For a long time, there has been a general consensus among observers about China’s socio-economic development. It is that China’s economic development is neither that of a market economy nor that of a planned economy. It is in fact “state capitalism”, also called “crony capitalism” by some. To put it simply, it is the state mingling with capital, which support each other. Such an alliance between the state and capital is built on the basis of the sharing of benefits, and growth in benefits is the prerequisite. Therefore, it is an unstable alliance, which will come undone sooner or later. Now in China, there is a rupture between the state and capital, and between power and money in the alliances of the rich and powerful. State capitalism in China is in deep water.

An important recent manifestation of the rupture is the Chinese government’s interference in Jack Ma’s companies. But in fact, if you remember how Xiao Jianhua and his Tomorrow group collapsed, you will understand the entire process had been planned and set in motion as early as in 2017, or even earlier. The public generally interprets the ruptures as the results of private capital’s challenge to the authorities and the accumulation of financial risks, the latter of which has prompted the authorities to take preemptive action. Of course, these reasons are real. But I think in a country like China, which has a state capitalist system underpinned by its one-party dictatorship, the fundamental reasons behind the ruptures between the state and capital are political if looked at in-depth.

This has been revealed unwittingly by government officials in the comments they have made. On 29 November, when Xu Lin, Minister of the State Council Information Office of China, attended the “2020 China New Media Conference”, he said that regardless of whether it is a mainstream media outlet or a business platform, whether it is online or offline, or how big it is, there is not an “enclave in public opinion”. He said it was necessary to “resolutely prevent an attempt to dilute the leadership of the party on the pretext of integrated development, and resolutely prevent the risk of capital controlling public opinion”. People with good judgment immediately realized that the warning was directed against capital forces that were making an ambitious effort to enter the media market with their financial capital, and they included Alibaba and Tencent.

Such worries of the authorities are not unfounded. In 2017, the Alibaba group built a huge media empire by employing all kinds of ways to acquire stakes in more than 20 media outlets, not to mention the South China Morning Post, an overseas publication. As for Tencent, its influence on China’s public opinion cannot be underestimated.

In fact, the entry of private capital into domains monopolized by the state has happened not merely in the media sector. The creation of Hupan University by a group of private entrepreneurs, who have thus made a foray into the domain of education, is also a development that has put Beijing on alert. The founders of the university are mostly the representatives of the capital forces, and they possess enormous wealth. These wealthy people, namely Jack Ma, Liu Chuanzhi, Feng Lun, Shi Yuzhu and others, include successful Internet entrepreneurs, people in all types of business and the children of tycoons. They are the new face of the forces in the private sector.

Not long ago Geng Xiaonan, a filmmaker and Sun Dawu, the owner of a private enterprise, were arrested together with their families simply because they had voiced their support for Ren Zhiqiang (the son of a businessman and a famous real estate tycoon himself who had written articles that sharply criticized CCP leader Xi Jinping) and liberals in China. They show that private capital has not renounced its social demands. Meanwhile, Jack Ma’s argument that “the financial regulatory system is hindering innovation” is a challenge to national policies. From the media, education, politics to polices, the CCP authorities, which are paranoid by nature, inevitably find the challenges in these areas increasingly intolerable.

According to rumors that cannot be verified, Xi Jinping expressed his wariness against the infiltration of capital in 2017. He said that some forces would begin to make political demands and would want a say after they grew strong. This brings us back to Jack Ma, and it is rumored that the latest suppression he has suffered has been ordered by Xi himself. All the indications show that the regime has taken center stage in the suppression of capital forces. The suppression is orchestrated by Xi himself and being carried out in a systematic and step-by-step manner.

The fundamental reason for the state’s actions is its worry that the emerging industries, represented by the Internet industry, will become a social force that the state cannot control. A so-called “color revolution” does not necessarily have to be imported from abroad. For the current term of CCP leadership led by Xi, internal “stability maintenance” is more important than economic development. To put it simply, whoever might threaten the CCP’s ruling foundations has to be eliminated regardless of whether he or she was an ally before. Such being the case, the rupture between the state and capital is an inevitable corollary.

Upon careful consideration, however, we can see that such rivalry does not necessarily benefit the CCP’s grip on power in the long run. It is because while such suppression will lessen the threat, it will also hamper economic development. When economic development loses steam, it will in turn threaten the foundations for the CCP’s rule.

(Wang Dan is founder of the think tank Dialogue China.)

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