Asset appreciation capitalism is a form of wealth creation where value is increasingly generated and accumulated through the rising value of assets, such as land and financial instruments, rather than through production of goods.
As the US moved from an industrial-focused capitalism to one where financial markets become central to wealth creation and distribution, “getting rich” is all about making owned assets more valuable, rather than about creating new wealth through labor or production.
The wealth growth of the owner class far outpaces the income growth of workers, even highly skilled and highly paid professionals. The end result is an extreme concentration (or monopoly) of wealth and power as well as extreme inequality..
.....In contrast to the US, being a student of Lenin’s political economy, China has chosen a completely different path under President Xi Jinping – the socialist market economy.
From the start of his time in office, President Xi has focused on growing the “real economy” (especially manufacturing), promoting competition, and clamping down on tech and real estate oligarchs. The aim of such policies is to prevent China from becoming another hollowed-out financialized rentier economy.
China has firmly adhered to retaining credit and monetary policies in the hands of the state, instead of being captured by private financial interests like the Federal Reserve in the US.
Although China’s model is informed by Lenin’s warning on finance capitalism, it has evolved from the central planning model of the USSR.
China’s current political economy is a combination of Hamiltonian economic programs and unique innovations based on its own historical tradition, including decentralized local execution under top-down strategic guidance, meritocratic performance management of government officials, and hyper competitive private sector......
.....The much decried “China overcapacity” is in fact a sign of full market competition, a sign of abundance.
Maybe from the purest return on investment perspective, many Chinese industries have overbuilt and failed to deliver high returns in the short term. But another perspective is China builds for future demand. In contrast, companies in the west build for existing demand with little buffer for resilience.
One example is electricity generation capacity. Beijing has invested heavily over 4 decades to develop both traditional and green energies from solar, wind, hydro to nuclear power. As a result, China produces more electricity today than the US, Europe, Japan and India combined.
China’s annual electricity demand growth equals to the entire country of Germany, but China builds 2 Germany’s worth of new generation capacity each year.
China is better positioned than any other country to meet the growing demand for electricity from large-scale AI rollout, with the world’s largest and fastest growing green and nuclear energy generation capacity and the biggest ultra-high voltage grid network......
This is a mixed model incorporating many elements of the Hamiltonian economic programs, which were responsible for economic takeoff of the US in the late 19th century, and elements of socialism inspired by the USSR. There is also a heavy dose of meritocratic governance based on long time Chinese traditions.
Of course, no models for political economy are static and universal. The China Model will continue to evolve, hopefully towards a more socialist model where equitable distribution is coupled with more wealth creation.
The ultimate contribution of the China Model is that China has shown the world an alternative – it is possible to modernize without wholesale westernization, and prosperity doesn’t only come from the financial capitalism practiced in the West.
