Hello everyone, welcome to News Five, today’s co-hosts are Jinshi, Qin Peng, Qin Yue, Yuting, and myself. With diverse perspectives colliding, we will guide you into the rich world of news. Feel free to subscribe and like our independent channel.
Today’s focus: Shocking secrets from the statistics bureau! Insider information on market intervention leaks, has Xi “shifted course”? The CCP is causing another turmoil, introducing new drafts; 80% of Chinese people’s savings can’t keep up with debts; 0.3% of elites control wealth! The Nobel Prize hits Beijing’s sore spot, avoiding the word “democracy”; Intel under investigation, is the CCP scapegoating?
This week, the Nobel Prize in Economics was awarded to three scholars researching “national prosperity disparities.”
They are two economics professors from MIT – Daron Acemoglu, Simon Johnson, and an economics professor from the University of Chicago – James Robinson.
The broad conclusion of these three economics professors’ research is that, relatively speaking, democratic politics are more conducive to creating economic growth. This research is considered to have significant epoch-making significance.
As the benefits of “democracy” were mentioned, mainland Chinese media reported with some awkwardness, carefully focusing on how “institutions” affect a nation’s prosperity, intentionally avoiding the word “democracy.”
The Nobel Prize committee praised the research of the three economists as being one of the “greatest challenges facing society.” These winners “prove the importance of the social system” in reducing the “national prosperity gap” goal.
Q1. Jinshi, Qin Yue, this research seems to be related to the Chinese economy. Do you think if the “social system” changes, it will fundamentally alter the Chinese economy?
If China changes its social system, meaning that the autocratic CCP embraces democracy, firstly, this is impossible. If one day China truly becomes a democratic country, I believe the Chinese economy would undergo fundamental changes for three reasons.
1. Countries with a free system have stronger innovation capabilities than autocratic countries.
If a genius invents something in the US, they will receive the wealth and recognition they deserve without hindrance. This motivates continuous innovation and positive development. In contrast, in China, a genius may need to curry favor with local officials and be politically correct to succeed.
Innovation comes from talent, and when talent in a country is unrestricted, the economic backbone of that country is stable. The CCP does not need to foster domestic inventions; it directly steals from countries with free systems.
2. Democratic countries have a legal environment and investment guarantee.
Democratic countries emphasize transparent rule of law, increasing foreign confidence in China, promoting capital inflow and technology transfer. With a more secure legal climate, investment in China would thrive, strengthening the economy.
Additionally, a comical anecdote reveals how people no longer trust banks due to government interference. If China were a democracy with robust legal systems, its economy would undoubtedly thrive.
3. Improved welfare systems in democratic nations enhance consumer spending power.
Countries with democratic systems usually provide comprehensive welfare, boosting consumer spending and stimulating domestic economic growth. Presently in China, people are cautious with spending due to limited public welfare in healthcare, retirement, and education.
If a family member falls ill in China, regardless of their hard-earned assets, the funds can vanish, accentuating the importance of a robust healthcare system. Democracies with sound systems do not turn away an emergency patient for lack of payment as seen in China. In a democratic China with proper governance, people would feel more at ease spending money.
A country with talent, investment, and consumer spending is bound to have a thriving economy.
Q2. Yuting, Qin Peng, what stage is the Chinese economy in currently? Recent statistics from the National Bureau show that Chinese people are becoming wealthy? Is this true?
Yes, indeed, some have become wealthy, but unfortunately, it is only a small fraction of the population. While the CCP does not openly disclose data on social wealth disparities, reports from financial companies and banks hint at the situation.
In 2023, China’s total wealth was reported at 79 trillion RMB, with private assets totaling 43 trillion RMB. Among this, 29 trillion RMB belongs to 4.6 million affluent individuals, 11 trillion RMB to 99 million middle-class individuals, and the remaining 3 trillion RMB to 300 million other ordinary citizens.
This data shows that the 4.6 million wealthy individuals have an average asset of 63 million RMB each, middle-class individuals have 1.11 million RMB each, and the remaining 1.3 billion citizens have an average asset of only 23,000 RMB, portraying a socio-economic divide. The wealthy, constituting 0.33% of the population, hold 67% of the wealth, whereas the majority, about 92.77% of the populace, only possess 7% of the wealth, equivalent to a fraction of the wealth held by the affluent.
Furthermore, reports from banks show that 0.07% of wealthy individuals hold 3.74 trillion RMB in total deposits, accounting for 31% of the bank’s total deposits. The significantly large wealth gap in China indicates that a select few hold a staggering amount of wealth compared to the majority of the population.
Qin Peng: These figures are indeed startling. What’s even more concerning is that the wealth disparity in China has been widening over the years. In 2023, Golden Key clients made up only 2.4% of all clients at China Merchants Bank but held 81.2% of the total assets, compared to 55.1% back in 2007. A similar pattern exists at Minsheng Bank. With the recent market intervention, this disparity is likely to escalate further as retail investors pour funds into the stock market, only to potentially lose a significant portion when the market correction occurs.
The wealth gap in China surpasses that of the United States. While it’s crucial to address these disparities, it is vital to understand that the recent efforts by the CCP focus on bailing out local governments and revitalizing the stock market, rather than addressing the roots of inequality and improving the lives of the ordinary citizens.
Q3. Qin Peng, Jinshi, has the top leadership truly shifted its direction? If so, how comprehensive is this shift? If not, why is the authority making these moves?
Qin Peng: There hasn’t been a genuine shift. Real change would involve rescuing private enterprises, improving people’s livelihoods, stabilizing international relations, and changing the system. However, current market interventions are geared towards aiding local governments and attracting retail investors into the stock market, potentially worsening future consumption patterns. Moreover, the proposed legislation to promote private businesses lacks innovative solutions and is unlikely to bring substantial change.
To be continued…