Unconstrained experiments in 21st century state capitalism

That seems to be theme behind two recent and excellent pieces by Shai Oster at Bloomberg. Both are a useful reminder that China is not pursuing an existing economic and social model, or even a well-defined ideology, but is inventing its own model as it hurtles along.

First up is a piece on an effort, perhaps quixotic, to predict future acts of terrorism:

The Communist Party has directed one of the country’s largest state-run defense contractors, China Electronics Technology Group, to develop software to collate data on jobs, hobbies, consumption habits, and other behavior of ordinary citizens to predict terrorist acts before they occur. “It’s very crucial to examine the cause after an act of terror,” Wu Manqing, the chief engineer for the military contractor, told reporters at a conference in December. “But what is more important is to predict the upcoming activities.”

He hinted at the scope of the data collection effort when he said the software would be able to draw portraits of suspects by cross-referencing information from bank accounts, jobs, hobbies, consumption patterns, and footage from surveillance cameras. The program would flag unusual behavior, such as a resident of a poor village who suddenly has a lot of money in her bank account or someone with no overseas relatives who makes frequent calls to foreigners. According to Wu, these could be indicators that a person is a terrorist. “We don’t call it a big data platform,” he said, “but a united information environment.”

… Brookings’s Pillar is skeptical. “No system of surveillance and exploitation of intelligence can stop everything,” he says. But Tsui, the Hong Kong professor, says if anyone has a chance of coming up with a workable high-tech Big Brother, it’s the Chinese. The lack of privacy protections means that China’s data sniffers are more practiced than those in the West. “The people who are good at this are good because they have access to a lot of data,” he says. “They can experiment with all kinds of stuff.”

Then there’s the recent and unprecedented expansion of “venture capital” funds sponsored by local governments and other official bodies:

The country’s government-backed venture funds raised about 1.5 trillion yuan ($231 billion) in 2015, tripling the amount under management in a single year to 2.2 trillion yuan, according to data compiled by the consultancy Zero2IPO Group. That’s the biggest pot of money for startups in the world and almost five times the sum raised by other venture firms last year globally, according to London-based consultancy Preqin Ltd.

The money’s in what are known as government guidance funds, where local and central agencies play some role. With 780 such funds nationwide and a lot of experimentation, there’s no set model for how they’re managed or funded. The bulk of their capital comes from tax revenue or state-backed loans.

The money is part of Premier Li Keqiang’s effort to bolster the slowing Chinese economy through innovation and reducing its dependence on heavy industry. The country began a campaign to support entrepreneurship in 2014 and has since opened 1,600 high-tech incubators for startups.

Honestly, I don’t have much analysis to offer on either of these reports, other than, wow.

One Comment

  1. The first proposal sounds like a mashup of the ‘social credit card’ idea and threat prediction. Both have been mooted in the US and elsewhere. Both are already practiced piecemeal in the US and elsewhere, too.

    The venture capital raising is in support of China’s 5-year-planned focus on new technology startups. Local governments have access to low cost capital and are willing to invest in ways that advance the national agenda. That’s how they roll in China. Seems to work, too.

    Reply

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