last week that the silencing of Jack Ma was not a result of a “crackdown on the private sector”, but the end result of Ma’s decade-long seeking of political influence finally hitting a wall:
In the essay, I also pointed out that Jack Ma “was not imprisoned, nor had he gotten some hefty fines on his head, nor was his multi-billion stake in Alibaba taken away from him. He was merely sidelined from a public image perspective.” But I am constantly amazed by the number of people who believed that the world-roaming Jack Ma was ever imprisoned or even put under house arrest.
Even in the comment section of the essay above, someone left this message that made my day:
Any proof on the statement that he wasn’t in prison or house arrest?
To this, my only reply is:
Any proof he was?
I mean, the burden of proof of the existence of anything shall fall on the side that believes it, not on the side that doesn’t. Just because Elon Musk once asked the ill-meaning question, “Where is Jack Ma?” does not prove Jack Ma was in a prison cell. In fact, any person who has an inkling of knowledge of how Chinese politics work knows that it is simply inconceivable for an ex-inmate to sit across the table of the same top leader who supposedly put that person in prison, not ever.
However, that’s not to say there aren’t REAL issues facing the private sector right now. In this newsletter, I have commented many times on the extremely harmful phenomenon of “high-sea fishing,” essentially rent-seeking law enforcement action against private businesses to boost local government coffers.
And here is where I think this symposium is actually helpful. A strong show of support for the private economy from the highest level of power sets the tone of “political correctness” for local government officials, further increasing the perceived costs for “unlawful” law enforcement actions.
Sometimes, not interfering with the private sector is the most important thing the government should do. I have commented before that the success of DeepSeek, as well as most of our private economy success stories, happened not because of the government but precisely because they went under the radar of the government.
In the essay on Hangzhou, where DeepSeek was founded,
commented that a key success of Hangzhou was precisely its “small government” approach to private businesses.DeepSeek’s success story was also a wake-up call for China’s government at large. Last week, I also wrote at Baiguan that:
the government should recognize DeepSeek as a great lesson about inter-connectedness among today’s diverse industries and about staying open-minded for market forces to run their courses, without making assumptions about right and wrong too soon.
What do I mean?
When Nvidia was created, its main purpose was to power high-quality image generation for…video games, an industry the Chinese government had historically looked down upon. But who would have predicted that a vibrant video gaming industry and the GPUs it required would become the foundation of AI in the 2020s?
It’s the same with DeepSeek. Historically, quant funds had a bad name and were always a scapegoat for stock market crashes. But who would have known that the fat profits quant funds collected from each of our retail investors would be used to power a ground-breaking, world-class large language model?
One of the best comments I have seen about the connection between the government and DeepSeek is told by one of China’s leading venture capitalists:
You think DeepSeek’s success is because of the Hangzhou government’s support? Nah. It’s just because Hangzhou didn’t kill the High-flyer Fund (the quant fund behind DeepSeek)
[The rest of the post about Alibaba’s latest financial results, new marriage data, and generic drug scandal is reserved for paid subscribers.
Once again, if you are a paid subscriber of Baiguan, please DM me for complimentary access or refund if you have double spent]