China: zombie S.O.E.'s, Military Industrial Complex, and COVID - 19.

David G. Klein - NY Times 2008 - image

 China's domestic economic strength lies with many factors, including S.O.E.'S ( state-owned enterprises.) S.O.E.'s, however, remain a double-edged sword for the  central government as they continue to bail out failing companies with bank loans and government subsidies  to avoid writing off loans, losing tax revenue and incurring job losses. These zombie companies drain resource allocation targets and conflate various sectors. The aftermath of the coronavirus on the Chinese economy, like those in the west, will see a spike  in bankruptcies as this over-extended sector is  reminiscent of the property bubble in 2008 in the U.S. and elsewhere that spawned the 2008 financial crisis.  Typical developed economies will see failed businesses  due to lost revenue  from the quarantine, despite the best efforts by government to provide stimulus.

  In the 1980's,Thatcher-ism and Reaganomics ushered in a period of privatization  away from publicly funded and managed services. The mind-set was that private companies could provide the same services cheaper and more efficiently than government programs. There is a strong argument in favour of this approach, though both systems (free market & planned economies) lack a system of checks and balances to drive the co-efficient to an acceptable level. The free market allows itself to eliminate weak performers, weak industries given to,  what Adam Smith called "The Invisible Hand." Coupled with free elections, under performing governments may face the wrath of the electorate because of the graft or lack of a good bottle of hair colour - see former Prime Minister of Canada, Steven Harper who was quite good at managing Canada's economy during The Great Recession (Canadian dollar traded higher than the U.S. greenback,) which may have led to early onset of greyness and avuncularity compared to his younger opponent and successor - Justin Trudeau.

Contrast that with the central government in China and arguments can be made for the strength of a planned economy that affects a population of approximately 1.38 billion during economic expansion as China has witnessed for close to forty years. Now, with the advent of COVID - 19 emanating from Wuhan that has crippled the global economy and led to over 227,000 deaths, culpability is nowhere to be found in South East Asia. But, give Wuhan officials much credo for putting up a hospital in ten  days and the central government closing many city - states, over-night. So, we can think of zombie-SOE's and then we can consider zombie - civilians who ascribe to whatever propaganda the central government instills ("Populist Authoritarianism" - Wenfang Tang) so that they can save face and avoid protests. China is better equipped than Hong Kong to manage a protest movement with its large military comprising approx 2,693,000. However, it is the strict code of honour that China demands of its personnel that create a zombie fortress of pan China apologists and supporters throughout the diaspora and on the mainland. No doubt, there is a "mainlandization" at work that promotes the expansionist mindset given to managing Taiwan, Tibet, Xinjiang, and The South China Sea and the hotly contested nine dash line that was censored as illegal by the ICC at The Hague in favour of claimant - The Philippines. In all fairness to Chinese propaganda and the Military Industrial Complex, the U.S. is quite capable in this respect, though, the tempest in a teapot remains the notion of "human rights" for the central government and Chinese citizens.

As China  is "capitalizing" on COVID - 19 to expand its presence in the South China Sea, the U.S. has also intensified their presence with FONOPS (Freedom of Navigation Operations.) Australia has also gotten into the fray to support the American efforts. Despite the pandemic, more help is needed from allies: Canada, Britain, Italy and France  et al to send a strong message to an aggressive Beijing to back off and focus the attention on solving the COVID - 19 crisis.  China's delivering medical supplies to countries they are interrogating is disingenuous, at minimum. 

In this election cycle, Donald Trump is spurring the opening up of the economy in spite of  the U.S. having 1,040, 488 confirmed COVID - 19 infections and 60,999 deaths as reported by John Hopkins University of Medicine  - April 30,) most in the international community and now surpassing the Vietnam war death toll. The hope is that Famotidine- a heartburn medicine on a trial in New York, as well as Favipiravir antiviral tablets -- a trial by an Indian lab, will provide effective results in treating COVID -  19.

Suffice it to say, Adam Smith's invisible hand has annihilated all boundaries.