Are we entering the “Cultural Revolution 2.0”?


For over a year, official China has seemed to be on the warpath against its own tech industry. Some of Xi Jinping’s actions: the suspension of Ant Financial’s IPO, the apparent house arrest of Jack Ma, the anti-monopoly campaign and fines imposed on tech companies, “voluntary donations” important carried out by Alibaba, JD, Meituan and others. the Common Prosperity campaign, the ongoing investigation and deregistration of Didi Global, the crackdown on popular actors and singers, the “rectification” of the Macau gaming industry, and much more. Chinese tech stock prices naturally reacted.

Why? To put it simply, this is part of a campaign to reduce the power of private companies and ensure billionaires do not gain political influence because of their wealth.

There is a secondary objective. The real estate industry, which provided a generation of Chinese with either the reality or the illusion of unimaginable wealth, has collapsed. Now, China must take advantage of the appreciation of assets in the stock market and integrate government markets into the system of political patronage.

So much has changed in a year:

· Cybersecurity: A new cybersecurity law implemented in June 2021 has been used to stifle voice in Hong Kong, stifle private companies like Didi Global and generally cast doubt on the ownership and management of personal data by private companies. Among other things, it represents the apotheosis of the process of drawing up individual credit files. They turn out to be for keeping an eye out for all kinds of junk including debtors.

· Anti-monopoly: The State Administration for Market Regulation (SAMR) has repeatedly fined companies for making acquisitions without seeking approval. Alibaba attributed the operating loss in the March quarter to a fine of $ 2.8 billion, or 4% of its 2019 revenue in China. Other companies fined include Tencent, JD.com Inc ., Suning Ltd., Didi, Meituan, Pinduoduo, Ctrip, Bytedance and Baidu Inc.

· LIFE : The variable interest entity structure (VIE) that has been deployed to evade foreign ownership restrictions in the tech sector has often been the subject of speculation. In early December, the CSRC denied a Bloomberg report that China would ban VIEs from registering overseas.[1] Nevertheless, restrictions will most likely be imposed, at least for VIEs listed outside of China.

· Casino: A crackdown on casinos and junkets that bring them customers from mainland China may be linked to currency control efforts and an interest in promulgating a traceable digital renminbi.[2] The Suncity boss, who is believed to account for up to 45% of all junket operations, was arrested in late November. Alvin Chau’s arrest effectively ended the business of the junkets, who organize and fund players from the mainland to visit Macau.[3] Chau had long been presented in the official press as a visionary. Now the mainland government wants more control over gambling in Macau and hopes the tables will eventually use the renminbi, especially the digital renminbi. Junkets typically create currency risk by accepting renminbi deposits against hard currency loans used for gambling. Many players seeking to launder and move ill-gotten gains have used fabricated “losses” at the tables to withdraw money. money from China.

· Celebrities: China’s Cyber ​​Security Administration has released new rules designed to reduce the popularity of social influencers, lowering them in search rankings and placing more controls on talent agencies. Influencers must be appeased and their agencies controlled. Promoters cannot use prompts or “flirtatious language”.

· Income taxes: The authorities have focused on taxing the wealthy, but only those who have become wealthy through private means. Actor Zheng Shuang, for example, was found to have underpaid income taxes and was assessed with unpaid taxes as well as fines reaching nearly 300 million yen. Zheng Shuang’s TV series has been removed from mainland mailing lists. Similar punishment was meted out to actors Zhao Wei and Zhao Xiaosong for apparent political mistakes in their films.

What is going on?

Liu He, Xi Jinping’s adviser, had to speak to the Chinese press in September to deny that China is entering “Cultural Revolution 2.0”. Liu He is considered by foreign observers to be generally sane and trustworthy, as he speaks perfect English and attended Kennedy School.

The comments appeared to respond to an essay by writer Li Guangman published on August 29 and quickly removed from the Internet. Li argued that “everyone can feel that a profound change is taking place” in the economic, financial, cultural and political spheres. On September 2, “Global Times” editor-in-chief Hu Xijin wrote a counterpoint, saying the comment was “seriously misleading.”

Ultimately, it’s about rolling out the Dengist reforms, which the CCP thinks have gone too far. It is also a matter of securing new flows of patronage. SASACs at all levels buy control of A-listed companies.

Deng Xiaoping, architect of China’s “socialist market economy”, probably never imagined that private companies would become more powerful and glorious than the public sector. From Xi Jinping’s perspective, it is high time to correct this. An essay published in several media at the end of August republished from the WeChat account of a certain Li Guangman. The article broadly proclaimed:

“This revolution will clean up the dirt. Capital markets will no longer be a paradise where capitalists can get rich overnight. Cultural markets will no longer be a paradise for nymphomaniac stars. The bodies of information and public opinion will no longer be a place of worship for Western culture. Red will return, heroes will return, and blood will return.

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