Tuesday, December 15, 2015

[Opinion] China Committing Economics Suicide?

1. I am pessimistic about China transitioning from a manufacturing economy to an information economy under its current political policies.

An information economy requires the free flow of information and China is continuing to make the wrong moves.

(BBC News 2015):

"China thinks your government should control your internet"

"At a conference on Wednesday China is arguing for cyber sovereignty, a system that allows governments to control the internet within their own borders."

2. This BBC news item reminds me of an episode in Season 5 (1991-2) of Star Trek: The Next Generation called "Hero Worship".

In this episode, a science vessel was destroyed by shock waves of increasing intensity.

It turns out that when the science vessel initially encountered the shock waves it raised its shield and raising the shield created a positive feedback loop with the source of the shockwaves which in turn magnified the shock waves.

Not knowing the reason for the bigger shock waves, the crew of the science vessel increased more and more power to the shield which led to ever bigger shock waves.

This vicious cycles eventually led to the destruction of the science vessel.

3. In analogy with the more power to the shield strategy of the science vessel, the totalitarian government of China is pursuing a more control strategy.

It seems the Communist Party of China under Xi Jinping has a very limited policy repertoire.

Whenever there is a problem, the prefer solution seems to be more control.

If China is relying on the market for the functioning of its economy, then more and more control of the market is not a solution.

A market is fundamentally an institution for the free buying and selling of goods and services.

Free flow of information is a prerequisite for the functioning of a competitive market.

The lack of free access to the Internet is one of the contributing factors to the (to date) failure of the Shanghai Free-Trade Zone, the first free-trade zone in mainland China.

The government arresting people for reporting on the 2015 Chinese stock market crash makes a mockery of the Chinese stock markets.

The Chinese economy is already manifesting many weaknesses.

Ever more control of the market will create a positive feedback loop that will eventually destroy the Chinese economy.

"Cyber Sovereignty" is one more step in the direction of economics suicide.


BBC News. 2015. China thinks your government should control your internet. December 15.
(accessed 2015-12-15).

Livingston, Scott D. 2015. Beijing Touts ‘Cyber-Sovereignty’ In Internet Governance. ChinaFile, February 19.
(accessed 2015-12-15).

Wildau, Gabriel. 2015. Shanghai free-trade zone struggles for relevance. Financial Times, September 27.
(accessed 2015-12-15).

"2015 Chinese stock market crash", Wikipedia - The Free Encyclopedia,
(accessed 2015-12-15).

"Cyber sovereignty", Wikipedia - The Free Encyclopedia,
(accessed 2015-12-15).

"Hero Worship (Star Trek: The Next Generation)", Wikipedia - The Free Encyclopedia,
(accessed 2015-12-15).

"Shanghai Free-Trade Zone", Wikipedia - The Free Encyclopedia,
(accessed 2015-12-15).