This economist must have been trained in the US “Chicago school”. I would caution that there are unavoidable political implications, as it will make China’s citizens stakeholders in a capitalist system overnight. It’s a policy pursued by many Western governments (Thatcher government in the UK, Howard government in Australia) and likely contributed to the right ward shift in politics in these countries.

I understand many economists (more inclined to the left) even in the West don’t support this kind of mass privatisation of SOEs. Indeed, privatising Telstra in Australia led to significant regulatory headaches, and the privatised Commonwealth Bank has been closing down branches all over Australia.

We should understand that many of China’s SOE have significant social (non-profitable) functions (like running rail services at or below cost) and other “universal service” obligations. Once these SOEs are privatised, they will come under strong pressure (from shareholders) to shit down unprofitable services and lay off staff, contributing to job insecurity.

Really, if the issue is weak domestic consumption in China, just get the PBoC to issue every citizen with a digital wallet, and make periodic grants or low-interest loans that are targeted at low-income residents or residents in the area of China that are struggling with poverty alleviation. The wealthy in China (like this economist?) do not need free shares to stimulate domestic consumption. It’s far more efficient to target those who are genuinely income constrained, if your goal is to stimulate domestic consumption. You get a bigger “bang” for each yuan spent if it is targeted.

I am not arguing that the PBoC granting digital funds is the best solution to the problem of weak domestic consumption. Just saying it is far better (and more targeted) than simply distributing shares to citizens.

Expand full comment

Agreed. He appears remarkably naive.

Expand full comment