Profit, Control, and the Illusion of Openness (translated and repost w a title added)

China’s propaganda machine portrays the country as a champion of globalization and a defender of free trade.

But that’s not the reality.

State-owned enterprises (SOEs) account for over 60% of China’s total GDP by annual revenue.

As of the end of 2023, China’s SOEs held total assets of 371.9 trillion yuan. State-owned financial institutions held assets worth 445.1 trillion yuan, while administrative and institutional state assets totaled 64.2 trillion yuan.

According to the 2024 report on China’s Top 500 Private Enterprises, these firms collectively hold only 49.85 trillion yuan in total assets—less than the assets of China’s administrative institutions alone.

Private and foreign enterprises are responsible for over 80% of employment in China and carry out the vast majority of exports, earning the country its foreign exchange. In contrast, SOEs are mainly responsible for imports—especially bulk commodities. In other words, SOEs are primarily responsible for spending money.

See the division of labor now?

All of this comes from publicly available data. The data speaks for itself—what’s needed is someone who can interpret it correctly.

Moreover, China enforces strict capital controls, imposing tight restrictions on outbound investments by residents and businesses. But capital controls are the enemy of free trade. If capital can’t move freely, how can there be free trade?

China also imposes heavy censorship on news, film and television, and the internet. Major Western media, publishers, streaming platforms, and tech companies are effectively shut out of the Chinese market.

China is a regulatory state. What it defends is not “free trade,” but “trade surpluses.”

Let me say that again: China is not defending free trade—it’s defending trade surpluses, which represent the government’s ability to earn U.S. dollars. Only with a dollar surplus can SOEs and the government have money to spend.

And yet, SOEs and the government are highly inefficient spenders. But this is baked into the system—it’s an extractive system. That’s also why China will never carry out meaningful reforms to wealth distribution. Do you think the government is stupid enough to make itself poor?

Chinese people must remain poor. They can only remain poor. That’s how the distribution system works. It distorts wealth distribution, and even more so the industrial structure and job market. That’s why the Chinese end up in a constant state of “involution.” In a system designed for “profits flowing through a single channel,” how could there not be involution?

Understand China’s land system, its household registration (hukou) system, and its distribution system—understand the Legalist thinker Guan Zhong’s idea of “profits through one channel”—and you’ll understand why involution is so pervasive in China.

China must encourage and expand exports while restricting and reducing imports. That’s why even in first-tier cities like Shenzhen and Shanghai, where per capita GDP exceeds $20,000—approaching the level of a moderately developed country—the statutory minimum wage is still only a little over 2,000 yuan.

Back in the 1960s, Premier Zhou Enlai famously said: “Everything for foreign trade.” Even when ordinary Chinese were struggling to survive, China continued to export massive amounts of grain, cotton, meat, and cooking oil.

“Everything for foreign trade” remains national policy today. To put it plainly: everything is for the surplus, everything is for U.S. dollars.

If Chinese people became wealthy, “Made in China” goods would no longer be affordable to foreigners. And if Chinese consumers had money, they’d spend it abroad—on shopping, real estate, even immigration. China’s current account surplus would disappear, and the government would become poor.
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