On Socialism’s Failure for China

On April 2nd of this year Donald Trump announced his ‘Liberation Day’ Tariffs on the world. I’ll explain why that’s important in a moment.

28 days later, according to the Diplomat, China passed it’s “first comprehensive law” to promote and protect private enterprise.¹

There were 2 reasons this was necessary.

(1) When it comes to competition with state-owned enterprises (SOEs), private businesses are discriminated against by the state and excluded from the markets
(2) “profit-driven enforcement” – the arrest of innocent business owners on dubious charges, and the seizure of their assets by struggling provinces in China to make a quick (and questionable) buck.

The attempted solution of these problems is by mandating equal access for every business to the market, and prohibiting local governments and SOEs from this “profit-driven enforcement.” They are trying to enforce the idea that, “private enterprises are to be treated as legal entities with enforceable rights.” The Diplomat, however, goes on to explain that there are little to no enforcement provisions in this law, and that all private businesses must, “adhere to the leadership of the Chinese Communist Party, uphold the people-centered approach, and maintain the socialist system with Chinese characteristics to ensure the correct political direction of private economic development.”² What’s wrong with this picture?

It’s clear China knows it needs private enterprise to survive, and even more it needs domestic private enterprise after Trump’s Liberation Day Tariffs rocked the Chinese economy to it’s core. According to the NY Times, quoting Ling Meilan, co-owner of a shirt factory, “The trade war has a huge impact, because if you can’t export, there will be fewer orders for clothing, and there will be nothing to do.”³ Another factory manager – only quoted by the family name ‘Yao,’ says, “If the U.S. tariffs are too high, we can’t do it, and I will definitely switch to other markets.”⁴ Those ‘other markets’ can only be China’s domestic market.

Along with this, China also released it’s 2025 security policy entitled, “National Security in the New Era.” According to the Diplomat on May 16th it prioritizes, “technological self-reliance, calling for investment in key infrastructure and indigenous innovation to minimize exposure to foreign sanctions or supply chain disruption.“

There’s a theme associated with all these articles. That theme is self-sustainment and reliance on China’s part. The cause of this can only be Trump’s Liberation Day Tariffs. The chain of events being:

1: Liberation Day Tariffs

2: China’s factories suffering due to lack of exports

3: The people and local governments/SOEs struggling to make ends meet

4: A need develops to move away from relying on an economy based solely on exports.

The main reason Trump implemented the Liberation Day Tariffs was to (1) curb the flow of smuggled fentanyl across the Southern border, and (2) for simple fair trade between the United States and the People’s Republic. China now has to choose. They can either surrender to Trump’s demands and open up their market to the U.S, or China can back away from the global economy – for a short period of time – and work on strengthening their domestic and regional stability. The latter seems like China’s desired option.

When discussing China’s economy, we must remember that they are a socialist state and as such will frame all their economic polices around socialism. The question then asked is, can the socialism of China support an economy with it’s foundation in domestic private enterprise? The entire idea of socialism would seem to say, ‘no.’

According to ThinkChina.sg, a magazine based in China that covers political, economic, socio-cultural and technological developments in China and the Greater China region, writes on March 10th, “They [the private sector] contribute more than 50% of tax revenue, over 60% of GDP, more than 70% of technological innovation achievements, over 80% of urban employment, and more than 90% of the total number of new enterprises.”⁵ On the other side of that coin, Think China also reports astonishing levels of talent loss in China, an estimated 15,200 high-net-worth individuals emigrated to countries such as the UAE, US, and Canada,⁶ and according to the Asia Times on February 17th, “…in recent years, regulatory uncertainty, crackdowns on major tech firms, and tightened government oversight have eroded business confidence and curtailed investment.”⁷

While all this is going on, Chinese President Xi Jingping made a remark at a private enterprise symposium, expressing his hopes that private enterprise would, “…first become prosperous, and then promote common prosperity.”⁸ In other words, he hopes private enterprise can become the cornerstone of a socialist utopia… But isn’t that completely antithetical to to socialism itself?

Think about it, out of 1.4 Billion people in the whole of China, how is that maybe 100 or so business owners will be forced to support the remaining 1,399,999,900 people? I thought, as Hillary Clinton would say, it takes the whole village to support the common good, not just Bill Gates’ money. Why can’t we all promote the common good? Why is our survival dependent on the hands of a few technocrats?

Could there possibly be a flaw in China’s socialist system?

We’re back to the decision China must make. Who will China surrender too? President Trump, or the over-arching will of capitalism?