China goes to break Ant Group’s Alipay as the nation continues to push for new ordinance for digital firms: “The Financial Times reported Monday, citing sources, that Beijing is moving to break up Alipay, and create a separate app for the company’s highly profitable loans business.”
Africa: do not follow China. China is scoring an own-goal and over the next few years, if this trajectory is not reversed, will begin to fade. As I wrote in Harvard Business Review, China transformed its economy by becoming the manufacturing capital of the world. China, despite that success, is not yet a high-income country. Yes, despite its aggregate wealth, China remains a developing economy. China’s per capita income is around (nominal) $9,000 while the US hits $60,000. In short, Chile is better than China (Nigeria is about $2,000).
Few countries have moved into the high-income status and in all those countries, one thing has been a constant: democracy and free markets. Yes, even if you produce for the world, without a free market system for capital to organize other factors of production based on market forces, you will struggle to get there.
Fair rule, transparency, democratic systems, retrenchment of states for the flourishing of the private sector, predictable and fairly applied regulations, and cardinal rule of law, are some of the factors that enable economic redesign, towards high-income status. From Japan to South Korea to Taiwan and to potential newcomers into the high-income countries, there was and will always be constant: what worked when you were poor to mid-income, will not work for you to move from mid-income to high-income.
At a poor state level, you need the government to create order, but quickly the government must retrench for markets, to drive productivity and improve the efficiency of the utilization of factors of production. It is through productivity in an evidently complex national system that nations move to high-income level. In my study of economic systems, only markets have the ability to allocate the factors of production at this level! No politician has any chance. President Xi is not helping China unless he never wants the nation to move to high-income status.
Yes, China is blowing the playbook thinking that what worked from its poor state to mid-income will work for it to move to high-income. Simply, China is scoring own-goals and it would be lucky to stay in mid-income. It has no chance of transitioning into high-income unless the Xi nation changes course.
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